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By Steve Weinstein
Over the years, Big Business has virtually numbed the public with its annual, head-spinning salary increases for top executives. But one of our giant "media" companies, Viacom, owner of CBS, MTV, and a host of radio and TV news stations, has actually managed to wake us up this year, at least for a moment, by recently paying two admittedly green executives more than $50 millioneachfor calendar year 2004. Fifty million dollars is double or triple the pay of the top executive, the CEO, at comparable corporations, and this amount of loot was now also going to the newly elevated No. 2 and No. 3 at Viacom.
Wall Street analysts, who are hard to shock, recoiled; they noted that 2004 was a year in which the Viacom stock value had fallen significantlyby 18 percent.
Even more stunning, deep in one of the documents that corporations have to file annually with the SEC, Viacom admitted that the two executivesLeslie Moonves (one of whose Viacom fiefdoms is CBS, of which he's president) and Thomas Freston (who developed MTV as its CEO)had no prior experience in the responsibilities of their new, high-level posts but expressed confidence that they would soon remedy that lack.
This admission appeared on page 33 of Viacom's 2005 proxy statement, where the board of directors listed the factors it had weighed before accepting the recommendation of board chairman and CEO Sumner Redstone to approve the Moonves/Freston promotions and the accompanying shower of money upon them. The board said it realized "that neither executive had experience in the top operating position of a large publicly held corporation, but by [our] accepting the recommendation these executives would be in a position to gain such experience prior to Mr. Redstone's retirement as Chief Executive Officer." The board said it had also considered "the associated added cost to the Company of compensating two executives at that level."
It's quite rare to find such unintended comedy in a proxy statement. Think of it. A huge American corporation was acknowledging, without a whisper of apology to its stockholders, that it was paying Moonves and Freston $52 million each for one year's worth of on-the-job training. The two men were promoted from their lower Viacom positions in July last year to be co-presidents and co-chief operating officers of Viacom. They had been handpicked by Redstone as his successor team. Redstone, who is 81, has announced he'll step aside as CEO by December 2007.
Incidentally, Redstone, to no one's surprise, also paid himself more than $50 million for 2004, a 58 percent increase over 2003. To be exact, he got $56 million from a "compensation package" of salary, bonus, stock options for more than 2 million Viacom shares (the options alone had a value of $34 million), and a number of other perks. As to be expected, this was a tad more than his two protégés' $52 million.
What makes Viacom a "media" empire is the scope of its many properties. In addition to CBS, its holdings include Infinity Broadcasting, MTV, Simon & Schuster, and Paramount Pictures. Included are 185 radio stations and 39 TV stations across the country. Of all these, CBS and the radio and TV stations that provide news are in the news business.
CBS used to be the gold standard of television news until the money changers got into the house a few decades ago and began diminishing the quality and range of the network's coverage. The decline began in the 1970s and accelerated when the Tisch family bought control of the network in the '80s. The Tisch money came from hotels and tobacco; the family had no interest in good journalism or the public's need for it. They began cutting budgets immediately, and the decline has continued ever since, through the ownership by Westinghouse, which bought the network in 1995, and then Viacom, which swallowed it four years later.
The CBS news staffs are not the culprits here; they've been beaten down by what we now call corporatizationthe driven pursuit of profits at the expense of honest, professional journalism.
The other networks are in the same reduced condition. ABC is owned by the Walt Disney Company. NBC is a component of General Electric. The newer Fox network is part of Rupert Murdoch's huge News Corporation.
The only thing that differentiates CBS from the others at this point in time is that its corporate owners decided to dip into the greed trough to a degree the others haven't yet tried. The key word is "yet."
In a phone interview, Carl Folta, Viacom's chief spokesman, defended the compensation packages by minimizing them. He seemed to blame The New York Times for the company's discomfort. He volunteered: "The New York Times was unfair in implying the [stock] options" were part of the three executives' annual pay packages for 2004. "To include them is just wrong," he said. "They're worth nothing at all right now."
Actually, the Times story on April 16, a lengthy and detailed one, made clear that the options could not be exercised until later dates. The first 20 percent of the options were cashable at the end of last year, with the remaining 80 percent cashable in increments over the following four years. Part of each executive's base salary is also deferred to future years.
Viacom's own stock option "grant" chart for 2004, on page 39 of the proxy statement, lists the "present value" of the options without qualification. Redstone: 2,050,000 shares, value $34,410,050. Moonves: 1,901,410 shares, value $32,071,665. Freston: 1,900,000 shares, value $32,047,100.
Stock options are always considered part of someone's compensation, even if they don't "vest" until a later date. And these options were all awarded in 2004. Even if we followed Mr. Folta's advice and erased the options' $98 million plus from the calculations for 2004, the combined compensation of the three Viacom executives would still total $61 millionand that's still way above the pay packages at comparable corporationsand much bigger corporations.
Such comparisons provide some idea of just how greedy the Viacom executive branch is. To recall, the top three men received a combined $160 million, stock options included. All the figures below include any stock options awarded in 2004.
Disney and News Corporation have roughly the same market capitalization as Viacom. Disney gave its top three about $27 million in 2004. News Corp.'s total was $45 million. General Electric has a capitalization five times the value of Viacom; it's one of the largest companies in the world. It paid its trio of top executives a combined $34 million.
I wonder if any of them will decide to play catch-up next year. I don't wonder if any of them ever get embarrassed about stuffing their pockets; that would be naive.
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