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Redstone Takes Pay Cut

CBS chairman Sumner Redstone restructured his annual compensation package last week, slashing his annual bonus by nearly one-half and tying additional payments to the performance of CBS stock.

CBS said last week that Redstone agreed to cut his annual salary to $1 million from $1.75 million, slash his annual bonus from $6.1 million to $3.5 million and deferred compensation, currently at about $1.3 million per year, will be eliminated.

Redstone will receive about $3 million in stock options in 2007 and performance share units — tied to the broadcaster’s total shareholder return of CBS stock compared to that of companies in the Standard & Poor’s 500 Composite Index — with a target value of $3 million.

The total will be about $10.5 million per year for Redstone, should all performance goals be met. He will receive the same compensation as chairman of Viacom, bringing his total annual compensation to about $21 million. Viacom and CBS split into two separate companies on Jan. 3, 2006.

Redstone has long kept an eagle-eye on his companies’ stock performance — Viacom's shoddy share performance was one of the factors in his decision to fire CEO Tom Freston. When Freston left on Sept. 5, Viacom shares had shrunk more than 10% from their January debut as a separate public company.

“The pay-for-performance model is one I have long championed, as it more closely aligns executive compensation with the returns the company generates for its shareholders,” Redstone said in a statement.

The decision to restructure his compensation also appears to have another benefit: It seems to have led to the withdrawal of a shareholder suit filed against the company in 2005 centered on what the plaintiffs said was exorbitant executive compensation at Viacom.

That lawsuit, which a federal judge this month said could move forward, criticized the 2004 pay packages of Redstone, Freston and now CBS CEO Les Moonves, who received a total of about $160 million in salary and bonuses that year. Viacom reported a net loss of $17 billion and its stock price declined 18% that year.

In 2004, Redstone received about $55.5 million in compensation — a $5 million salary, a $16.5 million bonus and $34 million in stock options. Freston and Moonves each received about $52 million in salary, bonuses and options that year.

In 2005, Redstone’s pay package was less gaudy. He received about $24 million in salary, bonuses and options. Neither CBS nor Viacom have released Redstone’s compensation for 2006; that should come in April, when both companies release their annual proxy statements.

In the release detailing Redstone’s new compensation package, CBS said that as a result of Redstone’s and the CBS board of directors’ actions “outstanding litigation related to CBS’s compensation practices has been favorably resolved in principle, subject to court approval.”

So far this year, CBS stock has declined about 3.4% to $30.52 per share on March 14. Viacom shares have fallen about 4% to $39.83 each as of last Wednesday.