CBS Chief Will Get $100 Million Severance and Still Keep His Job
CBS Chief Will Get $100 Million Severance and Still Keep His Job
(Bloomberg) -- CBS Corp. acting Chief Executive Officer Joe Ianniello is in line for a hefty haul when Viacom Inc. completes its proposed merger with the broadcast network.
While he won’t get to lead the combined entity, he’ll collect $100 million severance and remain chief of CBS with a new contract entitling him to tens of millions of dollars more.
The arrangement illustrates the extent of CBS’s effort to persuade Ianniello, a 22-year company veteran, to support the tie-up without having a shot at the top job.
It’s yet another example of the extravagant compensation practices of the billionaire Redstone family, which controls both Viacom and CBS and has for years heaped money on executives at a rate rivaling Silicon Valley’s tech giants.
“CBS and Viacom, given the majority ownership of the Redstones, have always been on the high side -- what they want is what happens there,” said Robin Ferracone, CEO of executive compensation consulting firm Farient Advisors.
Shari Redstone, who has been vice chairman of both firms ever since they split from each other in 2006, has for years advocated for a reunification and initially pushed for Les Moonves, then the CEO of CBS, to lead the combined entity. But a long-simmering feud between Redstone and the board over how the company should be controlled erupted into a courtroom fight last year, derailing plans for a deal and her relationship with Moonves.
Then Moonves’s reign abruptly ended after multiple women accused him of sexual harassment and a subsequent probe by the board found he destroyed evidence and lied to investigators.
His downfall left a void at CBS.
Ianniello, a Moonves protege who joined the firm in 1997, was elevated to acting CEO as the board began searching for someone to fill the job permanently. But directors struggled to find a replacement, and the search was suspended in April as they continued to debate a merger with Viacom.
“No other CEO would step into those shoes” knowing a deal is likely, Laura Martin, a Needham & Co. analyst, told Bloomberg at the time.
At that point, Ianniello’s prospects were less than ideal. He had aided Moonves in his attempt to dilute the family’s control of the broadcaster, bruising his standing with Redstone. And she was keen to ensure that Viacom CEO Bob Bakish had a top role in a combined entity.
But Ianniello wasn’t entirely without leverage. A legal settlement struck between CBS and the Redstones’ National Amusements Inc. temporarily barred the family from proposing a transaction. As a result, it became imperative to secure support from the broadcaster’s board and senior management, including the acting CEO, for a deal with Viacom, which is the smaller of the two firms. Ianniello also could provide institutional knowledge and stability at CBS while the board weighed the company’s fate.
His interim role was extended through the year, yielding him a raise and a $5 million cash bonus. The deal was announced in August and is expected to be completed before year-end.
CBS declined to comment on Ianniello’s compensation.
When two companies merge, the CEO who isn’t picked to lead the combined entity often leaves. Accepting a lesser job in the new organization is unusual.
To ensure executives won’t fight bids from rival companies solely to protect their jobs, their contracts typically offer generous benefits, including severance and early payouts of unvested stock awards, if they’re dismissed within a year or two after a merger.
Special Bonuses
If they get new jobs in the combined company, they typically don’t receive severance. Any outstanding stock awards are usually canceled and replaced with new ones, and sometimes they get special merger bonuses -- all meant to ensure they have a financial incentive to stick around.
Ianniello’s deal is structured differently. Once the merger closes, he’ll get $79 million in cash and about $20 million in equity. He’ll automatically begin a new 15-month contract, still as head of CBS but reporting to Bakish. It entitles him to an estimated $22.5 million in salary and bonuses and a stock grant worth $17.1 million based on Friday’s closing price.
It’s an unusual arrangement, but it might make sense for CBS, according to Farient’s Ferracone.
“In this case, you need Joe to get the merger done,” she said. “So you need to make him indifferent to whether he’s going to lose his job or not.”
Regardless of whether he stays for the full term, he’ll collect an array of benefits on his way out the door. They include a company-paid office in New York or Los Angeles for up to two years, equipped with a Bloomberg terminal and administrative support, and security services.
“Media companies continue to pay out very high numbers,” said Brian Tayan, a researcher at the Stanford Graduate School of Business who focuses on corporate governance. “When you combine it with controlled ownership, I guess they pay whatever they want, whether it makes sense economically or not.”
--With assistance from Jenn Zhao and Brandon Kochkodin.
To contact the reporters on this story: Anders Melin in New York at amelin3@bloomberg.net;Lucas Shaw in Los Angeles at lshaw31@bloomberg.net
To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Peter Eichenbaum
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