Power Sheet: The Real Cost of Ousting Viacom's CEO

Today I get to do one of my favorite things (really) which is reading a long, complicated SEC filing on CEO pay. And this one, filed yesterday, is a doozy, the filing that reveals the deal former Viacom CEO Philippe Dauman made with controlling shareholder Sumner Redstone to entice Dauman to drop some lawsuits and go quietly. If you really want to read it – all 21,272 words – it’s here. But if you want to know the big takeaway for your own life and career, it’s this: In negotiating the terms of your exit from any situation, do it at the very beginning, when everything is beautiful and it’s hard to imagine that you’ll ever leave at all. It’s amazing what the other side will agree to.

Remember that fact as you read outraged pundits, bloggers, and columnists venting over Dauman’s $72-million exit package. How could Redstone ever agree to saddle Viacom’s other shareholders with such an extortionate sum when the stock is down over 50% in the past two years? But in fact Redstone and his lawyers didn’t agree last week to reward Dauman so generously for such sorry performance; they agreed to it more than 18 months ago, when they signed his latest employment contract. Virtually everything Dauman takes with him as he leaves Viacom is simply what he was promised in his contract.

So, for example, he’ll get $46,400,000, presumably in cash, day after tomorrow by my reading. That’s a portion of his pre-determined severance payment. He’ll get the rest of it ($11,600,000) as $400,000 a month for 29 months. He’s also entitled to his bonus, pro-rated for the 323 days of Viacom’s fiscal year that have elapsed. We don’t know how much that will be, but his target bonus for the year was $20 million. His stock options vest, and he gets additional stock, all in keeping with his contract. I could have taken the time to calculate the value of all the stock awards, but then there wouldn’t have been a newsletter until next week sometime.

A detail that’s fairly common in these contracts: For three years Dauman gets an office and can keep his secretary at a salary of $165,405 plus raises and benefits as if she still worked at Viacom. Even her name is specified, but I’ll leave her out of this.

As shareholders and good-governance types howl over another CEO seemingly “paid to fail,” as it’s often put, remember that it all happened long before today’s mess was ever contemplated. Remember also the stated dollar figure for his departure is only the beginning of the real costs. Months of distraction by top leaders and the board may have cost Viacom much more. And by the way, I counted 62 lawyers named in this filing, which is surely far fewer than the total involved. Rage all you like about Dauman’s $72-million payday, but keep in mind that the real, much greater cost will never be known.

You can share Power Sheet with friends and followers here.

What We're Reading Today

Turing Pharmaceuticals sued by top exec...
...over complaints she faced backlash for accusing one of its co-founders of sexual assault. Nancy Retzlaff, who sat next to former-CEO Martin Shkreli defending Turing's pricing practices before a congressional committee, said co-founder Edwin Urrutia sexually assaulted her. Urrutia stepped down following an internal investigation. As chief commercial officer, Retzlaff claims to have been a candidate for the CEO's job and restricted stock, neither of which she received. Urruttia and Turing have not commented on the suit. NYT

Pfizer buys AstraZeneca division
Pfizer CEO Ian Read is on a buying spree. After agreeing to a $14-billion purchase of Medivation on Monday, Pfizer has come to terms with Pascal Soriot's AstraZeneca to buy its late-stage small molecule antibiotic division for up to $1.5 billion. Guardian

Judge won't dismiss GM ignition switch case in Texas
Mary Barra's company discovered that lawyers representing a plaintiff involved in a 2011 crash, which they allege was caused by ignition switch failure, showed the jury an altered key chain. The lawyers claimed the driver used a key with a large chain; GM has warned that heavy key chains could cause the ignition switch to malfunction. GM accused the driver and his lawyers of purposely deceiving the jury. The judge has ruled that the case will continue. Fortune

Disney and Vice make an unlikely pair
Bob Iger's family-friendly Disney seems like an odd investor in Shane Smith's gonzo-journalism outlet Vice Media. But as viewership of Disney's ESPN sags, the company needs ways to reach young males. It has become Vice's largest investor with a $400-million cash infusion enabling Smith to expand its Viceland channel internationally. There's speculation that Disney will eventually buy Vice. WSJ

Building a Better Leader

When negotiating, make sure you're in the right mindset
Negotiating when you're unprepared or in a bad mental state - having trouble at home, say - can endanger your business. Fast Company

One group that understands the impact of climate change…
…is insurers. Weather catastrophe losses have skyrocketed since the 70s. Fortune

Silicon Valley's baby brother is growing in Phoenix
Tech companies like Uber and Yelp are establishing outposts in the area, luring talent away from San Francisco. Inc.

Worth Considering

IBM battles Intel
While Brian Krzanich's Intel leads the way in server chips, Ginni Rometty's IBM has signaled to server companies that it wants a piece of this action. IBM has released specifications on its Power9 server chip, which can be adapted to customers' needs. Fortune

Turkish tanks enter Syria
President Recep Tayyip Erdogan ordered tanks past the Syrian border to push back ISIS fighters. The move comes after a bombing at a Turkish wedding killed 54 people over the weekend, for which Turkey blames ISIS. BBC News

As Bernie Sanders unveils his new organization...
...staff members are fleeing. The group, Our Revolution, is set to be announced this evening, but most of the staff has resigned. Some staffers were reportedly upset that it will accept donations from anonymous donors, which Sanders campaigned against, and many objected to his former campaign manager, Jeff Weaver, running the group. Many Sanders supporters blamed Weaver for mismanaging the campaign. NYT

Up or Out

Jim Gianopulos has stepped down as head of 20th Century Fox film studio nine months earlier than expected. Stacey Snider will succeed him, as planned. Los Angeles Times

Fortune Reads and Videos

Lawmakers want an explanation for EpiPen price hikes
With the price up 400% since 2008, Minnesota Senator Amy Klobuchar has called for an investigation by the Senate Judiciary Committee and the Federal Trade Commission. Fortune

Netflix's international customers...
…will likely outnumber those in the U.S. within two years, says a new analysis from IHS Markit. China, though, remains elusive. Fortune

Sony plans to turn PCs into PlayStations
Gamers will just need a PS Now subscription. Fortune

Nick Denton will be paid $16,666 a month...
...not to work in his former industry for the next two years. The Gawker founder signed a non-compete agreement with Univision as part of its purchase of his media company. Fortune