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.
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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.