NEW YORK — Viacom chairman-CEO Sumner Redstone and chief operating officer Mel Karmazin earned nearly $19 million in base salaries and bonuses last year and were awarded identical stock option grants worth an estimated $16.4 million, according to the company’s proxy statement released Thursday.
The generous pay packages are well above average. The chief executives in Business Week’s recently published 54th annual Executive Pay Scoreboard saw average salary, bonus and long-term compensation of $8.1 million. Nor do the figures reflect a trend in corporate America to slash or eliminate stock option grants in favor of restricted stock or other forms of long-term compensation.
They do reflect an ongoing and, according to some compensation experts, bizarre determination to match the pay of the company’s two top execs dollar for dollar.
The pay “is even more when you consider there are two of them — typically there’s a reduction from the No. 1 to No. 2,” said James Reda of James F. Reda & Associates in Gotham.
The rich packages also follow a flat year for Viacom’s stock. It started 2003 at about $43 and ended the year at $44. On Thursday, it closed at $40.42.
The board’s compensation committee said in the proxy it considered “a number of factors, including the role played by Messrs. Redstone and Karmazin in achieving strong operating results in a difficult economic environment and generating significant levels of free cash flow and growth in operating income.”
The company’s free cash flow rose last year to $3 billion from $2.6 billion.
Redstone, who controls about 75% of Viacom, and Karmazin each received a base salary of $3.993 million for 2003, up from $3.629 million the year before. Their bonuses of $15 million were down from $16.5 million. The grant of 800,000 stock options was up from 600,000 the year before.
Also last year, Karmazin exercised options to acquire more than 1 million shares worth $35.4 million.
The proxy noted that Karmazin sold only the number of shares necessary to cover the exercise price and pay the taxes associated with the exercise of the stock options.
Proxies filed with the SEC detail the compensation of a company’s top five highest paid execs.
Chief financial officer Richard Bressler earned a base salary of $1.155 million, up from $1.075 million. His bonus of $5.5 million and his grant of 400,000 stock options were the same as in 2002. Viacom estimated the present value of the options at $7.3 million.
General counsel and secretary Michael Fricklas and William Roskin, senior VP for human resources and administration, each earned a base salary of just over $1 million. Fricklas received a $1.2 million bonus and 125,000 stock options. Roskin was awarded a $1 million bonus and 90,000 stock options.
Viacom also announced that two members of its board will resign, leaving 15 to stand for re-election at the annual meeting May 19 in New York.
Ivan Seidenberg, CEO of Verizon, and William H. Gray III, CEO of the College Fund/UNCF, “have decided to leave our board in order to focus on other commitments,” Redstone said in a statement. He said their departures give Viacom the opportunity to further reduce its board size, moving closer to its target of 14 members.