CBS acting Chief Executive Officer Joe Ianniello is in line for a hefty haul when Viacom 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.
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.
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.
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.”
(c) 2019, Bloomberg · Anders Melin, Lucas Shaw