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Video giant slashes exit pay

Blockbuster's CEO agrees to a deal to leave by year-end for 62% less than he had expected.

March 21, 2007|Josh Friedman | Times Staff Writer

In a move that could inspire other companies to deflate their executive golden parachutes, video rental giant Blockbuster Inc. is sending its beleaguered leader off with a slimmed-down exit package.

Chief Executive John Antioco, 62, will leave the Dallas-based company by the end of the year, having received $8 million in bonus and severance by then. That's 62% less than Antioco would have gotten had the board not slashed his 2006 bonus and negotiated a smaller exit sum.

Billionaire investor and board member Carl Icahn -- who tried to oust Antioco in 2005 and has been an outspoken critic of the executive's pay in recent years -- was the driving force behind the deal, arguing that Antioco's compensation has been excessive given Blockbuster's troubles. In 2004, Antioco earned a pay package valued at $51.6 million.

A former Taco Bell executive, Antioco was hired in 1997 and has been under fire for years. Once a powerful force in entertainment, Blockbuster has suffered as DVDs have replaced videocassettes. Mass merchandisers discount DVDs to the point where many consumers opt to buy rather than rent them.

In addition, online competitor Netflix Inc. has eaten away at Blockbuster's market, while technology such as digital cable and satellite TV has also made scores of movies available to consumers.

Icahn, the company's biggest investor, issued a statement Tuesday expressing satisfaction with the deal. "John and the company have reached terms that are clearly in the best interests of the shareholders," he said.

Antioco, who also praised the accord, was unavailable for an interview. In a statement, he said the timetable provided "ample opportunity for an orderly succession by the end of the year."

Analyst Stacey Widlitz of Pali Capital in New York said Icahn was more focused on near-term profitability, while Antioco spent aggressively to build Blockbuster's Total Access program combining mail and in-store rentals.

The pay compromise comes in an era when new federal rules require fuller disclosure of executive compensation. Investors including Icahn have been pressing for closer links between pay and company performance.

"This opens the door to other boards and compensation committees saying, 'Look at what happened at Blockbuster in March of 2007,' " said Bill Coleman, senior vice president of

Don Lindner, executive compensation practice leader of WorldatWork, a Scottsdale, Ariz.-based association of human resource professionals, also predicted that more companies would act like Blockbuster.

"You are going to see more pressure on companies to tone down these termination packages," he said.

The pay dispute came to light last month when Antioco objected to the board's decision to award him a 2006 bonus of $2.28 million. He said he was eligible for $7.65 million as the company's stock surged 41% last year, but the board didn't agree.

Antioco and the company compromised at $3.05 million.

Under the settlement, Antioco will also receive severance pay of $4.99 million, compared with the $13.5-million payout he would have gotten under his previous contract terms.

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