Viacom Chief Executive Philippe Dauman and Executive Chairman Sumner… (Mel Melcon / Los Angeles…)
A shareholder has sued Viacom Inc., Executive Chairman Sumner Redstone and other company directors, contending the New York media company overpaid Redstone and his top two lieutenants by more than $36 million over four years.
Robert Freedman, a Viacom shareholder since 2005, contends the formula used to calculate bonuses for Viacom's top executives was based on broad terms that are difficult to quantify, including "vision and leadership" and "continuing to navigate economic challenges."
Freedman filed his suit Aug. 17 in Wilmington, Del. He maintains that Viacom's board did not comply with its own rules established in 2007 for calculating executive pay.
As a result, Viacom overpaid its top three executives -- Redstone, Chief Executive Philippe Dauman and Chief Operating Officer Thomas Dooley -- by $36.6 million during four fiscal years, 2008 to 2011.
The trio have ranked among America's highest paid executives in recent years, shining a spotlight on the media company's compensation practices.
In 2010, Dauman was the highest paid executive in corporate America, collecting a package valued at $84.5 million for nine months of work, an award boosted by a generous signing bonus he received for renewing his contract. Last year, he received $43 million in salary, stock and other benefits.
The 89-year-old Redstone was paid $15 million in salary and bonuses in fiscal 2010. Last year he received a nearly 40% bump in pay to $21 million for his role as executive chairman.
Dooley was paid nearly $65 million in 2010, with much of that earmarked as a signing bonus. Last year, Dooley's compensation package was worth $34 million -- slightly more than the compensation of Bob Iger, chief executive of the much larger Walt Disney Co.
Freedman's suit asks a federal judge to order the executives and board members to repay the company for the alleged overpayments. It also seeks the ability for Class B shareholders to have a say on pay policies.
Currently only Viacom Class A shares carry a vote, and Redstone controls nearly 80% of those shares.
The company defended itself in a statement.
“The plaintiff’s complaint is filled with inaccuracies, and completely fails to make a valid claim for a variety of substantive and procedural reasons," Viacom said in a statement. "We are confident that Viacom’s compensation practices are fully compliant with the law, and consistent with our 2007 plan.”
Viacom controls the Paramount Pictures movie studio in Hollywood and cable channels MTV, VH-1, Comedy Central, BET and Nickelodeon. In its most recent quarter, Viacom generated net income of $534 million, or $1.01 a share, compared with $574 million, or 99 cents, a year earlier.
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