Viacom Board Nears Deal to Keep
Karmazin Beyond Contract Term
By MARTIN PEERS
Staff Reporter of THE WALL STREET JOURNAL
In an unexpected turnabout, Viacom Inc.'s top two executives are near a deal
that will keep the entertainment giant's top management intact, say people close
to the situation, ratcheting down the tension and uncertainty that has plagued
the company for more than a year.
Viacom's board met Wednesday afternoon and was expected to discuss a deal
that would keep Mel Karmazin, the president and chief operating officer,
beyond the expiration of his contract at the end of this year. Terms of the deal
weren't known, but it is likely to be a compromise between Mr. Karmazin and
Viacom Chairman Sumner Redstone, who has said he wants to re-claim some
power of the company, owner of CBS, MTV and Paramount Pictures.
The 79-year-old Mr. Redstone, who owns a controlling stake in Viacom, gave
Mr. Karmazin effective operating control of the company when the two were
negotiating Viacom's acquisition of CBS. Mr. Karmazin, 59, was the chief
executive of CBS before the merger, which was completed in May 2000 and is
now considered one of the few media mergers that has been a success. Mr.
Redstone in January said he made a "supreme sacrifice" by giving up a "fair
degree of my power" to get the deal done but he wants the "prerogatives of
CEO."
The two have come close to making peace in the past
few months but have hit last-minute obstacles. As a
result, there was still a chance Wednesday the deal
could come apart, these people cautioned. The big
question mark was whether Mr. Karmazin would
agree to the deal. He has said in the past that he
wouldn't agree to a dilution of his power. One person
said Mr. Karmazin has been mulling over the
agreement for some time, debating whether he wants
to keep working with Mr. Redstone, who has sniped
at him in numerous meetings with investors over a
long period of time.
A deal between the two is likely to cheer investors as Mr. Karmazin is widely respected on Wall Street and
inside the company for his tough financial management and his command of operating details. Concerns that
he might leave Viacom had buffeted the company's stock off and on for over a year.
The deal removes a major distraction at a time when Viacom's business is under pressure as the advertising market appears to be
weakening ahead of the impending war with Iraq. Viacom gets about half its revenue from advertising, making it more exposed than
most other media companies. In 4 p.m. New York Stock Exchange trading yesterday, Viacom shares were up 29 cents to $38.75
after being down for much of the day. |
