Another flood of firings has struck several studios that are struggling or undergoing regime change. And the result is a cascade of multimillion-dollar packages paid to top executives getting the boot without cause, leading one veteran to remark, “This is a town where you’re paid to go away.”
There has been an unusually high number of top Hollywood executives — including longtime 20th Century Fox film chairman Jim Gianopulos and Paramount vice chairman Rob Moore — who have received rich payouts to leave quietly in recent months. The exodus highlights a common but nonetheless costly practice that is especially prevalent in the entertainment and media business, where companies go through tough times, have a change of leadership or want to avoid scandal.
“Severance is an insurance policy. In the entertainment business, you are putting a product out there that requires imagination. It’s inherently risky to be in a creative business,” says compensation expert David Yermack, a professor at NYU’s Stern School of Business. “And you want to provide a safe landing for those you are firing without cause. It’s a signal to the next group of managers that you will take care of them.”
Exit packages have been standard practice for decades in Hollywood as well as in corporate America. The major difference now is that not all studio executives who are pushed out are inclined to accept a producing deal — historically the most popular brand of golden handcuffs in the film industry — or some sort of consulting role. Rather, they want a golden handshake that sets them free — even to take another job without giving up any of their severance.
In June, 21st Century Fox chiefs Lachlan and James Murdoch announced that Stacey Snider would succeed Gianopulos when his contract ran out in summer 2017 and that he would then take on an advisory role at 21st Century Fox. That plan quickly unraveled, and Gianopulos negotiated a Sept. 1 exit. On a good year, Gianopulos — who ruled the studio for more than a decade — could have made nearly $20 million a year with bonuses. His contract either will be paid in full or he’ll receive a prearranged severance package, sources say.
“Companies will defend these payments as part of a bargain to leave on good terms,” says Kevin Murphy, a leading compensation expert and professor at USC’s Marshall School of Business.
Several ousted executives who opted for Hollywood producing deals say that route can be uneasy. “It’s very difficult emotionally for the fired person to stay and be reminded of that experience day in and day out, and it’s awkward for people who once reported to you switching power positions,” says one fired executive. “There’s no real incentive to make a person you fired look good, so the studio doesn’t help much.”
There are exceptions, such as former News Corp. president-COO Peter Chernin and ex-Sony co-chairman Amy Pascal. Chernin left in 2009 with a package that included a six-year TV and movie deal, which required Fox to buy two films a year from his Chernin Entertainment. (The movie deal has been renewed, but Chernin’s TV division now has a deal with NBCUniversal.) Pascal’s pact is valued at $40 million after Sony gave her such marquee titles as Spider-Man: Homecoming to produce. She was succeeded by Tom Rothman, who (like Snider at Fox) is reshaping the leadership ranks, causing friction and more departures. This summer, Sony motion picture group president Doug Belgrad stepped down and segued into a production deal.
Another common practice in the entertainment and media business is to extend someone’s contract even though that person, or their company, may be vulnerable. Viacom renewed Paramount chairman Brad Grey’s contract through 2020 despite the turmoil at the company. Meanwhile, his deputy, Moore, was pushed out in September after Shari Redstone took control of the Viacom board following Paramount’s challenged run at the box office. Moore had a full three years left on his contract, so he either got his full salary for that time period or negotiated a lower settlement. It’s common to pay 50 cents on the dollar when it comes to executives below the chairman level, such as the president of production.
Whatever Moore is walking away with pales in comparison to former Viacom chairman-CEO Philippe Dauman’s $72 million exit package when he departed in August.
Like Viacom, 21st Century Fox has been busy in terms of hammering out severance deals. In July, Fox News Channel impresario Roger Ailes walked away with a $40 million exit package after resigning under a cloud of sexual-harassment accusations.
Another media personality who recently negotiated a lucrative exit deal after resigning amid a cloud of scandal was Today co-host Billy Bush, who was suspended in October after hot-mic audio emerged from a 2005 taping in which Bush laughed and egged on Donald Trump when Trump made vulgar remarks about women.
But when it comes to severance lore, nothing is more famous than the $140 million deal that Michael Ovitz received when he was fired as president of the Walt Disney Co. in 1995 — after only 14 months. Disney shareholders revolted and filed a lawsuit that resulted in a lengthy and messy trial. In 2006, the Delaware Supreme Court ruled that Ovitz was entitled to the money.
“It used to be, ‘You can’t fire me because I quit,’ ” says Murphy. “Now, it’s, ‘I won’t quit, but you can fire me.’ “
This story first appeared in the Dec. 2 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.