How Fired Hollywood Execs Walk Away With Huge Paydays
Viacom's Philippe Dauman would get a massive payout given what's in his contract.
Getting fired in Hollywood becomes more lucrative every year. Take Viacom. Two decades ago, Frank Biondi left the company with $20 million. Ten years ago, Tom Freston's farewell brought him $80 million. Should Philippe Dauman go, he could be looking at least that amount and likely more (perhaps a lot more depending on vested stock and any settlement).
That's mainly a function of climbing compensation at large. When executives sign contracts for a set term, they are due a base salary, targeted bonuses and stock options. So long as they are not fired with cause, those exiting can expect to see most of what they anticipated had their services not been terminated. However, according to lawyers who specialize in negotiating and drafting these agreements, some companies have mitigation and offset provisions requiring employees to look for other work and, when they find it, having the new money replace the old. (Those with stature like Jeffrey Katzenberg at DreamWorks Animation or Roger Ailes at Fox have gotten "no mitigation" clauses written into their agreements.)
Some companies prefer that departing execs remain sidelined. 21st Century Fox CFO John Nallen's agreement requires that he not compete with the company during his contract term. According to sources, Viacom makes some of its top execs at MTV and Nickelodeon agree to forfeit money if they go to work for a rival. "You have to be careful with the construction [of noncompetes] because they can be unenforceable in certain states under certain circumstances," says attorney Kenneth Kleinberg of Kleinberg Lange.
The biggest action over the past few years pertains to when it's appropriate to fire with cause. "We go to war over what's cause," says one attorney. In Viacom CEO Dauman's agreement, for instance, he loses much of his substantial exit package if he engages in intentional acts of material fraud against the company, refuses to perform his duties, is convicted of a felony or violates corporate policies concerning insider trading or sexual harassment. "The trend has been to get as specific as possible on what constitutes cause," says attorney Bryan Sullivan.
Insiders say Amy Pascal's Sony deal allowing her to participate in the Ghostbusters reboot and Amazing Spider-Man films is the type of agreement only available to uppermost executives with enough time served. Those who fit the bill, say insiders, would be Peter Roth at Warner Bros., Bob Greenblatt at NBC or Leslie Moonves at CBS.
Pretty much every executive pledges confidentiality and nondisparagement. Studios have been broadening out what's a secret over the years. Notes Kleinberg, "There are tyrannical people at the top in some companies who don't want any discussion of their misbehavior."
Wondering What to Do With Your $80 Million Exit Package? Ask These Guys
The former HBO chairman and CEO was Warner Music chairman and CEO but was forced out in 1995 after six months, getting a payout of $80 million before deferred compensation and stock.
Where It Went...
- Fuchs bought land in Hawaii to develop the estimated $100 million Ke Kailani project on a 65-acre parcel of land; the development company filed for bankruptcy in 2011. “Hawaii was a big loss for me,” he tells THR without disclosing a figure. “When I left Time Warner, there seemed to be a lot of media guys that went and tried to do resort real estate.”
- Fuchs, 70, continues to own a New York City penthouse and houses in Katonah in upstate New York and Hawaii. “I’m still in court in Hawaii, so I can’t go there now,” he says, “so I lend it to a lot of friends.” (Fuchs is part of a class-action lawsuit in the state.)
- Fuchs acquired a stake for an undisclosed amount in MyTurn, which offered affordable computers with easy-to-use interfaces for the first-time computer user.
- He invested in Salon.com, Nerve.com and was an early investor in StubHub.
Biondi, 71, earned a rep for getting big exit packages. In 1996, he left Viacom, where he was president and CEO, with an estimated $12 million to $20 million-plus exit package. He then was fired as chairman and CEO of Universal Studios in 1998, with the cash settlement only worth as much as $30 million.
Where It Went...
- “Way back when, I was in the investment banking business. So I know my way around Wall Street, and I put a lot of the money in conventional stocks and private equity, and they have done fine,” Biondi tells THR.
- In 1999, he launched Waterview Advisors to make private equity investments in media and entertainment companies. Most have been sold, except SightSound Technologies, whose business “boils down to a lawsuit on a set of patents against Apple.” Says Biondi: “If we win the appeal, we will be in perfect shape. If we lose it, it will be over.”
- In 2011, Biondi participated in a $4 million seed funding round for SF-based Spreecast.
- He and wife Carol Oughton continue to own four houses, two in Brentwood and two on Martha’s Vineyard. “We bought them before I left Universal, but they all require a fair amount of maintenance.”
This story first appeared in the July 15 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.