moonves-cbs.jpgWhile striking writers and Hollywood networks and studios are still negotiating a contract, Les Moonves "has a honey of a new one", according to the nation's foremost expert in CEO compensation. The agreement, filed with the U.S. Securities and Exchange Commission on October 19, was made public today by Bloomberg Financial News' Graef Crystal. Both Viacom boss, Sumner Redstone, and the board Redstone/Moonves control, signed off on it. Altogether, Crystal says that the CBS Inc chief exec "looks to be sitting more than 200% above the competitive pay level based on my study of 542 CEOs. That compensation doesn't seem appropriate if you consider that CBS's performance has been on a steady decline since he became CEO on January 1, 2006."

moonves12.jpgNaturally, this doesn't surprise me because I've written a lot about Hollywood corporate gluttony over the years. This case is just the arrogance of rich old Viacom chairman Sumner Redstone claiming he cuts costs at every corner while at the same time lining the pockets of himself and his execs at the expense of investors. It's all so nauseating. I recall how, in 2005, Viacom was shameless enough to reimburse Moonves, who lives in Los Angeles but also has a New York apartment, $105,000 for the period he stayed in New York at his apartment instead of at a hotel. Talk about chutzpah: This is paying the guy to live in his own home. (To learn more about the Big Media CEOs' exorbitant pay, see my 2005 column Really Big Packages that ran in LA Weekly.)

Back to Moonves' contract this time around. Crystal analyzed the most-watched network in 21 different time periods, all ended this past October 15. The first of the 21 periods began on Dec. 31, 2005, the day before Moonves became CEO, and then the start date of each succeeding period was increased by one month. Of the 21 periods, CBS delivered a total return only twice that beat that of the Standard & Poor's 500 Index. Moreover, its returns in the 17 most recent periods all fell below those of the S&P 500 Index. As the time windows narrowed toward this Oct. 15, the negative gap between CBS and the index became progressively larger. "That performance pattern makes me wonder what Redstone was thinking when he effectively gave Moonves the moon in his new pay contract," Bloomberg's Crystal wrote.

Here's what the CBS Inc chief exec gets in the agreement that runs through October 2011, according to Crystal:

--> A base salary of $3.5 million. That's down from the $5.6 million he was paid in 2006, which was the highest of 542 U.S. CEOs running companies with market caps of at least $3 billion. His new base keeps him No. 1 until 2007 pay figures come out. So much for pay risk. (General Electric CEO Jeffrey Immelt was No. 2, with $3.3 million. GE's 2006 sales were $161 billion; CBS's were $14 billion.)

--> A target bonus of $10.5 million, three times his salary. That's what Moonves gets essentially for showing up. There could be more if he performs, though nothing is specified.

--> An option covering 5 million shares, with a present value at grant that I calculate to be $35 million, using the Black-Scholes model. It isn't known whether that 5 million option-share grant will be repeated during Moonves's four-year agreement. If it's an annual event, then his total compensation looks to be $57 million a year, not including the income-tax equalization. If it is a one-time event, the figure drops to $30 million.

--> An annual grant of free shares worth $7.6 million on each of four grant dates during his contract. To earn them, Moonves will have to achieve a performance target for budgeted free-cash flow. Moonves can propose the target, and the board must approve it. Whatever it may be, neither Moonves nor his board are saying.

--> A make-whole provision so Moonves doesn't face the higher income tax that New York state and New York City levy compared with California. That allows Moonves to spend whatever time he wants at his company's New York headquarters and not suffer any monetary consequences compared with spending all his time at CBS in California. (In a statement, CBS said the rationale for this provision is that Moonves is a longtime California resident and that the company has major facilities in that state. Still, the vast majority of CEOs whose company headquarters are in New York are not given the option of having their shareholders foot the bill for any state and local taxes above those they owe wherever it is they choose to live.)

--> Should Moonves be shown the door, he stands to receive severance that includes as much as three years of salary and three years of his average past bonus. He also keeps all options and free shares.

--> If Moonves's agreement isn't renewed, he gets some more gold, by electing to be a senior adviser for $2 million a year for three years and a one-time grant of another 300,000 shares, worth $8.1 million as of the close on Dec. 7. For this, Moonves isn't required to work more than five days a month and eight hours a day. Assuming he works the maximum hours, his pay rate, including cash and the current stock price, would be a lovely $9,800 an hour. Compare that with Moonves's pay as CEO. If we take the lower estimate of his annual compensation package -- $30 million -- and assume he works 60 hours a week for 48 weeks a year, his hourly rate would be $10,500.

"Does that small gap suggest a substantial degree of indifference on the part of CBS's board as to whether Moonves works or loafs?" Crystal asks.