April 30 (Bloomberg) -- Philippe Dauman has to be steamed.

In 2007, the chief executive officer of Viacom Inc. outperformed his corporate sibling, Leslie Moonves, CEO of CBS Corp. Yet their surrogate father, Sumner Redstone, paid Moonves 3.2 times more.

Leaving aside that Redstone must think that pay-for- performance means you pay more for less performance, the compensation packages these two gents received are awesome: By my estimates, $22 million for Dauman and $71 million for Moonves.

As for Redstone himself, he managed to extract total pay of about $26 million for being the non-executive chairman of both boards. On May 27, he turns 85.

Corporate-governance theory says you get the best governance by having a non-executive chairman and also having a shareholder who, like Warren Buffett, owns a ton of stock.

Redstone certainly qualifies here. Besides being the non- executive chairman, he holds stock in both companies now valued at about $4.8 billion. He also controls about 80 percent of the voting power of each company.

Let's set the 2007 performance of Dauman and Moonves side by side:

-- Net sales: Viacom up 18 percent; CBS down 1.7 percent.

-- Operating income: Viacom up 6.1 percent; CBS down 1.9 percent.

-- Diluted earnings per share: Viacom up 23 percent; CBS down 20 percent.

-- Total shareholder return: Viacom's was 7.2 percent, a bit higher than the 5.5 percent return on the Standard & Poor's 500 Index. CBS's return of negative 9.9 percent lagged behind the S&P 500 by 15 percentage points.

Comparing Returns

-- Dauman has headed Viacom since Sept. 5, 2006. Between that date and the close of trading on this April 25, Viacom's annual return of 6.5 percent ranked it at the 56th percentile of the current companies in the S&P 500 Index that had total return records for the entire period. For Moonves, whose tenure dates to Jan. 1, 2006, his company's annual return of negative 0.4 percent ranked it at the 35th percentile.

To put the pay packages of Dauman and Moonves into perspective, I compared them with the CEOs of 500 other companies, all with market values of $3 billion or more. (Data for this study were obtained from Equilar Inc.)

After controlling for differences in company size, as measured by net sales, and for differences in pay risk, as measured by the percentage of options in the pay package, I found that Dauman's $22 million pay package was 94 percent above a competitive level, ranking him as the 40th-highest-paid CEO.

Fourth Place

As for Moonves, his $71 million pay package positioned him 472 percent above a competitive level, ranking him as the fourth most-overpaid CEO.

For another look at Moonves's pay, I compared him with 19 of CBS's pay comparators listed in the company's proxy statement. Interestingly, one of those comparators is Viacom itself.

It turns out that the median company among the 19 had net sales of $36 billion, more than twice that of CBS's $14 billion. It is axiomatic in studying executive pay, that the larger the company, other things being equal, the higher the pay package.

The median company also performed better than CBS (total return of 2.8 percentage points below the S&P 500 Index compared with CBS's 15-point decrement). And the median pay package of $22.2 million was a mere 18 percent above a competitive pay level while Moonves's was 472 percent above.

It Counts

In fairness, $31 million of Moonves's $71 million pay package consisted of a giant stock option covering 5 million shares. The company described the option as a one-time event, with no options to be granted in the future, or at least until his four-year employment agreement ends in 2011. On that basis, some would argue that only $7.75 million of the $31 million should be considered 2007 pay.

But it is worth noting that Redstone himself took a mega- option in 1998. At the time, he promised that he wouldn't receive more options or additional pay for five years. He reneged on that commitment less than two years later, receiving another large option, as well as a $2 million salary and a $15 million bonus.

That sort of behavior has made me something of a cynic and has led me to conclude that ``If you grant it, I count it.'' After all, CBS could have handed Moonves 1.25 million option shares a year for four years.

Perhaps the most troubling aspect of Moonves's pay in 2007 was his bonus of $18.5 million. How do you get such a big bonus for performing so poorly?

The answer may lie in a statement in the CBS proxy that ``Mr. Moonves presided over accomplishments, including achieving or exceeding budgeted financial objectives.''

With the dismal financials that Moonves produced, what does that statement say about the budget bar over which Moonves was required to jump?

It's time for Redstone to step into a well-deserved retirement and to get some tigers to replace the pussy cats now on both Viacom's -- and especially -- CBS's board compensation committees.

(Graef Crystal is a columnist for Bloomberg News. The opinions expressed are his own.

To contact the writer of this column: Graef Crystal in Santa Rosa, California, at at graefc@bloomberg.net.

Last Updated: April 30, 2008 03:41 EDT