The video rental chain's chief exec John Antioco will depart by the end of the year -- taking a reduced severance package with him
Blockbuster's (BBI) CEO John Antioco will leave his position by the end of the year and collect a smaller check on his way out, in the latest chapter of his battle with a board that includes the billionaire investor Carl C. Icahn. The Dallas video rental company's decision comes as more CEOs come under fire for their outsize pay.
Antioco is getting a $3.05 million bonus for 2006, instead of the $7.65 million he had been entitled to under his previous employment agreement. His company is also paying a lump sum of $4.99 million, instead of the $13.5 million he would have gotten had he been terminated without cause or resigned for good reason on Dec. 31, 2007. "I am pleased that we were able to reach this agreement," Antioco said in a press release Mar. 20. "This revised employment agreement allows for management continuity and ample opportunity for an orderly succession by the end of the year."
The board had initially offered Antioco a $2.28 million bonus, but agreed upon the higher amount after fighting with him over the matter for weeks. Blockbuster had announced on Feb. 27 that it was trying to resolve its disagreement with Antioco, according to a Securities and Exchange Commission filing.
This isn't the first time Antioco has run into trouble. Icahn had forced himself onto Blockbuster's board in 2005 -- and bounced Antioco off of it. When the CEO threatened to quit if he wasn't reelected back onto the board, Icahn had accused Antioco of "blackmailing" Blockbuster shareholders to collect on a $50 million severance arrangement. With Icahn's support, the board eventually brought back Antioco, avoiding the payout (see BusinessWeek, 3/5/07, "Just Don't Call Him A Raider").
Having Antioco back, apparently, was just temporary.
"John and the company have reached terms that are clearly in the best interests of the stockholders," said Icahn in a press release Mar. 20.
Blockbuster has been struggling in recent years to keep customers as the Los Gatos (Calif.) mail-order DVD rental service Netflix's (NFLX) sales continue to grow explosively. For the fourth quarter of 2006, Blockbuster's net income was $12.9 million during the fourth quarter 2006, compared to $18 million during the same period last year. As investors shake their heads, the company's stock price has fallen by more than 53% during the past five years.
Blockbuster's stock dropped by another 3.1% to $6.89 per share in midday trading on the New York Stock Exchange Mar. 20.
CEO Antioco's reduced pay package is unusual enough to be newsworthy, but it isn't the only example of compensation shrinkage. When Frank Blake replaced Robert Nardelli as CEO of the home improvement retailer Home Depot (HD) in January, he got no provision for severance pay, compared to the $210 million retirement package with which Nardelli decamped. Not to mention other crucial differences, like Blake's target bonus tied to performance and a base salary at $975,000 instead of Nardelli's $2.25 million (see BusinessWeek.com, 1/25/07, "Home Depot's Newfound Austerity"). Critics had lambasted Nardelli for his hefty compensation.