AP News, March 20th, 2007
The chairman and chief executive of struggling movie-rental company Blockbuster Inc. got the company's board to give him a slightly bigger bonus for 2006, but not without agreeing to give up his job.
John Antioco, who has been the CEO for nearly a decade, will leave the company by the end of the year, Blockbuster announced Tuesday. Shares closed down 25 cents, or 3.5 percent, to $6.86 in trading on the New York Stock Exchange, then lost another 6 cents in after-hours trading.
Under the agreement announced Tuesday, Antioco will receive a bonus of $3.1 million for last year's work. The board had previously offered him $2.3 million, but he argued he was entitled to $7.7 million. Such disagreements over pay sometimes occur, but rarely do they spill into the public as Antioco's did in Securities and Exchange Commission filings last month.
Antioco has repeatedly clashed with billionaire investor Carl Icahn, who is on the board and holds about 10 percent of Blockbuster's stock. Icahn acquired a large stake in the company two years ago and has been pushing for change.
At the end of last year, Dallas-based Blockbuster reported strong growth in the number of Total Access subscribers, its new program that merges online rental service with its retail stores in an effort to fight off competition from Netflix Inc. But launch costs were higher than expected, and cost-cutting and declining earnings at the company's retail stores have pounded the company's stock price in the past few years.
Icahn said he and the board will continue to work with the management team.
"John and the company have reached terms that are clearly in the best interests of the stockholders," he said in a statement released by Blockbuster.
Antioco said the new agreement should allow for an orderly succession and that he would remain focused on improving company initiatives like Total Access, which he is credited with designing.
Arvind Bhatia, an analyst with Sterne, Agee & Leach, said he doesn't expect Antioco's departure to have a major effect on the company's direction or day-to-day operation.
"Total Access was spearheaded by him, but it is at a point where it is in a good position to grow. A new CEO could pick up from here and go," he said.
For 2007, Antioco will earn a salary of $1.25 million, a bonus of $2 million and continue to collect perquisites like a $1,100-per-month car allowance.
When he leaves, he'll get a lump sum payment of $5 million, considerably less than the $13.5 million he would have been entitled to receive if he had been terminated without cause or had resigned for good reason at year's end.
The trim in Antioco's compensation package comes at a time when shareholders are increasingly pushing for more accountability in executive pay. Compensation is usually heavily tied to financial targets, but boards have some discretion in how much is awarded, and Blockbuster's board decided to exercise that discretion _ a move that ultimately led to the departure agreement with Antioco.
Icahn and Antioco first tangled two years ago when Icahn bought his stake. Icahn had Antioco removed from the board in a proxy fight and then said the CEO was "blackmailing" shareholders by trying to collect $50 million in severance.
The board eventually brought Antioco back, avoiding the severance payout.
