When Mel Karmazin left as president of media giant Viacom Inc. last June, he walked away with more than $31 million.
That package alone would have been enough money to make Karmazin one of the 10 highest-paid executives at publicly traded companies in New York City. But after being out of work for five months, he added his name to the payroll of upstart Sirius Satellite Radio Inc. as chief executive. That gave him another cool $144 million last year - making him far and away the top-paid executive in New York City.
While Karmazin's riches give him a huge boost on the executive-pay ladder, many other executives in just a mere 12 months also have amassed tens of millions in wealth.
Karmazin even outdid his former boss at Viacom Inc., chairman and chief executive Sumner Redstone, who got nearly $59 million in pay last year. Redstone's top deputies - Tom Freston and Leslie Moonves - took home pay totaling about $55 million each.
And, as every year, Wall Street's top honchos did well, too - including American International Group's controversial
former chairman and chief executive, Maurice "Hank" Greenberg, who was forced to resign in March in the wake of state and federal investigations into financial practices at the insurance firm. He took home $29 million last year.
Newsday's executive compensation special report doesn't examine just the pay figures of the No. 1 person at the city's publicly traded companies. On Newsday's behalf, the firm Aon Consulting also took a wider look at others in the executive suites. This showed that sometimes the chief financial officer at one company made a lot more than the No. 1 person at another.
The list shows, for example, that publishing firm McGraw-Hill Cos.' chief executive Harold McGraw III made half as much last year as the No. 2 people at brokerage house Bear Stearns Cos.
In a class of his own
But Karmazin dominates the Top 100 executives list with his month and a half of work at Sirius.
The satellite-radio company, whose staff of 514 employees is tiny by New York standards, faces a fierce fight for customers with agressive competitor XM Satellite Radio. On top of that, the company had accumulated a deficit of $1.9 billion as of last year.
Despite its financial condition, Sirius agreed to reimburse Karmazin if the tax man imposes any so-called excise taxes on any income or benefits he receives from the company.
Karmazin is promised a yearly $1.25 million salary, plus an annual bonus from Sirius. But last year most of Karmazin's pay package came from the 30 million shares in stock options the company awarded him when he joined on Nov. 18. He also was granted 3 million shares of Sirius stock outright.
Stock options allow an employee the right to buy a company stock at a set price, so the more a company's stock rises above the pre-set price, the richer the holder gets when the options are cashed in.
Value of stock options
With stock options, executives don't make money if their company's stock falls in price after the options are given. But on the flip side, if the stock price increases even just by a few dollars, executives can win - and sometimes win big.
Karmazin won't be able to fully cash in on all 30 million options right away. But if Sirius' stock gains a mere $5 per share in five years, Karmazin could realize a profit of $150 million on them. He will make another $15 million on the restricted shares. In addition, if Karmazin is terminated or Sirius gets acquired before five years are up, he will be able to capture his windfall sooner.
Karmazin doesn't "have to deliver much in terms of stock price to make money," said Paul Hodgson, senior research associate at The Corporate Library, an independent investment research firm.
Karmazin, through his media relations department, declined to comment for this story.
In defense of Karmazin, the man who started out as an ad salesman for WCBS radio may just be the dynamic personality to make the nascent satellite-radio company succeed. His close alliance with Sirius' star shock-jock, Howard Stern, helps boost the company's visibility, and certainly investors are paying more attention to the firm with Karmazin at the helm.