In a surprise ending to one of the most closely watched management sagas, Viacom Inc. President Mel Karmazin was close Wednesday night to extending his contract at the entertainment giant beyond the end of the year, sources close to the situation said.
The new employment agreement would lift a cloud that has been hanging over Viacom for more than a year. Many investors had expected Karmazin, whom they hold in high regard, to leave the company because of his widely publicized power struggle with Viacom's chief executive and controlling shareholder, Sumner Redstone. The two executives have had a difficult time sharing the reins since becoming partners nearly three years ago.
Under any new agreement, the 79-year-old Redstone is expected to take back powers he ceded reluctantly to his No. 2 executive as part of a 2000 merger between Viacom and CBS Corp. Karmazin was chief executive of CBS. In addition to the CBS network, its TV stations, billboards and Infinity Broadcasting radio group, Viacom owns MTV, BET, VH1, Nickelodeon, Showtime, Paramount Pictures, UPN and Blockbuster Video.
Although sources said Karmazin, 59, had not yet signed a new contract Wednesday evening, they indicated that Viacom was preparing to announce his plans to stay at the company as early as today.
Details of the new contract were not immediately available.
Karmazin's current contract expires at the end of the year, although certain of his powers disappear in May, when the three-year merger agreement between Viacom and CBS ends. The pact gave Karmazin, who serves as chief operating officer, the authority to hire and fire executives without Redstone's approval and protected him from being ousted without a two-thirds vote of the board. Viacom's board consists of an equal number of directors from the former CBS and Viacom.
In January, Redstone told The Times he had no intentions of reinstating what he refers to as Karmazin's "superpowers."
"I made a sacrifice to get CBS," he said. "I gave up a lot of power, and I didn't like it. Why would I? I built the company from nothing."
At the same time, Karmazin had said he would not stay if his powers were diluted.
Although the two executives have had no public blow-ups, tensions had become so disruptive to the company's stock that independent board members intervened last year, ordering the men to reconcile their differences.
Redstone and Karmazin agreed at the time to table any discussion about Karmazin's fate until the end of last year.
Yet the failure to come to a quick resolution in the new year gave rise to a new round of speculation that Karmazin would exit.
Investors are expected to applaud a new pact. Karmazin's cost-consciousness has helped Viacom outperform its rivals and become the most valuable of the media stocks.