The corporate parent of MTV, Comedy Central and Paramount Pictures announced Monday that Redstone's 2007 salary and bonus would not exceed $4.5 million, down from as much as $9.1 million.
The pay cut is designed to make Redstone's compensation similar to packages awarded to Philippe Dauman and Thomas Dooley, two longtime Redstone confidants who replaced recently fired Chief Executive Tom Freston.
Viacom's board also approved giving Redstone stock options currently valued at $3 million, plus Viacom shares currently valued at as much as $3 million. The number of shares Redstone gets will depend on how Viacom's stock performs compared with the overall stock market.
All told, Redstone's compensation would not exceed $10.5 million, down from the $21.5 million he received in 2005, before Viacom was split into two publicly traded parts in January.
The performance-based pay "will put the compensation of Viacom's most senior executives directly in line with the interests of its shareholders," Viacom director Robert Kraft said in a statement.
Viacom has drawn harsh criticism for its executive compensation. Last year, before the split, the company disclosed that it paid Redstone $56 million in 2004 even though the stock had declined 18% during the year. In 2003, his compensation totaled $35.5 million.
In June, a New York state judge ruled that investors had the right to sue Viacom over claims that Redstone and others were overpaid.
"If Redstone hasn't got enough incentives with the millions of Viacom shares he owns, I don't know why this salary will tip the balance," said Graef Crystal, an executive compensation expert. "He's been an utter pig as far as compensation goes. He basically backed an 18-wheeler up to the company's treasury, and packed in everything he could."
Redstone, 83, who amassed an estimated $8-billion fortune by building Viacom, also has been under scrutiny for his leadership. Redstone shrugged off suggestions that he misstepped recently by ousting Freston and severing Paramount's relationship with movie star Tom Cruise.
Redstone's pay soared beginning in 2000 when he insisted on receiving a pay package equal to the $13 million promised his new deputy, Mel Karmazin. Before that, Redstone did not take a salary or bonus.
After clashing with Redstone, Karmazin left in 2004 with an extra $35.4 million in his pocket.
Redstone is still likely to earn a generous paycheck as the chairman of CBS Corp., which paid him a $7.1-million bonus when it split from Viacom at the end of last year.
After the split, Redstone owned more than 84 million shares of Viacom stock, worth about $3.1 billion, and 47 million shares of CBS, worth an estimated $1.4 billion, according to regulatory filings.