Blockbuster CEO to leave company by end of year

Wednesday, March 21, 2007

SAN ANTONIO -- The chairman and chief executive of Blockbuster Inc. will leave by the end of the year, ending a high-profile salary squabble with the movie-rental company's board, it announced Tuesday. John Antioco, who has led the company since 1997, has repeatedly clashed in the past two years with billionaire investor Carl Icahn, who is on the board and holds about 10 percent of Blockbuster's stock. In the most recent dispute, Icahn and the rest of the board tried to withhold a chunk of Antioco's 2006 bonus.

At the end of last year, the Dallas-based company 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.

Under the revised employment contract announced Tuesday, Antioco will receive a bonus of $3.1 million for 2006. The board had previously offered him $2.3 million, but he argued he was entitled to $7.7 million under his previous agreement.

In addition to resolving last year's bonus dispute, the new employment agreement calls for Antioco to earn a salary of $1.25 million, a bonus of $2 million and to continue to collect perquisites like a $1,100-per-month car allowance this year.

In a statement released by the company Tuesday, Icahn said, "John and the company have reached terms that are clearly in the best interests of the stockholders."

Antioco said the employment 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.

When Antioco leaves Blockbuster, 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 a large stake in the company as it was struggling. 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.

Blockbuster shares fell 23 cents, or 3.2 percent, to $6.88 in midday trading on the New York Stock Exchange.

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