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Sumner Redstone's CEO Sweepstakes
He has his two top talents racing against each other to fix Viacom's problems

Nobody ever doubted that octogenarian Chief Executive Sumner M. Redstone could put on a good show. By the time Viacom Inc. (VIA ) President Mel Karmazin finally took a powder in June, Redstone was well aware of the jitters on the Street about his succession plans -- or lack of them. So he pulled off a masterstroke, naming his longtime confidant and MTV Networks guru Tom Freston and his CBS prime-time ratings magician Leslie Moonves as dueling lieutenants. In the realm of CEO succession plans, the bake-off has all the makings of Hollywood high drama.

At least that's how it seems to have been scripted for investors. But with Redstone, things may be trickier than they appear. Sure, "[he] knew people were nervous because there wasn't a succession plan, so he gave them one," says analyst Jake Balzer at Guzman & Co. "We'll see if he keeps it." But Redstone is cleverly getting more. Rather than announce one heir, he's setting up his top two talents to go into hyperdrive and take the risks needed in today's high-stakes media world. It's a way to hold on to both guys and get investors jazzed again. How could the Tom and Les Show fail to eventually give his stock a kick, especially after dropping 14% since last January?


That's a lot of positive energy at a company that was distracted for years by reported clashes between Redstone and Karmazin. Now, Redstone gets to enjoy a double benefit: His two deputies race each other to fix problems, and Moonves, a sought-after manager these days, remains in the fold. Remember that just a few months ago, when things weren't looking so good for CEO Michael D. Eisner at Walt Disney Co. (DIS ) across town, Moonves' name landed on the list of potential Mouse House successors. Sensing that a winner might slip away, Redstone quickly promoted him.

But Redstone is nothing if not unpredictable, as he has proven in the past by turning out potential successor Frank Biondi and alienating Karmazin. Redstone even has a booby trap of sorts waiting for Freston and Moonves, each of whom signed contracts to receive $15 million a year in salary, bonus, and deferred compensation. But the contracts also give Redstone the opportunity to name the men co-CEOs by 2007, effectively keeping the chairman's job for himself or his 50-year-old daughter Shari, who runs the family-owned National Amusements Inc. theater chain. "So what changes then?" asks Biondi. "You still have two guys working hard to please the top guy, and the top guy is Sumner or his daughter. That's succession?" True to Redstone form.

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