Sirius XM's Mel Karmazin Gets A Pay Raise

Posted by: Olga Kharif on July 01, 2009

Despite all the tribulations Sirius XM has gone through in the past year, the company’s board has just voted to extend the contract of CEO Mel Karmazin through 2012. As part of the new package, Karmazin receives a pay increase of $250,000 a year and 120,000 options exercisable at 43 cents a share. The stock is currently trading at 46 cents. It has jumped nearly 7% on the news of Karmazin’s contract renewal.

But shareholders who have seen the stock plummet from $2 a share a year ago might question whether Karmazin deserves the kudos. Yes, he steered the company clear of bankruptcy by securing, earlier this year, a $530 million loan from Liberty Media. But at the same time, Sirius’s performance of late has been nothing to write home about. This spring, the satellite radio provider reported its first-ever subscriber loss. More losses could be in the offing as demand for autos equipped with Sirius radios continues to be slow, and consumers opt for satellite radio alternatives, including Web and high-definition radios and iPods.

Sirius has just lost its executive in charge of music programming to Clear Channel. And even the Liberty Media deal leaves shareholders in the cold. The loan can be converted into equity, which would dilute holdings of existing shareholders; so Liberty Media is expected to grab a huge stake in the business at the expense of existing shareholders. While the investment possibly averted bankruptcy, it was arguably in part Karmazin’s management — for instance, his decision to wait for regulatory approval of Sirius’s merger with XM for more than a year — that brought Sirius close to the brink in the first place. The wait kept Sirius from more aggressively marketing its services. Some analysts also question Karmazin’s decision, post-merger, to slash some of the company’s programming in an effort to cut costs — a decision that turned off some of the service’s long-time users. All together, this seems like the wrong time for dispensing rewards.

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Reader Comments

TB

July 1, 2009 08:10 PM

Mel Karmazin does not deserve a raise instead of saving money he would rather blow it on higher salaries. There are, or were, many people that worked remotely that required less overhead and did not live in expensive cities. They did their job correct and with tremendous pride, to make sure that details were covered. He would rather pay big salaries and raise rates then think of the customers needs.

LearnToRead

July 1, 2009 08:33 PM

120,000,000 not 120,000. How hard is it to read the 8-K? You have a link to it...did you bother reading it?

Neal Barkett

July 2, 2009 08:36 AM

Mel has guided this company thru a merger that is took an unpresidented 18 months thanks to the FCC & DOJ. He then has contended with an economic break down of the economy & auto industry not seen in most lifetimes. The fact that the company is still alive and starting to thrive is a an amazing undertaking in itself. Percentage wise the pay raise was not out of line. It looks as tough he brought the company out of this perfect storm and there is know new light at the end of this tunnel. He has invested large amounts of his own monies into this companies stock,showing he has put his money where his mouth is! How many CEO's can say that.

Denise Hubbard

July 3, 2009 12:14 AM

There is a DVD movie out about the whole Sirius XM/Mel K. story called: Stock Shock.

Very good flick and explains stock market manipulation as well. Stock Shock is at amazon.com and elsewhere.

Travis

July 20, 2009 07:42 PM

That piece of s... just started charging $2.99 for on-line content. I have been a loyal subscriber of two radios for over 6 years and now this incompetent looser who pays stern millions of dollars is charging listeners more money because he can't effectively manage a company. Everyone who reads this should cancel there XM subscription. What a joke.

bob

July 28, 2009 12:42 PM

Blaming Mel for the financial difficulties at SiriusXM is like blaming George W. Bush for 9-11. Only an idiot would link the two.

Reggie

July 28, 2009 10:10 PM

Sirius XM, price manipulation, and media bias. It's like peanut butter and jelly. See "Stock Shock* asap. stockshockmovie.com

tj

November 2, 2009 03:44 PM

I'm doing a persentation on the XM Sirius Merger and this guy is ridiculous. This is the results of a monopoly.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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