But Redstone will not be scrambling for pennies down the back of his sofa, because the deal links the majority of his pay packet to improved returns for Viacom's shareholders, of which he is one of the largest.
At the grand age of 83, Redstone has been chairman of Viacom since 1987. In 2004, he had said that he planned to retire within the next three years -- although that was before the restructuring that split CBS from Viacom last year.
Under his new employment terms, Redstone's salary will be reduced to $1m a year from the current $1.75m, and deferred compensation, presently $1.3m million a year, will be eliminated.
His target cash bonus under Viacom's short-term incentive plan will be reduced from $6.1m to $3.5m a year, but he will receive an annual award of stock options to a value of $3m. He will also receive an annual award of performance share units with a grant-date target value of $3m.
Viacom said that the deal reflected the pay packages given to Philippe Dauman, Viacom's new chief executive, and Thomas Dooley, chief administrative officer at the media giant.
Dauman became chief executive at Viacom earlier this month after the surprise departure of Tom Freston, the man once seen as a potential successor to Redstone.
Redstone is in a strong position to profit from the agreement, because as well as being chairman of Viacom, he owns 70% of the company's voting shares.
He said: "As both a major shareholder and as the executive chairman of the company, I have long been in favour of the pay-for-performance model, which I believe is good for shareholders and good for the company.
"I want to commend the compensation committee for not only listening to our stockholders, but for their leadership, creativity and discipline in creating this new shareholder-friendly compensation structure."
Redstone recently made headlines after an interview, in which he gave some very frank opinions on why Paramount had ended its long partnership with Tom Cruise. As well as criticising Cruise for hurting profits at the company, he said that the actor was "effectuating creative suicide" and that his increasingly eccentric behaviour was hurting box office sales.
The pay deal comes into effect on January 1 2007.
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