Blockbuster Inc.'s (NYSE:BBI) CEO John Antioco is set to fight back after the company dramatically cut his bonus check by about $5 million, exercising what is known as "negative discretion". The company's Board of Directors awarded Antioco a $2.28 million bonus, which comes in addition to his salary and deferred compensation amounting to about $2.5 million. Interestingly, the bonus also came with a provision saying that if Antioco protests, he is supposed to get nothing. Typically, these fights between management and the Board of Directors take place behind closed doors; however, since Antioco complained, the company was required to set aside a $4.5 million contingency (under FASB accounting rules) which was then reported in the company's SEC filings.

Why was Antioco's bonus reduced in the first place? Well, the Board of Directors argues that the company's profits have fell 28% in the fourth quarter due to higher costs for the launch of its "Total Access" program to combine ints online and in-store rental programs. Moreover, the company continues to struggle against its main competitor Netflix, which has now delivered over a billion DVDs. The company has also had problems with the CEO in the past, after Carl Icahn accused him of blackmailing shareholders by trying to collect a $50 million severance package after being removed forcefully from the company's Board. However, this payout was avoided when Icahn and the Board brought Antioco back onboard later. Consequently, many people believe it is actually Icahn behind the cut, trying to further motivate the CEO to increase free cash flows and unlock shareholder value. But either way, many people are hoping that other companies will follow in their footsteps and not be afraid to enforce change.