Tags: Sumner Redstone | Viacom | board | media

Viacom Shakeup: Redstone Replaces Five Board Members Including CEO

Image: Viacom Shakeup: Redstone Replaces Five Board Members Including CEO
(Photo: AP file)

Thursday, 16 Jun 2016 03:39 PM

After months of intrigue and speculation about a leadership change at Viacom, Sumner Redstone moved Thursday to remake the board of the embattled entertainment conglomerate, changes that are widely believed to signal the imminent ouster of Viacom chairman-CEO Philippe Dauman.

Redstone's National Amusements Inc., which holds controlling interests in both Viacom and CBS Corp., announced that five members of the Viacom board had been removed and replaced by new directors of the company. Pushed off the 11-member board were Dauman, George S. Abrams, Blythe J. McGarvie, Frederic V. Salerno and William Schwartz.

The five were replaced by venture capitalist Kenneth Lerer, co-founder of the Huffington Post and chairman of Buzzfeed; Nicole Seligman, a lawyer and former Sony executive represented President Bill Clinton during his impeachment trial; Judith McHale, former Discovery Communications chief executive; Thomas J. May, the chairman of the Eversource Energy utility and director at Bank of America; and Ronald Nelson, chairman of Avis Budget Group and former co-chief operating officer of DreamWorks SKG.

National Amusements emphasized that the new directors were independent and have no formal affiliations with Viacom, Redstone family members or the trust that will govern Redstone's holdings after the 93-year-old mogul's death.

The move has been anticipated for more than a month, since Redstone publicly broke with Dauman, the man who served for decades as his adviser and since 2006 as head of the corporation that controls Nickelodeon, MTV, Comedy Central and Paramount Pictures.

"Sumner Redstone has made no secret of his lack of confidence in the existing Viacom board of directors," said Redstone lawyers Michael Tu and Rob Klieger in a statement. "He fully supports the steps taken today by National Amusements."

But because Viacom's board last month publicly vowed to mount a legal challenge to dismissals, National Amusements said it has also filed legal paperwork Delaware Court of Chancery seeking an affirmation of its right to remove the five directors. Redstone's iron grip on Viacom and CBS Corp. through his preferred voting shares gives him broad leeway to replace directors at will.

National Amusements said it has asked the court for a temporary affirmation that the existing Viacom board stay in place until a final ruling on the removals is issued. At the same time, National Amusements asks the court to prohibit that board from taking any action beyond "the ordinary course of business."

The expected ouster of Dauman represents a striking reversal of fortune for the man depicted as Redstone's "business son," an adviser who helped Redstone with some of his biggest acquisitions and who the billionaire once called "the wisest man I've ever known."

The announced changes will undoubtedly face a legal challenge, since Dauman has already gone to court in Massachusetts contesting an earlier shift in the Redstone empire and arguing that the 93-year-old magnate does not have the mental capacity to make important decisions. A hearing in that case is expected by the end of the month in a Boston suburb, though the matter has been complicated because Redstone has asked a Los Angeles judge to affirm his ability to make changes in the leadership of his holding company, National Amusements.

The battle for ultimate control of Viacom has been fully joined since May 20, when Redstone publicly broke with Dauman. It was on that date that a lawyer speaking for the billionaire sent notice to both Dauman and attorney George Abrams, another long-trusted adviser, informing both men that they had been removed from the board and trust that oversee National Amusements Inc. The holding company is the vehicle through which Redstone controls his majority interests in both Viacom and CBS Corp., with the trust positioned to oversee Redstone's holdings when he dies, or is deemed incapacitated.

After booting his two long-time consiglieres, Redstone complained through emissaries that Viacom had not been doing well under Dauman's leadership and that he was unhappy about a preemptive attempt to sell a stake in his "baby," Paramount. While willing to consider such a move, Redstone's handlers said he wanted a more definitive briefing on why the change would benefit the company's shareholders..

Dauman called his ouster from the National Amusements panels "invalid and illegal," arguing that the move was part of "a shameful effort by Shari Redstone to seize control by unlawfully using her ailing father Sumner Redstone's name and signature." Dauman and others inside Viacom suggested The Viacom CEO went to court in Massachusetts asking that he be reinstated to the National Amusements positions, suggesting the 93-year-old Sumner Redstone lacked the mental capacity to make such a decision and had been manipulated by daughter Shari.

Lawyers for Redstone, meanwhile, went to court in Los Angeles seeking to validate Dauman and Abrams' removal from National Amusements. The Massachusetts court took up the matter first, with a judge saying he hoped to give initial guidance to attorneys for the two sides by the end of June. Among the topics that remain to be resolved -- which state court should have jurisdiction -- one in Massachusetts, where National Amusements was formed, or one in California, where Redstone now lives.

The actions by the ailing Redstone, who is mostly bed-ridden and fed through a tube, appeared to clear a path to greater power for daughter 62-year-old Shari, a lawyer and tech investor whose relationship with her father has run famously hot and cold over many years. When Dauman and Abrams were booted from the National Amusements panels, their replacements were seen as being loyal to Redstone's daughter.

Dauman and his lawyers and supporters at Viacom argued that the ascension of Shari Redstone flew in the face of her father's position of many years. He had said publicly that he wanted family members to benefit from his shares in Viacom and CBS, but intended for the twin corporations to remain in the control of professionals who were not part of the family.

The dueling court cases over control of National Amusements will resurrect the issue of Sumner Redstone's mental capacity, just weeks after a California judge declined to rule on the same subject.

Judge David J. Cowan ruled in early May that Redstone's videotaped testimony made clear that he wanted Shari as the ultimate overseer of his health care and not Manuela Herzer, the long-time companion who had served in that role for several years. The judge called the elder Redstone "alert" and "composed" in his statements, though he did not make a formal finding about his mental state.

The Herzer matter may not have reached its final conclusion, though, because she immediately appealed and filed a new lawsuit, seeking at least $100 million in damages from Shari Redstone, her two sons and half a dozen of the magnate's caretakers. The lawsuit alleges that Shari led a plot to eject Herzer from the Redstone home -- which also resulted in her losing her position in an estate plan, which once would have given her $50 million and Redstone's Beverly Park mansion, valued at $20 million.

Redstone's attorneys, in turn, have threatened to sue both Herzer and another ex -- Sydney Holland -- to recover some $150 million in cash and assets they claim the two women already have received.

Despite the face he has been mostly a recluse in recent months, confined to his mansion in Beverly Park, Redstone and the people around him have been attempted to signal in recent weeks that he is still mentally capable of making business decisions for Viacom and CBS.

The mogul was taken to the Paramount Pictures lot last Friday where chairman Brad Grey met with him inside the minivan that transported him and Shari Redstone and the health care aides that Redstone relies on for care and communication assistance.

On Tuesday, Sumner Redstone visited the CBS Studio Center lot in Studio City where Moonves met with him inside the vehicle. During both studio visits, Redstone also made a point of driving around the lots to look at the fruits of his empire.

© 2017 Thomson/Reuters. All rights reserved.

   
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After months of intrigue and speculation about a leadership change at Viacom, Sumner Redstone moved Thursday to remake the board of the embattled entertainment conglomerate.
Sumner Redstone, Viacom, board, media
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2016-39-16
Thursday, 16 Jun 2016 03:39 PM
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