NEW YORK/SAN FRANCISCO Controlling shareholder Sumner Redstone removed five of Viacom Inc’s (VIAB.O) directors, including Chief Executive Philippe Dauman, from the media company’s board, his holding company announced on Thursday.
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Five new directors have been elected to the board to replace those chopped, who comprise Dauman, George Abrams, Blythe McGarvie, Frederic Salerno and William Schwartz.
Redstone and his daughter, Shari Redstone, own National Amusements, the privately held theater chain company that controls 80% of Viacom’s voting stock. As Viacom’s controlling shareholder, Redstone would traditionally have that power so long as he followed proper procedures and didn’t abuse his position, said Larry Hamermesh, a Widener University law professor who teaches DE corporate governance. The changes, which must be affirmed by a DE judge, have been described by Viacom’s lead independent director as “a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom”.
As its executive chairman and CEO Philippe Dauman apparently fights for his business life, Viacom said it expects fiscal third quarter domestic ad sales to decline about 4%.
In an attempt to prevent Shari from following through on her removal of Dauman and the other board members, Salerno has filed suit in a DE court to prevent the moves from being approved.
Viacom cuts its earnings outlook Friday, blaming in part the high-stakes battle over control of the entertainment giant. Remaining in place are the other six directors, COO TOM DOOLEY, REDSTONE and his daughter, Vice Chair SHARI REDSTONE, CRISTIANA FALCONE SORRELL, DEBORAH NORVILLE, and CHARLES E. PHILLIPS, JR.
National Amusements, the Redstones’ family investment vehicle, said the indemnification agreement shows that under Dauman’s leadership, “Viacom is diverting valuable corporate resources to mount a legal and PR campaign against Sumner Redstone”.
Redstone’s mental capacity and whether the billionaire properly consented to the removal of Viacom’s directors may be the focus of the case, Hamermesh said.
Viacom’s shares jumped after Reuters first reported Redstone’s move, ending the session up 6.7 percent.
If Dauman leaves the company, he’s in for a lucrative severance pay.
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The news likely comes as little to surprise to the board members themselves. Yesterday they again called on the court to expedite the trial in light of “unprecedented and improper actions” by Redstone’s side since the initial hearing last week. Some investors said they hope a board shakeup could point to an eventual merger between the two media companies. Dauman claims that Shari wants to gain control of Viacom.
