Sumner Redstone Fires Most of Viacom Board
Fred Salerno, the company's lead independent director — until being ousted Thursday, at least — calls the maneuver "brazen and demonstrably invalid" and vows to sue.
Sumner Redstone has fired most of Viacom's board in one of the biggest assertions of power in corporate history, replacing directors the mogul has been at war with — including CEO Philippe Dauman — in favor of members of his own inner circle.
Redstone's trust, National Amusements, ousted George S. Abrams, Blythe McGarvie, Frederic Salerno and William Schwartz in the latest twist in a series of dramatic events involving the future of the $18 billion entertainment conglomerate. Those who remain Viacom directors include Sumner Redstone, daughter Shari Redstone, COO Thomas E. Dooley, Cristiana Falcone Sorrell, Deborah Norville and Charles E. Phillips.
Salerno, the lead director — until Thursday's ousting, at least — quickly denounced the action as "a brazen and demonstrably invalid attempt by [Shari] Redstone to gain control of Viacom and its management in disregard of Sumner Redstone's wishes."
Dauman and others have maintained for months that Shari is actually manipulating her ailing, 93-year-old father. Salerno said Thursday he is filing a lawsuit "today" seeking "an expedited determination that Ms. Redstone's attempted removal and replacement of Viacom directors is invalid."
At the same time, Redstone named a number of top entertainment and technology executives to replace the ousted directors. They include venture capitalist and BuzzFeed chairman Kenneth Lerer; former Sony exec Nicole Seligman; former MTV Networks executive Judith McHale; Eversource Energy chairman Thomas May; and Avis Budget Group CEO Ron Nelson, who used to work at DreamWorks and Paramount.
The battle for Viacom began in earnest when Sumner Redstone replaced Dauman and ally George Abrams on a seven-member trust that will control Redstone’s assets once he dies or is deemed incapacitated. Redstone warned in recent days that he was dissatisfied with how the company that owns MTV, Nickelodeon and Paramount Pictures is being run, and that he was considering removing Dauman from the board because of the struggling company's wayward strategy.
The mogul has been angry with Dauman over a plan to sell a large stake in Paramount, which has long been considered one of the crown jewels in Redstone's media empire, which also includes CBS, run by CEO Leslie Moonves. Redstone, who hasn't been seen around Viacom or its assets in several months, actually visited Paramount last week and chatted with studio chief Brad Grey without leaving his vehicle.
Things really heated up this week when Salerno issued an open letter to Redstone that read, in part, "It is alarming that your representatives refuse us the opportunity to talk with you, express our perspectives, share our friendship, or understand directly from you what your wishes might be."
Redstone's response was blunt: "I no longer trust Philippe or those who support him." National Amusements, which owns 80 percent of Viacom's shares, said in Thursday's announcement that the new board of directors will "evaluate the current management team and take whatever steps it deems appropriate to ensure that Viacom has in place strong, independent and effective leadership."
Thursday's shake-up on the Viacom board sent its stock surging 7 percent as investors remained hopeful that new leadership at the company might put an end to the surreal legal and boardroom fight. The stock, which began underwater on Thursday, closed $2.85 higher to $45.05 on volume nearly three times its average. Shares of CBS also closed higher, gaining 2 percent to $54.48.
BTIG analyst Richard Greenfield on Thursday quickly upgraded Viacom stock to "buy" and placed a $55 target on shares. The analyst has been arguing for board and management changes, and for Viacom to merge with CBS.
Salerno's entire statement issued after he and others were removed from the Viacom board on Thursday reads as follows:
“Today Viacom received notice from National Amusements, Inc. that purports to remove Viacom directors and replace them with new directors, subject to a ruling by the Delaware Court. This is a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom and its management in disregard of Sumner Redstone’s wishes and to undermine the current Board’s ability to represent the best interests of all of the stockholders of Viacom.
“With the support of the independent directors of the Board, I am filing today a lawsuit in Delaware Chancery Court seeking an expedited determination that Ms. Redstone's attempted removal and replacement of Viacom directors is invalid and that the directors elected at the 2016 Annual Meeting continue to serve. I am also seeking an expedited hearing, expedited discovery and an order of the court to maintain the status quo pending resolution of the litigation.
“Mr. Redstone established and maintained for decades a clear estate plan for the governance of Viacom upon his death or incapacity — based on independent control and professional management of Viacom going forward. He said repeatedly that the Board will be responsible for making decisions about governance, leadership and succession, and he hand-selected a group of trusted advisors and independent directors to fulfill this role.
“Sadly, it is now clear that Mr. Redstone is being manipulated and used by his daughter in an attempt to accomplish her long-held goal of gaining complete control of Viacom.”