Viacom Board Member: We'll Fight Attempts to Fire Us
"We feel the responsibility to challenge in court what we honestly believe would be legally flawed removals."
Viacom board members on Monday sent a letter vowing to fight any attempts to oust them from their positions, setting up the latest legal salvo to rip through the embattled media giant.
Frederic Salerno, lead independent director of Viacom, and his fellow board members said that founder Sumner Redstone does not appear to be acting on his own "free will," and could be under the influence of daughter Shari Redstone. The letter stated that Sumner has always made it known that he did not want his daughter in control of the company that owns marquee properties such as MTV, Nickelodeon and Paramount Pictures.
There has been heavy speculation in Hollywood and on Wall Street that Shari Redstone, acting on behalf of her family's trust that owns a majority of Viacom and CBS, would try to oust the board members and then dump CEO Philippe Dauman. Shari Redstone and Dauman have often been at odds in recent years, especially as Viacom's stock has lost more than 30 percent of its value during the past year.
"We know that none of us is 'entitled' to his or her Board seat," Salerno said in the letter. "But we were elected, until our terms expire or we are properly removed, to look after the interests of all the stockholders of Viacom. That is what Delaware law requires — and that is what Sumner Redstone has always expected."
Other co-signers of the letter include Deborah Norville, Charles Phillips, William Schwartz, Blythe McGarvie and Christopher Falcone. Salerno said that he and Schwartz have been rebuffed in numerous attempts for a face-to-face meeting with Sumner Redstone.
Salerno also portrayed the 11-member board as defenders of mom-and-pop shareholders in a bid to spare their seats. He also held steadfast to their decision to sell a major stake in Paramount, despite reports that Redstone is opposed to such a deal.
“One important step we are considering is a minority investment in Paramount that can contribute not only direct financial funding but commercial and strategic opportunities as well. We hope that the fight over control does not impair or completely undermine this potential step with Paramount,” wrote Salerno.
He added: “We also understand that if Sumner is found competent and acting without undue influence, we may be legally removed simply for having explored strategic options that might include a minority investment in Paramount. That said, our job is to try to do our job, not to try to keep our job. That is all we can promise — and we do promise it.”
Salerno's pleas might fall on deaf ears once the stock market opens.
Eric Jackson, a fund manager at SpringOwl Asset Management which owns a few thousand shares of Viacom, reiterated his call to "fire Philippe Dauman." He said on Monday that "a board overseeing a 50 percent drop in the stock price over the last two years ... saying 'hell no, we won't go' ... (showed) astounding chutzpah."
Jackson first set his sights on Viacom in January with a 99-page slideshow he posted online that excoriated Dauman and others at Viacom. He called for a new chairman, and he got more than he bargained for when Redstone became chairman emeritus and Dauman was made executive chairman, a move Jackson wasn't happy with given his low opinion of Dauman.
Meanwhile, investor Mario Gabelli -- who has also been outspoken regarding the corporate soap opera at Viacom -- called for a special shareholders meeting to discuss the latest twists that have slammed the company's upper ranks.
The latest moves continue a dramatic corporate and family drama that escalated in recent weeks in a flurry of legal action between Dauman and Redstone. Dauman and another longtime Redstone ally were ousted from the mogul’s trust, which controls both Viacom and CBS. And, in the process, Shari Redstone emerged in control of the board of National Amusements trust and the fate of both media giants.
Dauman last week made an attempt to fend off Shari Redstone, who many in Hollywood believed had for months been orchestrating a careful campaign to strip the executive of his duties. He and other Viacom directors filed a lawsuit that questioned whether Sumner Redstone — who turned 93 on Friday — was lucid enough to make complex business decisions and was being controlled by Shari Redstone.
On Friday, a Massachusetts court approved Dauman's request for a speedy court case and scheduled opening arguments on June 7 about why he should be reinstated to the National Amusement trust.
A spokesman for Redstone declined to comment.
The full Salerno letter is below.
To All Viacom's Constituencies:
I am writing as the Lead Independent Director of Viacom on behalf of Viacom's independent directors. As speculation grows that Viacom's directors, other than Sumner and Shari Redstone, face the possibility of a direct attempt to remove them from Viacom's Board of Directors, we want our many important constituencies to understand, clearly and without rhetoric, what we are thinking and why.
We know that none of us is "entitled" to his or her Board seat. But we were elected, until our terms expire or we are properly removed, to look after the interests of all the stockholders of Viacom. That is what Delaware law requires — and that is what Sumner Redstone has always expected.
We now find ourselves facing a possible attempt to remove Viacom directors as a result of a chain of actions said to have been legally put in motion by the controlling shareholder of Viacom, Sumner Redstone.
We know that such an attempt, on its face, would be completely inconsistent with Sumner's lifetime commitment to an independent Board and professional management for Viacom after his incapacity or death. More specifically, it would be equally inconsistent with his stated judgment for many years that his daughter, Shari, should not control Viacom or his other companies.
We face a key question: Should we acquiesce in or contest a removal attempt? Acquiescence is appealing — it would remove some of the antagonism and public controversy, and avoid contentious and time consuming litigation. But to a person we feel the responsibility to challenge in court what we honestly believe would be legally flawed removals. That is especially so because the flaw we see would be the inexplicable assertion that Sumner was acting of his own free will and with the mental competency to do so. For several weeks, I and the Chair of the Governance and Nominating Committee, Bill Schwartz, have tried to meet face-to-face with Sumner, but with no success to date.
We will contest the purported removal if it comes, because we see that as our responsibility to the non-control shareholders of Viacom who own 90% of the equity of the company – and to the legacy of a man we greatly admire and consider a dear friend. We can do no less than try to make sure that the fates of Viacom, its majority equity holders and Sumner's legacy are ably represented on their behalf and impartially decided by the courts.
While we will engage on that front, we have not forgotten and will not forget a primary role we have as Viacom directors — to oversee the performance of Viacom's business. The Board is not happy with where Viacom's performance stands. We know Viacom needs to do better — and we are very focused on that objective and on the need for management to drive it.
To that end, one important step we are considering is a minority investment in Paramount that can contribute not only direct financial funding but commercial and strategic opportunities as well. We hope that the fight over control does not impair or completely undermine this potential step with Paramount. We also understand that if Sumner is found competent and acting without undue influence, we may be legally removed simply for having explored strategic options that might include a minority investment in Paramount. That said, our job is to try to do our job, not to try to keep our job. That is all we can promise — and we do promise it.
In sum, our priority agenda is and has been to pursue the critical goal of improving Viacom's performance and now, if needed, a judicial determination of the legality of any removal attempt.
On behalf of Viacom's independent directors — Cristiana Falcone, Blythe McGarvie, Deborah Norville, Charles Phillips, William Schwartz and myself,
Lead Independent Director