Activist Shareholder Criticizes Viacom With Online Slideshow

Boston Beginnings
Christopher Patey

Redstone was born in a Boston tenement to a father who changed the family name from Rothstein to Redstone and built a regional movie-theater chain. After a short career as an attorney (he graduated from Harvard and Harvard Law), Redstone joined his father's company, National Amusements, in 1954. He became CEO in 1967 and steadily grew the company with profitable investments in studios.

"Oh la la! C'est trop cher!" says one slide that compares CEO Philippe Dauman's salary to that of his peers.

Viacom, already dealing with a shareholder lawsuit alleging board members are too cozy with executive chairman Sumner Redstone, now have a different activist shareholder who released an online slideshow replete with alleged mistakes made by Viacom management.

The 99-slide presentation from Eric Jackson's SpringOwl Asset Management calls the 10 years since Viacom and CBS split into two separate companies a "lost decade" for Viacom, given that its stock is down 4 percent since then while the S&P 500 and CBS have climbed 59 percent and 72 percent, respectively, in the same time frame.

The slideshow chronicles Viacom's stock performance for one year, three years and five years to show its "chronic underperformance against peers."

Among the many alleged mistakes rehashed in the presentation is an investment 10 years ago that gave the conglomerate a half-interest in Vice, which it sold back a year later for a few million dollars. Since then, Walt Disney and 21st Century Fox have each invested in Vice, which today is worth an estimated $4 billion.

SpringOwl criticizes Viacom for listing Deborah Norville as an "independent director" even though she hosts Inside Edition, produced by Viacom's sister company, CBS.

"The Viacom board is too large, too cozy and too overpaid for underperformance," says one slide. "Outside directors are among the highest paid in the media sector, perhaps explaining their generosity towards Viacom's CEO and COO."

Those two executives, Philippe Dauman and Thomas Dooley, should be replaced, as should Redstone, argues SpringOwl, which says the two have been paid a combined $432 million in the past five years.

"Is Dauman worth six times more than Netflix's Reed Hastings? Is Dauman worth 30 percent more than Disney's Bob Iger?" one slide asks. The same slide tweaks Dauman for his French-sounding name by listing his five-year compensation of $243 million with a thought bubble exclaiming: "Oh la la! C'est trop cher!"

Redstone is an "absent chair" whose removal is necessary if the stock is expected to meaningfully rise, SpringOwl argues.

SpringOwl maintains that Viacom "sped its destruction when CEO Dauman heavily licensed content to Netflix in 2011 ... In doing so, he heavily trained a generation of Nick viewers to go to Netflix for Dora instead of Nick."

The slideshow lists nine steps for "revitalizing Viacom's culture and stock price" (some bullets paraphrased for brevity):

1. Redstone steps down.
2. Refreshed board and new chairman.
3. New leadership.
4. "Explore Alibaba Pictures/Amazon investment into Paramount."
5. Explore a merger with AMC Networks.
6. "Conduct a strategic assessment of assets."
7. "Massive operating expense reduction."
8. New push into over-the-top services.
9. "New hit shows coming from transformed creative culture at company."

SpringOwl says that the "potential rerating" of Viacom if it were to hire "good" management is an additional $13.2 billion in market cap on top of the $17.37 billion the conglomerate sported on Tuesday.

A 99-slide online presentation is apparently SpringOwl's preferred method of getting its point across, as it posted a similar slideshow — same number of slides, even — calling for changes at Yahoo, including the removal of CEO Marissa Mayer.

Jackson and his SpringOwl aren't the only activists calling for big changes at Viacom. Last month, Mario Gabelli, who owns more Viacom voting shares than anyone outside of those controlled by Redstone, also floated the idea of Alibaba taking a stake in Viacom.

Viacom responded to SpringOwl's slideshow with the following statement:

"Viacom's board and management team are completely focused on delivering long-term value to shareholders. We are looking to the future and the opportunities ahead. We are encouraged by the growth in our strong international business, the ratings upswings at most of our networks, Paramount's strong start in 2016, our leadership position in advertising technology and other positive recent developments."