Activist Shareholder Readies Another Salvo at Viacom After CEO Pay Revealed

Dorothy Hong
Philippe Dauman

Philippe Dauman was paid $54.15 million in fiscal 2015, a compensation package that shareholder Eric Jackson of SpringOwl Asset Management calls "egregious."

One week after an activist shareholder published an online 99-frame slideshow excoriating Viacom's allegedly overpaid management, SpringOwl Asset Management will strike again on Monday with an article at Jim Cramer's 

This time around, SpringOwl's managing director Eric Jackson will focus on CEO Philippe Dauman's fiscal 2015 compensation of $54.15 million and the unusual way Viacom first disclosed it last week via a press release that left out a $17 million bonus and other tidbits, thus indicating he was paid $36.9 million. A few days later, an SEC filing revealed Dauman's full compensation.

"Instead of a pay decrease in 2015 related to the stock dropping in half, Dauman's pay actually increased 23 percent year-over-year," Jackson writes in his soon-to-publish article. "For Viacom shareholders, it's shocking. It certainly appears as though the company was doing everything it could to cloud this payment and make it appear to shareholders that his pay went down. Did they not think anyone would notice?"

In an interview with The Hollywood Reporter, Jackson said Dauman's "egregious" payday, coupled with the confusing way Viacom disclosed it, has strengthened SpringOwl's case that Dauman should be relieved of his duties and other massive changes should happen at the company. The $17 million bonus for a contract extension should be especially disheartening to shareholders.

"I've never even heard of that," said Jackson. "It's like they're saying: 'Wow, Philippe, we know you have so many options to get $40 million elsewhere, so as a token of our gratitude — to lead our company as you have, where the stock has declined 50 percent in just one year — we're going to give you $17 million just for putting your John Hancock on this extension.'"

"This comes across as a company trying to hide the truth," he said of the discrepancy between the press release and the SEC filing two days later. "The optics are not good."

Viacom says the $17 million is warranted because, while presented as a lump sum in Friday's regulatory filing, it vests in 2017, 2018 and 2019 and the ultimate value of the award depends on the stock price.

"The criteria used by the board for compensation decisions is articulated clearly in the proxy. Like every company, it is tied to operational benchmarks and not to stock price," said a Viacom spokesman. 

Viacom also points out that $18 million in equity awarded to Dauman in 2015 has a current real-value of zero and will rise as the stock price increases.

Nevertheless, others also were critical of Dauman's compensation.

"It is a pretty aggressive package for a company that has seen its value deteriorate like it has," Moody's Investors Service credit analyst Neil Begley told THR on Monday. "I can’t imagine shareholders being pleased." 

"It is clearly not justified," said Gimme Credit analyst Dave Novosel, given "the weak ratings and poor domestic advertising growth" at TV assets and "the lackluster performance at Paramount." 

Activist investor Mario Gabelli, who owns more Viacom voting shares than any entity not controlled by executive chairman Sumner Redstone, also weighed in on Monday, and was more charitable than most.

"Compensation is not an issue for an active CEO in the entertainment business where entertainment is doing quite well. Notwithstanding that, I'd like to see a little more creativity from Viacom, and I think that's going to happen," he told THR on Monday.

In the same filing that revealed Dauman's pay, Viacom said that the 92-year-old Redstone was paid 85 percent less than a year ago due to "reduced responsibility." Jackson of SpringOwl, a $300 million fund that owns less than 5 percent of Viacom, addressed that point as well.

"If this was the Redstone of 2006 watching the performance of Viacom in the last 12 months, would he be as accommodating of Philippe?" he asked. 

"We're going to speak up about these facts. It certainly strengthens our case for change," Jackson continued. "I would think it would irritate Sumner and Shari Redstone, where Sumner is willing to take a big cut in pay yet the CEO, who is primarily responsible for the organization, gets a 23 percent increase. That's not an alignment of interests with shareholders. You cut the stock in half and get a 23 percent increase? What kind of universe are we living in?"

He also criticized Dauman for taking $220,361 last year for his personal use of Viacom's aircraft.

"That's a bit of an irritant as well, when you saw all of these other numbers," said Jackson. "I understand that a guy needs walking-around money living in New York City, but this just starts to get ridiculous — all these numbers year after year, when you look at the state of company."

Georg Szalai contributed to this report.