Shari Redstone's Power Play that Could Prevent a Paramount Sale

Illustration by: John Ueland

Sumner’s daughter ups pressure on Viacom chairman Philippe Dauman as a board battle looms and a Redstone granddaughter tries to join the messy health care fight.

This story first appeared in the May 6 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

What, if anything, does Shari Redstone plan to do next in her battle with Viacom chairman Philippe Dauman? It's an important question because if she has the stomach for battle, she potentially could do a lot.

If the grim, "living ghost" picture of 92-year-old Sumner Redstone's condition painted by his ex-companion Manuela Herzer is even half true, Shari, 62, potentially could seize control of her father's media empire by challenging his competence to fulfill any corporate role. In fact, several legal experts agree Shari could launch that challenge and still contend, as she has in litigation initiated by Herzer, that her father is perfectly competent to make personal decisions, such as dropping Herzer as his health-care proxy and excluding her from his will, as he did in 2015. "You can be competent over many transactions but be incompetent to manage complicated things," says USC law professor Elyn Saks.

If Sumner were to be declared incompetent, a seven-member trust would take control of Viacom and CBS. And if Shari has a majority of votes on the trust, as has been speculated, she could replace the Viacom board and rid herself of Dauman, 62. Some insiders think Shari, who has avoided the spotlight, never would try to wrest control of her father's properties until nature has taken its course. "It would not be characteristic behavior for her," says an executive high in Sumner's empire. But if anything could provoke her, it might be Dauman's announced plan to fast-track the sale of a stake in Paramount.

The battle over the future of Viacom has taken weird twists with the late 2015 ejection of Herzer and Sumner's former girlfriend, Sydney Holland, from his life and Herzer's subsequent legal fight to be reinstated as his health-care rep. (On April 19, Keryn Redstone, Sumner's estranged granddaughter, even attempted to add herself as a plaintiff in the case.) But one of the odder developments involves conflicting accounts of Sumner's position on the planned sale. Dauman has told his board that he "thought" he heard Redstone approve the idea during a visit to his Beverly Park mansion in mid-February and that a nurse had witnessed the exchange. That seems a strange note to pass along to Viacom directors unless he expected to be challenged, which is exactly what happened — though not in an especially direct way.

Just days after his encounter with Dauman, Sumner met with Paramount CEO Brad Grey and declared himself to be, in fact, vehemently opposed to a sale. This time, Shari was present during the conversation. As Sumner long regarded Paramount as the jewel in the Viacom crown, it's easy to imagine he might not be pleased to see even a part of it auctioned off.

Shari has not taken a public position on the Paramount sale, but media reports that her father objects to the plan read like a shot across Dauman's bow from her camp. How credible was Dauman's account that Sumner had endorsed the sale? Herzer already has publicly challenged the veracity of Dauman's descriptions of earlier meetings with Sumner and has alleged Sumner would not have been capable of expressing the full-throated support for Dauman the Viacom chairman has attributed to him. (In November, the New York Post ran a caricature depicting Dauman as a lying Pinocchio.)

Perhaps it's fair to question both sides. Is Sumner really capable of taking a position on the sale of Paramount? An April 9, 2015, email — which recently surfaced thanks to Herzer's court case — suggests there were big doubts a year ago among several parties in Sumner's life about his capacity to make decisions regarding his media empire. In that email, attorney Adam Streisand dispensed advice to prospective clients Herzer and Holland. Sources say this email was written as the two women — then still very much holding sway over his household — were pushing him to make a strong public statement regarding his estrangement from Shari. Perhaps Herzer and Holland foresaw Shari would challenge their influence over her father; certainly Herzer has made much of that estrangement in her fight to be reinstated in Sumner's life.

According to Streisand's email, both Viacom and Sumner's estate lawyer, Leah Bishop, warned that if Sumner embarrassed his daughter by making such a statement, she could seek to take control of his affairs. At that point, wrote Streisand, Sumner's "current condition will become public and Viacom will have to remove Sumner as an officer/director and stop paying him compensation." Alluding to both Viacom and Bishop, Streisand wrote, "They don't want to poke the bear right now."

The obvious implication is that if Shari was to take charge of her father's affairs, those who enjoyed a remunerative place in his world would be at risk. Including Dauman. Bishop, who continues to repre­sent Sumner, declined to comment on Streisand's account, as did Viacom. Sumner never issued any statement recriminating Shari. And it is unclear whether Streisand was retained by Herzer or Holland; he did not respond to a request for clarification. (He is not representing Herzer in her current court fight.)

Despite the apparent uncertainty about Sumner's wishes, a Viacom insider says Dauman, under pressure because of the company's weak cable networks and prolonged stock slide, still intends to sell the stake in Paramount by the end of June. So far, however, it doesn't appear that there have been any briefings of possible suitors, making it hard to say just how fast-tracked the transaction might be.

And even if Shari stands by as part of her father's empire is sold, the day will come when the trust will control whatever remains of Viacom. If Shari has four votes, it appears she will have the power to fire Dauman and any other board member she chooses. Company rules state board members can be removed "at any time … with or without cause." USC law professor Michael Chasalow even sees the possibility of Shari attempting to dismiss Dauman for cause, if she can make the case he misled the Viacom board and investors about Sumner's condition and the various instructions attributed to him. But according to a securities filing, Dauman's contract allows him to quit for "good reason" if Viacom were to "change the parties to whom he reports." He would receive an exit package worth as much as $75 million if that happens, a scenario that seems to provide abundant fodder for legal jockeying.

Even the insider who thinks that it's not in Shari's nature to seek control while her father is alive still believes it's only a matter of time before the battle for Viacom is underway. "She's keeping her powder dry," says this person. "But she's not done."