Inside Viacom's Board Meeting: Dauman Calls From St. Barths, Redstone in L.A.

Philippe Dauman - H 2016
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The CEO has been on a long-ago scheduled vacation, though it has obviously turned very much into a working holiday, according to insiders.

While the board of directors debated whether or not Philippe Dauman should replace Sumner Redstone as executive chairman, the Viacom CEO was vacationing on a tropical island in the West Indies.

Indeed, the special meeting of the board of directors was such a last-minute thing that it was held as a conference call via telephones at no physical location. Sumner and daughter Shari Redstone called in from Los Angeles, while Dauman weighed in from St. Barths, where he has been for about a week.

The CEO has been on a long-ago scheduled vacation, though it has obviously turned very much into a working holiday, according to insiders.

The meeting was called for the purpose of discussing a plan whereby Sumner Redstone would step down and become chairman emeritus while Dauman would replace him as executive chairman while also maintaining his role as CEO.

The meeting lasted about 60 minutes, and when it was over, Sumner Redstone was indeed chairman emeritus and 10 of the 11 board members voted in favor of Dauman replacing him as executive chairman, with only Shari Redstone voting against the proposal.

Vice chairman Shari Redstone signaled her displeasure with the plan a day earlier when she suggested it would be inappropriate for someone who is a trustee of her father's family trust to chair either Viacom or CBS, and, even after today's vote, Dauman remains a trustee.

Wall Street reacted poorly to the decision, as Viacom shares were trading 5 percent higher until news of Dauman's promotion was released, then the gain was wiped out.

On Wednesday, Sumner Redstone also stepped down as executive chairman of CBS, and CEO Les Moonves assumed the role. He did so with Shari Redstone's support, as he is not a trustee of the family trust.

CBS shares were trading fractionally lower on Thursday, even though several analysts cheered the promotion of Moonves.

But while the Moonves appointment at CBS was expected, forces had lined up against Dauman at Viacom, in the form of some Wall Street analysts and especially SpringOwl Asset Management, an activist investor with a less-than 5 percent stake in Viacom.

SpringOwl went so far as to create a 99-frame slideshow that it posted online last month, giving reason after reason that Dauman should not only not be chairman, but he should be replaced as CEO, as well.

After Viacom's board voted 10-1 in favor of Dauman's promotion, SpringOwl said: "As evidenced by the negative reversal in the stock price, the market agrees with the position of both SpringOwl and Shari Redstone that someone other than Philippe Dauman should be the chairman."

Nevertheless, Dauman has officially claimed the mantle of executive chairman, with a glowing endorsement from William Schwartz, who chairs Viacom's governance and nominating committee as a board director.

"In choosing a successor to Sumner, the board considered the need for seasoned leadership in this time of unprecedented change," he said. "We believe his becoming executive chairman is in the best interests of the company and all shareholders."

Before promoting Dauman, who has been with Viacom for 30 years and CEO for a decade, the board offered the executive chairmanship to Shari Redstone, though she declined.

Perhaps underscoring Shari Redstone's disapproval with Viacom's decision, she isn't quoted at all in the company's press release announcing Dauman's promotion. By contrast, she is quoted at length in Wednesday's press release announcing the promotion of Moonves at CBS, calling him a "creative and effective leader" who "will make a great chair."