Sumner Redstone Resigns as CBS Exec Chairman

Sumner_Redstone_leslie_moonves_Split - H 2016
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Sumner_Redstone_leslie_moonves_Split - H 2016

CEO Leslie Moonves is stepping into the role. Viacom, where Redstone remains executive chairman, said its board of directors will meet Thursday.

Sumner Redstone, the billionaire media mogul who for decades was considered one of the most influential men in the entertainment industry, has resigned as executive chairman of CBS, with CEO Leslie Moonves stepping into the role, the company said Wednesday. 

Redstone, 92 and in poor physical health, stepped down effective Tuesday and was appointed chairman emeritus. His daughter, Shari Redstone, will continue to serve as vice chairman, as she has since 2005.

Sumner Redstone is also executive chairman of Viacom, and there was speculation Wednesday that his role there would change, but Viacom did not respond to a request for comment. Viacom did, however, issue a press release announcing that its board of directors will meet Thursday.

In after-hours trading on Wednesday, Wall Street appeared to cheer Sumner Redstone's decision, as CBS shares rose 4 percent. Viacom stock, beaten down for two years, spiked 8 percent in after-hours trading.

"I am honored to accept the chairmanship of this great company," said Moonves. "I want to thank Sumner for his guidance and strong support over all these years. It has meant the world to me."

Sumner Redstone's role at both CBS and Viacom has been criticized in some circles for several months as the media mogul has been forced to fend off assertions that he is mentally impaired. Manuela Herzer, an ex-girlfriend seeking to be reinstated as Redstone's health care agent, has insisted he be examined by a doctor, and a judge has agreed.

In a recent SEC filing, Viacom revealed that Sumner Redstone was paid 85 percent less in its most recent fiscal year than he was in the year prior due to "reduced responsibilities," and observers speculate his role at CBS also diminished over the course of a year.

Minutes after CBS announced the changes, Shari Redstone issued a statement about succession at both CBS and Viacom, and it seemed to suggest that Viacom CEO Philippe Dauman will not be appointed board chair if Sumner Redstone steps down there.

"My father's trust states his intention that I succeed him as (non-executive) chair at CBS and Viacom, and also names me as a trustee after his death," Shari Redstone said Wednesday. "However, it is my firm belief that whoever may succeed my father as chair at each company should be someone who is not a trustee of my father's trust or otherwise intertwined in Redstone family matters, but rather a leader with an independent voice."

Since Moonves is not a trustee, he therefore is qualified to be chairman of CBS — based on Shari Redstone's criteria — but Dauman is a trustee, so presumably she would not back him as a choice for chairman of Viacom.

Two years ago, in his last lengthy interview, Sumner Redstone told THR that he was "very busy" in his role as executive chairman at CBS and Viacom, and that he spoke to the two CEOs every day. Within a year, though, Redstone was routinely skipping shareholder meetings and conference calls for the first time in decades as the multibillionaire's speech became increasingly inaudible.

While the timing was difficult to predict, Moonves replacing Sumner Redstone at CBS was to be expected, given the mogul has repeatedly referred to the CEO as a "genius" or "supergenius" over the years.

While some have speculated that Moonves might actually be appointed board chair at Viacom as well, Redstone told THR two years ago that neither executive would ever report to the other. Also, Dauman's contract stipulates he could step down as CEO (with a golden parachute worth millions of dollars) should anyone other than himself replace Sumner Redstone at Viacom.

In the CBS press release issued to journalists on Wednesday, there is no statement from Sumner Redstone — only his daughter and Moonves are quoted. The press release also reveals that the CBS board of directors offered Shari Redstone the position of non-executive chair, but she declined.

"I have been fortunate to work with Les and he has clearly established himself as a creative and effective leader who understands both the challenges and the opportunities that are shaping today's media landscape," Shari Redstone said.

"I am particularly grateful that Shari Redstone has agreed to continue in her role as vice chair of the company," said Moonves. "Her business acumen and knowledge of the media space remain very important to me as we move forward, and I greatly appreciate her support and invaluable counsel."

Late Wednesday, commentary from Wall Street analysts began to trickle in, mostly supportive of Moonves and the resignation of Sumner Redstone.

"He deserves to be recognized as the visionary leader that he is," James Goss of Barrington Research said of Moonves, noting strength at Showtime and ratings leadership at CBS. Goss also credited Moonves for "saving the network" by charging retransmission fees.

Several analysts suggested that the move at CBS is more significant for Viacom — the conglomerate that controls the Paramount film studio and TV channels like MTV, Nickelodeon and Comedy Central — because it portends a restructuring of the board there as well.

Brian Wieser of Pivotal Research quickly raised his price target on Viacom to $59, up from $53 previously. The stock closed Wednesday at $44.67.

"While a net positive for CBS, the more significant implication is for sibling company Viacom, where changes at the top of the organization should lead to a rerating of the stock by many investors," Wieser wrote.

"The big question for me is will Philippe want to serve as CEO under a new independent chairman. Alternately, will an outsider chairman want Philippe to stay on as CEO," said Steve Birenberg of Northlake Capital Management. "Wall Street would likely bid up Viacom shares if Philippe were out — whether that truly mattered in the long run or not."

Activist fund SpringOwl Asset Management — which has been extremely critical of Viacom, demanding Dauman and Sumner Redstone step down — simply presumed that the change at CBS means change for Viacom, also.

"We thank Sumner for his service and a tremendous entrepreneurial career in building a great set of assets," SpringOwl said in a statement emailed to THR. "The positive jump in share price in after-hours trading demonstrates shareholder approval for these changes. We strongly urge management and the board to appoint an independent director as executive chairman and that it not be Philippe Dauman."