After taking weeks to line up all his pieces in his battle with Viacom CEO Philippe Dauman, Sumner Redstone has finally made his big move to regain control of his company.
Today, his National Amusements, Inc., which controls Viacom and CBS Corp., announced that it had removed five members of Viacom's board of directors—including Dauman—and had elected five new independent directors. The massive board overhaul also sets the stage for Dauman's eventual dismissal as Viacom CEO.
The five new directors are Kenneth Lerer (BuzzFeed chairman and former chairman and co-found of The Huffington Post), Thomas May (chairman of Eversource Energy), Judith McHale (president and CEO of Cane Investments, and former president and CEO of Discovery Communications), Ronald Nelson (Avis Budget Group's executive chairman of the board, and former co-COO of DreamWorks SKG) and Nicole Seligman (former president of Sony Entertainment).
They are replacing Dauman, George Abrams, Blythe McGarvie, Frederic Salerno and William Schwartz, all of whom have been battling with 93-year-old founder and chairman emeritus Redstone over the company's future.
Remaining as Viacom directors are COO and director Thomas Dooley, Cristiana Sorrell, Deborah Norville, Charles Phillips, Jr., Redstone and his daughter Shari, who is non-executive vice chair.
While Dauman remains CEO, "it will be the responsibility of the newly-constituted board to evaluate the current management team and take whatever steps it deems appropriate to ensure that Viacom has in place strong, independent and effective leadership," the company said in a statement. (Put another way: farewell, Philippe.) The board will also need to elect a new chairman.
National Amusements filed papers in the Delaware Court of Chancery to validate their actions, and requested that the court temporarily maintain the existing board in place before it makes a final ruling and prohibit the board from "taking any action outside of the ordinary course of business."
Salerno, who had been the lead independent director, called the move "a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom and its management in disregard of Sumner Redstone's wishes and to undermine the current Board's ability to represent the best interests of all of the stockholders of Viacom." He said he is filing a lawsuit today, seeking "an expedited determination that Ms. Redstone's attempted removal and replacement of Viacom directors is invalid. … Sadly, it is now clear that Mr. Redstone is being manipulated and used by his daughter in an attempt to accomplish her long-held goal of gaining complete control of Viacom."
UPDATE: Salerno indeed filed a lawsuit in the Delaware Court of Chancery late Thursday seeking an expedited determination that National Amusement's "attempted removal and replacement" of the board directors is invalid and alleging Shari Redstone is breaching her fiduciary duty as a board member by attempting to take control of Viacom.
"Shari now seeks to become Mr. Redstone's puppet master, pulling his strings behind the scenes to improperly seize control of Viacom. In doing so, Shari is attempting to use her father's control to dismantle his own estate plan to serve her personal interests," the complaint reads. "Her attempt to do so, however, is based on exercising undue influence over her defenseless father and/or manipulating him to purportedly exercise authority when he was not mentally competent to have done so."
Shari's actions "have affirmatively harmed the public stockholders, who collectively hold an approximate 90% equity interest in Viacom," according to Salerno's filing. "This is precisely the type of harm Mr. Redstone, through his longstanding estate plan, sought to avoid."
Redstone hinted at today's actions yesterday, when he told Salerno in a statement, "I am determined to act in the best interests of the company and all of its shareholders. I do not trust you or the current board to do the same."
On May 20, Redstone removed Dauman and Abrams from the seven-person trust that will control Viacom (and CBS Corp.) after his death, as well as from the board of National Amusements, which owns 80 percent of Viacom's shares.
One week ago today, Dauman said at an investors conference that Viacom
is staying focused on business and has already completed half of its upfront sales. He called Redstone "my great friend" and noted that they worked "side by side" for 30 years in every Viacom transaction. Despite the power struggle, "we think we have a lot of opportunity ahead," Dauman said of Viacom. "We're optimistic about it."
