NEW YORK — Angry shareholders put Viacom Inc. chairman Sumner Redstone on the defensive at the company’s annual meeting Thursday, forcing him to defend his leadership, the company’s management and its strategy for dealing with its troubled Blockbuster video unit.
Viacom’s stock price has lately recovered from the lows it hit in April after Blockbuster CEO Bill Fields resigned, closing up 6¢ to $30.18 Thursday, but it is still down 32% on its year high of $44.
“None of us is happy with the market’s current valuation of Viacom,” Redstone told the meeting, but he insisted the stock price would eventually recover.
“There is no denying that we have had our difficulties,” Redstone said, but he focused on the deals struck in the past year — such as the sale of Viacom’s radio station group and the spinoff of its cable systems — and added that the “long-term fundamentals of Viacom’s core businesses are extremely sound.”
Viacom is close to hiring a replacement for Fields, Redstone said. With a new CEO in place, and as Viacom implements “a number of new initiatives” at Blockbuster to improve the operational performance, “we will turn Blockbuster around.”
He also told the meeting that Viacom had begun discussions with Universal Studios’ parent Seagram Co. Ltd. on ways to break up the USA Network partnership between the two companies, as ordered by the Delaware Chancery Court earlier this month, although Redstone declined to comment on whether Viacom would sell its 50% interest.
Redstone’s assurances of future prosperity were met skeptically by shareholders, two of whom noted that they had heard his promises before. Instead, half a dozen shareholders rose one after another to press Redstone on the quality of the company’s management and the strategy for Blockbuster’s future.
Some of the speakers focused on the role played by Redstone’s two deputies, Philippe Dauman and Tom Dooley. As one said, “How do you justify paying bonuses of $2.25 million and incentive compensation and life insurance to these two gentlemen who don’t have a vision, marketing knowledge, distribution knowledge?”
The shareholder went on to ask whether it wasn’t time for Redstone to “step down from your role as a one-man chieftain and get somebody with the vision of (News Corp. chairman) Rupert Murdoch” to run the company.
In a seething response, Redstone reminded the shareholders that he had been “born in a tenement (and) started with two drive-in theaters.”
“Today I control one of the best media companies in the world. … How do you think I got there? Goddamn hard work, commitment and brain power,” Redstone added.
He also defended Dauman and Dooley, noting they might not be as well known as former CEO Frank Biondi, but “they are where they are because of their competence and brilliance.”
At another point a shareholder questioned whether Viacom’s management was creative enough. “Could it be that the company has become stale and boring?” the shareholder asked, prompting Redstone to assert that “we are awash with creativity.”
Other shareholders questioned whether changing technology would make Blockbuster’s video rental chain redundant, an issue frequently put to Viacom execs and always dismissed. Redstone maintained his usual stance Thursday, insisting he saw “no immediate danger” to the business.
He also defended Viacom’s stock performance, insisting that over the past decade it had risen more than any other entertainment company’s stock price. Redstone added that all the major entertainment company CEOs come in for criticism at times.
“Every one of us runs into a period where we get bashed. (Time Warner’s) Jerry Levin had it, Rupert Murdoch has it occasionally. You can’t look at (the stock price) from a limited period of time,” Redstone said.