Viacom’s Corporate Health Comes Under Intensifying Scrutiny

Viacom Inc. and its corporate chief Philippe Dauman are under intensifying scrutiny as the company works its way through shifts in the media business and tries to fend off inquiries regarding the health of its controlling shareholder, Sumner Redstone.

The owner of MTV, Comedy Central and Nickelodeon has grappled for months with ratings declines at its major cable-TV networks, and has articulated a strategy of devising new kinds of pacts with advertisers based on non-traditional data to help it move forward. Those efforts, however, are destabilized by continued reports about Redstone’s declining health.

The Wall Street Journal reported Wednesday that Redstone has suffered a series of “mini-strokes” that have affected his speech, and that he has taken and passed several mental competency tests. The newspaper also suggested both Dauman and Shari Redstone, Sumner’s daughter, might see a future for themselves in the management of Viacom after Sumner Redstone passes away.

Leah Bishop, an attorney with Loeb & Loeb who has been working with Sumner Redstone in the administration of his estate, could not be reached for immediate comment.  Redstone controls both Viacom and CBS Corp. through the movie-exhibition company National Amusements Inc.

In a statement provided by a Viacom spokesman, Sumner Redstone expressed support for Dauman’s management. “Philippe is my long-time friend and partner.  He continues to have my unequivocal support and trust, which he has earned over our many years together.  He is out in front navigating an unprecedented level of change in the industry and he has articulated for me, for the Viacom board and for his management team, a smart, innovative and sustainable path to success<” Redstone said. “We are both long-term thinkers and I am more confident than ever that he is on the right track.”

There is a plan in place for what happens to a Redstone family trust that controls National Amusements upon Sumner Redstone’s death. Voting control will be held by seven trustees:  Viacom CEO Dauman; George S. Abrams, a Boston attorney who has been a Viacom director for years; David R. Andelman, a Boston attorney who is a director of CBS and National Amusements; Norman I. Jacobs, another attorney who has advised Redstone; Leonard L. Lewin, an attorney with ties to Phyllis Redstone, Sumner Redstone’s ex-wife; and two of Redstone’s heirs, Shari Redstone, his daughter, and Tyler Korff, his grandson. Shari Redstone and Tyler Korff will take over as trustees from Sumner Redstone and Phyllis Redstone, according to a previous statement from  Bishop.

In the statement, Sumner Redstone said the decision to transfer his controlling interest in Viacom and CBS to the independent trust “will ensure that the assets will be professionally managed for the benefit of all shareholders.  Recent speculation about personal agendas has only confirmed for me the wisdom of my decision.”

Viacom shares rose somewhat in Wednesday trading, rising 64 cents per share, or 1.37% on less-than-average volume of 4.51 million.

After putting through a restructuring that resulted in the departures of several veteran programming executives and a charge of $785 million earlier this year, Viacom has been working to create new alliances with advertisers and content providers.

On the programming side, the company has named a new chief for MTV, an executive from Discovery Communications who is well-versed in digital media, and announced the launch of a new nighttime programming block on Teen Nick that will revive classic Nickelodeon cartoons for the now-adult viewers who grew up with them.

Behind the scenes, Viacom is working to bolster its data capabilities, hiring executives who can use information collated from set-top boxes, social media and third-party trackers of consumers to help advertisers place ads in more specific fashion. Earlier this month, Viacom hired a veteran media-buying executive, Julian Zilberbrand, to help supervise its burgeoning data efforts. Zillerbrand was a senior executive at ZenithOptimedia, a media-buying unit of France’s Publicis Groupe.

[Updated, 11:00 AM PT]

 

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