Leslie Moonves will become chairman of CBS Corp., a move that investors may interpret as an effort to solidify the management of the company given questions about the health of its executive chairman, Sumner Redstone, who also holds the same position at Viacom. Redstone will become chairman emeritus of CBS, while Moonves will continue in his role as president and CEO.
The announcement also appears to suggest Shari Redstone, Sumner’s daughter, is playing a greater role in the companies her father controls through his holdings in National Amusements, a movie exhibition chain that oversees about 80% of both CBS Corp. and its sister company Viacom Inc. Shari Redstone has the right to become chairman of CBS and Viacom after her father’s death, per the terms of the Redstone family trust that will inherit his controlling stakes. But Shari Redstone cut a private deal with Moonves assuring him the chairman’s post after her father’s death. That arrangement was triggered sooner than expected by Sumner Redstone’s resignation letter.
Moonves was formally nominated by Shari Redstone, who is vice chair of the CBS board of directors.
Sumner Redstone, whose deep involvement in the companies he controls for years been a hallmark of his ownership, resigned as executive chairman via a letter to Moonves sent on Tuesday with a copy to the board’s nominating committee and to its governance committee. Per CBS’ bylaws, the company had to convene a special board meeting with 24 hours notice to directors. Directors gathered at CBS’ L.A. headquarters in Studio City at 1 p.m. on Wednesday, with some participating by phone. The meeting and unanimous vote on the elevation of Moonves to chairman took less than 10 minutes, a source familiar with the situation said. Sumner Redstone was believed to have participated by telephone.
The Moonves move, announced after the stock markets closed, and the intrigue surrounding Viacom sent shares of CBS and Viacom soaring in after-hours trading. Viacom shot up 10% to $49.20, suggesting that investors see changes afoot for a company that has seen its stock price slump 40% during the past year amid criticism of Dauman’s leadership. CBS shares were up 4.6% to $50.49.
The agreement may accelerate what had eventually been expected to pass. After Moonves’ appointment was made public, Shari Redstone released a statement that sets the stage for conflict over the ultimate control of Viacom. Viacom CEO Philippe Dauman is known to have clashed on business issues with Shari Redstone. Her statement obliquely asserts that he will not become chairman of Viacom in the long run because Dauman is also a member of the seven-member Redstone family trust. Dauman has nearly three years remaining on his most recent employment contract, which runs through the end of 2018.
“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,” Shari Redstone said in a statement. “I was honored to nominate Les as the CBS Chair and am delighted to congratulate him on his new position. He follows in the visionary tradition of my father, and I know that Les will successfully lead CBS into the digital future.”
Reps for Dauman and Viacom did not return calls seeking comment beyond a statement that the Viacom board of directors will meet on Thursday. That was seen as a sign that Sumner Redstone may have sent a resignation letter to Viacom directors as well.
The elder Redstone, a famous figure who has cut a swath through Hollywood and Wall Street over the decades through his management of corporations that control everything from the Paramount movie studio to MTV to the CBS broadcast network, has come under scrutiny in recent months due to speculation about his well-being and his ability to govern the boards of both companies. Redstone is involved in a legal case with a former companion, Manuela Herzer, who has disputed how his health care decisions are governed.
Shari Redstone could have taken on the role of non-executive chairman of the CBS board, but declined, the company said, citing “other professional and personal responsibilities.” She is co-founder and managing partner of Advancit Capital, a venture capital firm that invests in early stage companies focusing on media, entertainment and technology. She is also vice chair of Viacom and president of National Amusements.
For Moonves, the promotion to chairman did not trigger a new employment contract or compensation package, a source said. The CBS CEO’s current contract runs through 2019.