The rapid-fire series of events Wednesday laid bare what insiders already knew: Shari Redstone is on a collision course with Viacom CEO Philippe Dauman for control of the Redstone family trust that will inherit her father’s iron-clad control of CBS Corp. and Viacom. A battle is expected to flare Thursday at Viacom’s board meeting to address the resignation of Shari’s 92-year-old father as chairman, which follows on the heels of Sumner Redstone’s resignation as CBS Corp. chairman on Wednesday and the elevation of CBS president-CEO Leslie Moonves to the chairman’s post.
Shari Redstone and Dauman are expected to face off at the meeting given the statement she issued Wednesday asserting that Viacom needs an independent leader, not someone who is connected to the Redstone family trust. Moonves fits that description; Dauman does not.
“It is my firm belief that whomever 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,” said Shari Redstone.
In the face of Shari Redstone’s statement and investor criticism of the company’s governance, the Viacom board faces a key vote on Thursday. Although Shari Redstone has made it clear she does not want an operational role at Viacom, she may assert her right to succeed her father on an interim basis to block Dauman from being elected to the role and until a new chairman can be installed.
Another scenario is that the 11-member Viacom board votes one of its six independent members to the chairman’s post. That would be seen as a nod to shareholder concerns about the management strategy. Viacom’s independent directors are: former Oracle president Charles Phillips, “Inside Edition” anchor Deborah Norville, attorney William Schwartz, corporate veteran Blythe McGarvie, World Economic Forum alum Cristiana Falcone Sorrell and telco industry vet Frederic Salerno.
Thursday’s board drama is likely to be a warm-up for clashes expected to erupt over the administration of the Redstone family trust. A source familiar with the situation said Shari Redstone has been working to build a voting bloc on that seven-member board that would allow her broad influence on crucial decisions regarding the long-term future of CBS Corp. and Viacom. The question of how the companies proceed is coming to ahead just as biz watchers are preparing for a big burst of M&A activity among media companies.
Media analyst Michael Nathanson said as much in a research note issued following Wednesday’s developments.
“Thinking about what this change for CBS and Viacom could mean for the broader media landscape, we believe that changes for the Redstone controlled empires could be the trigger for media company consolidation as each company will be forced to figure out if they are a buyer or seller in the coming months,” Nathanson wrote.
For years, Shari has endured the public drama of a tumultuous relationship with her famously mercurial father, who is 92 and in failing health. But in the past year the two have made strides in repairing their strained relationship. Shari Redstone and her family spent extended time with the patriarch in his Beverly Park home over the holidays. And, she frequently travels to Los Angeles, where she visits with her father. She is here in town this week.
At some point in the past few months, sources said, Redstone father and daughter came to agreement on some key issues involving the management of CBS, which along with Viacom are the media congloms that Sumner Redstone controls through the super-voting shares owned via his National Amusements Inc. holding company. Those shares will transfer to the trust controlled by a seven-member board of trustees that includes Shari Redstone and Dauman.
It’s understood that Shari Redstone, who is president of National Amusements and managing partner of the media and tech investment firm Advancit Capital, helped persuade her father that it was time for him to resign as chairman of Viacom and CBS, amid mounting criticism from shareholders and questions about his mental state. Shari Redstone already had the right per the terms of the family trust to succeed her father as chairman of CBS and Viacom, moving up from her current role as vice chair of both companies.
While Shari Redstone does not want an operational role at either company, she does want a say in who does take the reins. Shari Redstone made a private deal with Moonves some time ago that he would be named chairman after her father’s resignation or death. She has no such agreement with Dauman, who has faced strong criticism of his leadership as Viacom grapples with a 40%-plus loss in its share price and performance issues at its core cable networks and Paramount Pictures division.
The shift of Sumner Redstone to CBS chairman emeritus is a symbolic one for the Redstone family and the media business at large. But within CBS it amounts to business as usual as Moonves has run the company largely unfettered by Redstone since he became CEO in 2006. By all accounts, CBS has smartly evolved from a company rooted in the broadcasting sector to a content-generating machine with a blueprint for growth in cable and international markets. Adding “chairman” to the nameplate outside Moonves’ offices in L.A. and New York is a formality for the exec who has long been a titan of TV and ranks as one of Hollywood’s most well-liked CEOs.
The picture has not been as bright at Viacom, home to MTV, Nickelodeon, VH1, Comedy Central, BET and CMT, among other domestic and international cable channels, and Paramount Pictures. Management of the film and TV assets has been hammered by outside observers for what is seen as a lack of investment in high-end talent and programming at a company whose brands were once synonymous with youth and pop culture. Paramount, meanwhile, has been through a long dry spell of limited production and releases relative to its major competitors.
A former senior Viacom exec recently criticized the company as Dauman and other top execs earned high salaries but performance flagged. All of this has contributed to a mounting sentiment in the industry and on Wall Street that Dauman, a longtime lawyer for Redstone, is not the right leader for the company at a time of upheaval in the media landscape. By multiple accounts, Shari Redstone shares that view.