CBS has agreed to pay $1.25 million to settle a shareholder lawsuit which accused the company of paying millions to former chairman Sumner Redstone after he was incapacitated by illness.
The suit was filed in Delaware Chancery Court in July 2016 on behalf of shareholder R.A. Feuer. It accused the CBS board of directors of improperly paying Redstone $13.5 million in salary and bonuses since 2014.
At the time, Redstone’s health had badly deteriorated, and he was barely able to communicate. Redstone, who is now 95, resigned as chairman in February 2016. He continued to receive a $1 million salary as chairman emeritus, which was subsequently reduced to $50,000 a year in July 2017.
In a ruling in April 2018, Chancellor Andre Bouchard threw out the shareholder claims regarding Redstone’s $9 million bonus paid in 2014. However, the ruling allowed the claims to proceed accusing CBS’s directors of breaching their fiduciary duty by paying $4.4 million in salary to Redstone. The suit also accused Redstone of unjust enrichment for receiving the $1 million salary as chairman emeritus. That claim also was allowed to go forward.
In a settlement filed Friday, CBS’s insurer will pay $1.25 million to resolve the dispute. The funds will go back into CBS’s general coffers, not to shareholders.
Under the agreement, the CBS directors and Redstone do not admit to wrongdoing, and are not obliged to pay anything personally.
Redstone remains chairman and CEO of National Amusements Inc., which owns nearly 80% of the voting stock of CBS and Viacom.