Viacom's Board Names Dauman Chairman, Replacing Aging Redstoneby and
Board rejects Shari Redstone's call for someone independent
Directors vote 10-1 Thursday in favor of CEO's appointment
Viacom Inc.’s board rebuffed Sumner Redstone’s daughter and named Philippe Dauman as chairman, marking an end to the family patriarch’s reign over the media company he’s controlled for almost 30 years.
Viacom, the owner of MTV, Nickelodeon and Paramount Pictures, announced the decision Thursday. On a conference call, Redstone and the other directors voted 10-to-1 in Dauman’s favor, according to a person familiar with the matter, with Vice Chairman Shari Redstoneas the sole dissenter. The daughter of the company’s 92-year-old founder, a major investor in her own right, had on Wednesday called for an independent chairman in a letter to her fellow directors.
“Philippe has been instrumental with Sumner in every aspect of Viacom’s success for nearly 30 years," William Schwartz, chairman of the board’s governance and nominating committee, said in a statement. "We believe his becoming executive chairman is in the best interests of the company and all shareholders.”
Shari Redstone, 61, declined the board’s offer to become non-executive chairman, choosing to remain vice chairman. She had foreshadowed that decision Wednesday, saying in a statement that the chairman of Viacom shouldn’t be a member of her father’s trust -- like herself or Dauman -- or otherwise involved in the Redstone family.
“Shari is going to continue to advocate for what she believes to be in the best interests of Viacom shareholders,” a spokeswoman said in a statement Thursday.
In successive days, Redstone has stepped back from two of the biggest U.S. media companies, CBS Corp. and Viacom. At CBS, longtime Chief Executive Officer Leslie Moonves is taking the chairman’s role with the blessing of Shari Redstone.
Redstone remains the controlling shareholder of both companies, meaning either chairman will ultimately need the approval of his old boss to make any big moves.
The future for Viacom looks more contentious than at CBS, since Shari Redstone and Dauman are publicly at odds despite their shared financial interests. The younger Redstone and Dauman, also 61, are also members of a trust that will oversee Sumner Redstone’s family holding company after he dies or is found incompetent. National Amusements Inc., 80 percent owned by Redstone and 20 percent by his daughter, controls both CBS and Viacom. The other trustees include Tyler Korff, Shari Redstone’s son, and four attorneys with ties to the family.
The elder Redstone is passing the baton at Viacom and CBS at a challenging time for conventional media companies. After years of growth in advertising and pay-TV subscriber fees, both businesses are showing signs of decline.
The TV industry is losing viewers as subscribers drop or scale back their service. Meanwhile, younger audiences are embracing online media, like Netflix Inc. and YouTube, for video and music.
That’s hit Viacom especially hard, since its channels target younger age groups. The Class B shares of Viacom fell 45 percent last year, the worst performance in the Standard & Poor’s 500 Media Index, which dropped 5.7 percent. CBS was down 15 percent in 2015. Together, the two companies have a market value of about $40 billion.
“There’s a lot of bad sentiment about Philippe and the job he’s done -- I’m not in that camp,” said Sal Muoio, founder of New York-based S. Muoio & Co., which has less than 1 percent of Viacom’s voting stock. “They’re in a tough position given the demographics of their viewers. Things affect them more, first. I tend to be me more patient.”
The company has “terrifically valuable assets” that would be a bargain for acquirers, he said.
Viacom rose less than 1 percent to $44.99 at 12:02 p.m. in New York. The stock had gained 8.5 percent this year through Feb. 2.
Dauman has just “bought himself six or nine more months” to improve Viacom now that he’s been named chairman, Mario Gabelli, chairman of Gamco Investors Inc., said on CNBC. His firm is the second-largest holder of Viacom voting shares.
Redstone’s decision to step down coincides with questions about his mental condition and fragile health. The aging mogul was sued last year by former girlfriend Manuela Herzer. She claimed he was incompetent when he kicked her out of his house and put Dauman in charge of his health care if he could no longer make decisions on his own.
Under a judge’s order, he was examined last week by Stephen Read, a geriatric psychiatrist retained by Herzer. The findings haven’t been made public.