Viacom Holders Shouldn't Re-Elect Five Directors: Glass Lewis

  • Proxy adviser cites compensation for CEO Philippe Dauman
  • ISS also recommended withholding votes from board members

Viacom Inc. investors should withhold votes for five directors on the board’s compensation committee because they haven’t adequately aligned Executive Chairman Philippe Dauman’s pay with his performance, shareholder advisory firm Glass Lewis & Co. said.

The firm joins another major proxy adviser, Institutional Shareholder Services Inc., in recommending against the re-election of the directors: Blythe McGarvie, Deborah Norville, Charles Phillips Jr., Frederic Salerno and William Schwartz. ISS also recommended withholding votes for Cristiana Falcone Sorrell for her role on the audit committee, which oversees pledging of stock by majority shareholder Sumner Redstone.

Redstone’s National Amusements Inc. holds 80 percent of voting shares, so the recommendations are highly unlikely to prevent the re-election of the board members when shareholders decide on the matter March 14 in Miami. Still, Glass Lewis joins a growing number of critics of New York-based Viacom, including prominent media investor Mario Gabelli. Shares of the company have fallen about 46 percent in the past year amid shrinking ad sales and viewer losses at its cable TV networks.

On Tuesday, Dauman announced the company was exploring the sale of a stake in its film unit, Paramount Pictures, which has fallen into last place in market share among Hollywood’s six major studios.

“The members of the compensation committee have the responsibility of designing and reviewing all aspects of the compensation program for the Company’s executive officers,” Glass Lewis said in the report, published Tuesday. “In our opinion, a sustained disconnect between pay and performance may be a signal that the committee is not effectively serving shareholders in this regard.”

Egan-Jones Ratings Co., another proxy adviser, recommended investors vote for all board nominees in a report made before the firm set tougher guidelines for 2016.

Viacom has already been confronting board turmoil. Dauman became Viacom’s chairman this month, succeeding Redstone, who stepped down after years at the top amid failing health. Dauman’s promotion was opposed by Shari Redstone, Viacom’s vice-chairman and daughter of the 92-year-old Sumner.

Viacom rose 1.5 percent to $37.56 at 10:27 a.m. in New York.

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