Exclusive: Top investors question whether Viacom's Redstone should step down

Wed Dec 2, 2015 5:57pm EST
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By Jessica Toonkel

NEW YORK (Reuters) - Two of the largest shareholders in Viacom Inc (VIAB.O: Quote) have made the highly unusual move of publicly questioning Sumner Redstone's mental fitness to remain executive chairman of the multi-billion dollar media company.

Mario Gabelli, whose funds hold the second-largest voting stake in Viacom after Redstone himself, and Salvatore Muoio, whose firm is the seventh-biggest voting shareholder, voiced the concerns a week after a former girlfriend of Redstone filed a lawsuit alleging that the 92-year-old mogul was mentally incompetent.

A member of Viacom's board made the rare move of responding publicly on Tuesday to investors' concerns, saying Redstone remains "mentally capable."

The investors' expressions of doubt about the mental competence of a high-profile company executive came as a surprise, but gossip column reports and heavy secrecy around the health of the media mogul have led to intense speculation over the future of Redstone and his $45 billion media empire.

Redstone has not been involved in the day-to-day management of the company for some time, but the lawsuit by ex-girlfriend Manuela Herzer, who has petitioned the court for an examination of Redstone, has caused some to worry that a surge of litigation could hamper the company as it tries to recover from a drop in TV ratings.

Herzer filed the lawsuit Nov. 25, weeks after being kicked out of Redstone's Los Angeles-area home. Redstone had designated her as his agent to make health care decisions if he was unable to do so, and in October Redstone replaced her with Viacom Chief Executive Philippe Dauman.

Herzer claims that Redstone was mentally incapable of making that decision and asked the court to reinstate her.

Redstone's lawyer, Gabrielle Vidal, had said the lawsuit was baseless and that Herzer is financially motivated.   Continued...

Chairman and CEO of GAMCO Investors, Inc. Mario Gabelli speaks at the Reuters Global Investment Summit in New York, November 19, 2015. REUTERS/Brendan McDermid