Investors target Viacom in suit on Redstone pay, call for change

Tue Jan 19, 2016 5:33pm EST
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By Dan Levine and Jessica Toonkel

(Reuters) - Investors targeted Viacom Inc (VIAB.O: Quote) on two fronts on Tuesday, in a lawsuit alleging Executive Chairman Sumner Redstone is incapacitated and should not have been paid millions in compensation, and in an activist investor presentation calling for changes to the board and management.

The separate moves were the latest challenges to New York-based Viacom, whose networks include Nickelodeon, MTV and Comedy Central. The cable network has been under pressure due to weak ratings and concerns about the mental condition of 92-year-old Redstone, whose holding company, National Amusements, has about 80 percent of the voting stock at Viacom and CBS (CBS.N: Quote).

A November lawsuit by an ex-girlfriend of Redstone has raised questions about his ability lead the company as well.

Viacom has maintained Redstone is in full mental control. It said the most recent lawsuit was without merit and it would contest it vigorously. It also responded to the activist report, saying it was focused on long-term value for shareholders.

"We are encouraged by the growth in our strong international business, the ratings upswings at most of our networks, Paramount’s strong start in 2016, our leadership position in advertising technology and other positive recent developments,” Viacom said in a statement.

CBS, also named in the lawsuit, declined to comment.

The shareholder lawsuit, filed in the Delaware Court of Chancery against the boards of Viacom and CBS, alleges the companies improperly paid millions for Redstone's services as executive chairman "while he was physically and mentally incapacitated."

Payments to Redstone "for services not rendered" amounted to bad faith by the two boards, the lawsuit said. It also said the Viacom board misrepresented Redstone's deteriorated physical and mental condition in a January 2015 proxy statement.   Continued...

Sumner Redstone, executive chairman of Viacom and CBS Corporation, holds a proclamation to his name before unveiling his star on the Walk of Fame in Hollywood, California in this March 30, 2012 file photo. REUTERS/Mario Anzuoni/Files