Viacom investors pay CEO's legal bills in Redstone spat

Fri Jun 17, 2016 5:01pm EDT
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By Jessica Toonkel

(Reuters) - Viacom Inc disclosed on Friday it would foot the bill for embattled Chief Executive Officer Philippe Dauman's legal fight against controlling shareholder Sumner Redstone, even as Wall Street cheers the executive's potential departure.

The disconnect demonstrates the complicated corporate governance challenge Viacom's board is facing in the battle for control of Redstone's $40 billion media empire, which includes CBS Corp and Viacom, investors and corporate governance experts said.

"I don't think it's appropriate to use shareholder money for the suit," said Ben Strubel, a principal with Lancaster, Pennsylvania-based wealth manager Strubel Investment Management, which owns non-voting shares of Viacom. "I don't think it's appropriate to use shareholder money toward his compensation given the company's performance."

Viacom, which owns Comedy Central, Nickelodeon, MTV and Paramount, has been struggling to turn around its ratings. Reflecting some of that weakness, the company's stock is down nearly 50 percent over the past two years.

On Friday, Viacom said its third-quarter profit would fall well short of Wall Street expectations, citing a disappointing domestic box office haul from its latest Teenage Mutant Ninja Turtles movie and disruption stemming from all the controversy.

Viacom's stock has risen about 15 percent since May 20, when Redstone removed Dauman and board member George Abrams from the seven-person trust that will ultimately control Redstone's media empire. About half of that rally came on Thursday when Redstone ousted Dauman and four others from the Viacom board.

Viacom shares fell 1.4 percent to close at $44.42 on Friday.

If a judge affirms the new slate of directors, they have the authority to overhaul Viacom management, which may include Dauman. If he is removed, he could potentially receive nearly $90 million in severance, according to compensation consultant Equilar.   Continued...

A woman exits the Viacom Inc. headquarters in New York April 30, 2013. REUTERS/Lucas Jackson