Viacom's board has approved an arrangement with Philippe Dauman that will see him giving up his role as Chief Executive Officer (CEO) of the media company but remaining as non-Executive Chairman until September 13, when he will leave with a $72 million payout, according to sources familiar with the situation.
Tom Dooley has been moved from Chief Operating Officer (COO) to interim CEO until September 30, the end of the company's fiscal year, and could be named to the job without the "interim" modifier. That decision will be up to Viacom's board, which will expand to 16 with the addition of five candidates Redstone has proposed. The new directors include Judith McHale, former president of Discovery Communications, Ken Lerer, an investor in companies including BuzzFeed, and Nicole Seligman, formerly president of Sony Entertainment. Redstone's National Amusements owns 80% of Viacom's voting shares.
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Philippe DaumanWhen Dauman leaves, he will not be replaced on the board, bringing the number down to 15. Three other directors will depart at the company's next annual meeting, expected around January or February 2017.
As Viacom Inc prepares to announce the impending departure of CEO Philippe Dauman, his interim replacement, Thomas Dooley, is planning to reach out to investors, setting a new tone for a company that has kept communications minimal.
Dooley plans to set up meetings between shareholders and heads of Viacom networks, which include Comedy Central, MTV and Nickelodeon, two people familiar with the situation said on Friday. The move to engage is not unusual for a new CEO but marks a stark about-face from the closed, secretive culture that has surrounded Dauman and the $17 billion media company, investors and analysts told Reuters.
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Thomas DooleyDauman and Sumner's daughter Shari Redstone were said to have been cordial and complementary of each other in the board's phone meeting last night. Sumner, who has difficulty speaking, was on the call but did not say much, if anything.
Dauman had accused her Shari of manipulating her 93-year-old father in an effort to seize power, a charge that she vigorously denied.
Dauman has been authorized to present the board with a proposal to sell a 49% stake in Paramount. But it would only be approved if directors are unanimous in support. Up to now, Redstone has opposed a deal.
The CEO told analysts early this month that he was talking to "a handful of prospects." But he acknowledged that the process "has slowed down in recent weeks," though he remained hopeful he could still move forward with "a highly beneficial transaction to present to our board."
The agreement with Redstone ends court battles in the Massachusetts Probate and Family Court, the state where the National Amusements trust was established, and Delaware's Chancery Court, the state where Viacom is incorporated. In the first, Dauman and director George Abrams wanted to overturn Redstone's move to oust them from his family's trust and the National Amusements board. In the second, Viacom wanted to block National Amusements' effort to replace five directors - including Dauman.
The agreement does not affect a Massachusetts suit by Redstone's granddaughter and Sheri Redstone's niece, Keryn, who opposed the changes at the family trust and National Amusements. Keryn said on Thursday said she plans to continue her part of the Massachusetts lawsuit challenging her grandfather's ability to make decisions. "Keryn has not participated in any of the settlement negotiations and has no information about its terms," her lawyer, Pierce O'Donnell, said in a statement. "Keryn will carefully review any settlement presented to Judge George Phelan in the Massachusetts litigation to assure that it is in the best interests of her fellow trust beneficiaries and herself. At the present time, without any resolution of her claims, she will press forward to trial." The trial is scheduled to begin on September 19.
In previous statements, Keryn Redstone has contended that her grandfather is no longer competent and that Shari Redstone is pulling his strings.
"No one from the outside has seen my grandfather in many months," Keryn said in a statement in July. "When I last visited him on Valentine's Day before Shari banned me from his house, he was listless and had a melancholy, vacant look, lacked any affect, and sobbed uncontrollably. He kept asking 'Where is Manuela? I miss her.' I am very worried about his healthcare and what Shari has done to him."
Shari Redstone was a rival of Dauman's for control of her father's $40 billion media empire, which includes CBS. She also criticized Dauman and opposed his election as chairman earlier this year.
Dauman and Viacom charged that Redstone is no longer competent to manage his affairs - and was being manipulated by Shari, who's Viacom's Vice Chair. They wanted an independent doctor to examine him.
The Redstones rejected the allegations, saying that Sumner is still calling the shots at his media empire.
The Massachusetts and Delaware judges had left open the possibility that they would approve an exam.
Investors have grown weary of the fight, which has effectively frozen Viacom at a time when its cable networks and Paramount are struggling. The stock has lost nearly half of its value over the past two years and has lagged the overall market over the past 12 months. Domestic ad sales at the company's cable networks declined 4% in the June quarter, making it the eighth consecutive quarter that the number has dropped. Ratings drops have been especially notable at Comedy Central and MTV.
Meanwhile, Dauman, one of the highest paid CEOs in the U.S., acknowledged that Paramount has "had a rough go at the box office recently," including with disappointing sales for a film he had long touted:
Teenage Mutant Ninja Turtles: Out of the Shadows.
"Fundamentally for Viacom, if it could have gone wrong in [the current fiscal year], it did," MoffettNathanson Research's Michael Nathanson said early this month. "Almost every driver" of earnings growth "declined massively worse than expected. The question is after slashing estimates again, what can get worse from here?"
A long-time legal advisor to Redstone, Dauman helped the mogul buy Viacom and Paramount Pictures. Dauman joined the company as a counsel and rose to be deputy chairman but had to leave when the company merged with CBS, then run by strong-willed Mel Karmazin. Dauman reportedly received $150 million in severance and started a private equity firm with Dooley called DND Capital Partners.
He stayed on the company's board and was named CEO in 2006 after CBS was spun off and Redstone fired Tom Freston, one of the founders of MTV. Dauman never enjoyed Freston's reputation as a creative leader at the company.
Dauman has been among the highest paid corporate executives. Last year he received total compensation of $54 million. His exit package is expected to be worth another $72 million.
Dauman's administration has been criticized for being too slow to adjust to the changing digital entertainment landscape. One analyst, Todd Juenger of Sanford C. Bernstein, famously likened Viacom under Dauman to Kodak in the days when digital technology was taking over the camera business, eliminating the need for film.
He has also been criticized for buying back Viacom stock instead of investing in assets that could grow Viacom's business and make it more tech-savvy.
Many of Viacom's cable networks are youth oriented, and their ratings have been hard hit as young consumers turn to digital devices for entertainment. The ratings drop has led to falling ad revenues and hurt its leverage with distributors. Some analysts say Dauman hurt Viacom's Nickelodeon kids business by licensing its programs to Netflix, gaining short-term revenue while building a powerful long-term competitor for young eyeballs.
When Redstone's former live-in companion Manuela Herzer last year accused Redstone of being mentally incompetent, Dauman was among his defenders.
In court papers, Dauman said that "although Sumner has a substantial speech impairment, I speak with Sumner several times a week by telephone regarding both business and personal matters. I also visit him in person on a monthly basis." During one visit last October, "We had an extensive business discussion regarding articles that had appeared recently in the New York Times and the Wall Street Journal, and we also discussed personal matters," Dauman said. He visited Redstone again in November. "On both occasions, he was engaged, attentive and opinionated as ever."
In December, Dauman told an investor conference that Redstone maintained his "incredible will to live" and his "enjoyment of life." He urged people to look in a mirror and to exercise some humanity when talking or writing about the ailing mogul. "We should retain a sense of decency here."
Redstone frequently introduced Dauman during Viacom earnings calls by calling the CEO "the wisest man I know." That stopped as Redstone's health declined and he no longer spoke on the calls.
On Viacom's February earnings call, after Dauman succeeded Redstone as chairman, he thanked Redstone, calling him his "colleague, mentor and friend."
Dooley has been COO of Viacom since May of 2010. Like Dauman, Dooley is a New Yorker. He earned a Bachelor of Science from St. John's University and an MBA at NYU.
He joined Viacom in 1980, rising to executive VP and deputy chairman. When Viacom merged with CBS, he left with Dauman to form DND Equity Partners, which invested in media and telecommunications businesses.
On earnings calls, Dooley was usually responsible for reporting on the company's debt and cash flow. He also tended to provide projections and guidance for upcoming quarters and the remainder of the year.
Even with the settlement, the legal activity surrounding the Redstone media empire might not be over.
Original sources: Deadline, Broadcasting & Cable, Reuters UK; Additional sources: Wikipedia (I, II); H/T: ToonZone Forums member Tommy Lawson.
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