By Joe Flint
Viacom Inc.'s board of directors won't exit without a fight.
Anticipating being pushed out by controlling shareholder and
former chairman Sumner Redstone, lead independent director Frederic
Salerno said in a letter to Viacom constituencies Monday that the
independent board members are preparing for a legal battle to keep
their seats because they don't believe Mr. Redstone has the mental
competency to act of his own free will.
Mr. Redstone, who is 93 years old, has yet to make any such move
to demand their removal.
But in the past week and a half, Mr. Redstone has overhauled his
holding company, National Amusements Inc., and the trust that will
oversee his controlling stakes in Viacom and CBS Corp. when he dies
or is incapacitated. Viacom Chief Executive Philippe Dauman and
board member George Abrams were replaced on the trust and the
holding company's board with new stewards who have ties to Mr.
Redstone's daughter, Shari Redstone.
In the letter on behalf of the company's independent board
members, Mr. Salerno reiterated the board's belief that it is Ms.
Redstone, vice chairman of Viacom, who is behind Mr. Redstone's
recent decision to remove Mr. Dauman and Mr. Abrams. Ms. Redstone
has denied the accusations.
The Salerno letter reflects the independent directors'
expectation that their posts could be in jeopardy soon. A removal
attempt by the Redstone family "could happen any time," a person
close to the matter said Friday. And if it does, those directors
expect all six independent members will be ousted rather than just
a majority, the person said Monday.
In the letter, Mr. Salerno said the recent speculation that Mr.
Redstone is preparing to remove some or all of the Viacom board
"would be completely inconsistent with Sumner's lifetime commitment
to an independent board and professional management for Viacom
after his incapacity or death." He added that "it would be equally
inconsistent with his stated judgment for many years that his
daughter, Shari, should not control Viacom or his other
companies."
While acquiescing to being dismissed would end the public
controversy and avoid litigation, the independent directors "feel
the responsibility to challenge in court what we honestly believe
would be legally flawed removals." They said it is also their
responsibility "to the legacy of a man we greatly admire and
consider a dear friend."
Representatives for Mr. Redstone and Ms. Redstone declined to
comment. Viacom also declined to comment.
The letter from Mr. Salerno on behalf of fellow independent
board members William Schwartz, Deborah Norville, Cristiana
Falcone, Blythe McGarvie, and Charles Phillips is the latest twist
in the soap opera going on at Viacom, parent of cable channels MTV,
Comedy Central, Nickelodeon and the movie studio Paramount
Pictures.
Mr. Salerno said his repeated attempts to see Mr. Redstone have
been denied. Last week, he again requested a face-to-face meeting
to get Mr. Redstone's thoughts on Viacom's strategy, including the
planned sale of a minority stake in Paramount Pictures, a move the
mogul has said through his spokesman that he opposes.
In Monday's letter, Mr. Salerno said the stake sale could be a
financial and strategic boost for Viacom.
"We hope that the fight over control does not impair or
completely undermine this potential step with Paramount," he wrote.
Mr. Salerno added that "we also understand that if Sumner is found
competent and acting without undue influence, we may be legally
removed simply for having explored strategic options that might
include a minority investment in Paramount. That said, our job is
to try to do our job, not to try to keep our job."
Mr. Salerno also emphasized that the board isn't happy with
Viacom's performance and said that management needs to drive
improvement.
Last week, Mr. Dauman and Mr. Abrams filed suit in Boston to
block their dismissal from the trust, accusing Ms. Redstone of
manipulating her ailing father to orchestrate their removal. Ms.
Redstone has said that she had nothing to do with the changes to
the trust and that her father is calling the shots.
This comes after a lengthy legal battle over Mr. Redstone's
competence that was brought by former companion and later
caretaker, Manuela Herzer. When Mr. Redstone had Ms. Herzer barred
from his house and removed as his health-care agent last fall, she
filed a suit saying he lacked the mental capacity to make those
decisions. She, too, pinned the moves on Ms. Redstone, a claim the
daughter of the mogul denied.
A California judge dismissed Ms. Herzer's case earlier this
month but didn't rule on Mr. Redstone's mental capacity. The judge
did hear from Mr. Redstone via video-taped deposition in which he
showed his disdain for Ms. Herzer quite clearly. However, the tape
also revealed his severe challenges in speaking and problems
recalling basic facts.
In that case, Mr. Dauman filed an affidavit last fall saying Mr.
Redstone was still sharp and engaged. In his recent suit, he said
the mogul was "clearly being manipulated by his daughter,
Shari."
Mr. Redstone turned 93 on Friday. A party was held at his
Beverly Glen estate with attendees receiving T-shirts made up by
Ms. Redstone that read, "Sumner's Back."
Joann S. Lublin contributed to this article.
Write to Joe Flint at joe.flint@wsj.com
(END) Dow Jones Newswires
May 30, 2016 19:51 ET (23:51 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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