VIAB Viacom Inc

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.

A spokesman for Mr. Redstone said on Friday that "Sumner Redstone will make every decision with the same deliberation and consideration with which he removed Philippe Dauman and George Abrams as trustees, based on the best interests of shareholders."

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 and Nickelodeon and the movie studio Paramount Pictures.

For the first time, the board publicly acknowledged that it believes Viacom's management team needs to step up the company's performance. The stock had fallen 40% in the year leading up to the recent changes, amid ratings declines at its cable networks and overall concerns about Viacom's ability to weather the rapid changes in the pay-TV industry.

"The Board is not happy with where Viacom's performance stands," Mr. Salerno wrote. "We know Viacom needs to do better -- and we are very focused on that objective and on the need for management to drive it."

Last week, The Wall Street Journal reported that the board was preparing to wage a court fight in Delaware if National Amusements dismissed directors or pushed for the firing of Mr. Dauman as CEO.

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."

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 20:42 ET (00:42 GMT)

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