Corporate governance practices at Viacom have been so bad for so long that I was tempted yesterday to just laugh off the announcement — made right after the annual shareholder meeting — that it has appointed Inside Edition anchor Deborah Norville to its 15-member board. Sumner Redstone owns about 79% of the voting shares. What he says goes. So what difference does it make if the board includes someone who has never demonstrated an interest in corporate finance or affairs? Norville has “more than 30 years of media and television experience and brings a unique perspective to our board that enhances the diversity,” a Viacom spokesman says.
Sorry, but that’s not good enough. Viacom is a $30.8B global company that employs nearly 10,000 people. And Redstone controls 79% — not 100%. He gladly takes other people’s money to run the enterprise. That means he has both a legal and moral responsibility to protect them as well as himself. It should lead him to bend over backwards to ensure that the board represents shareholders, and does so effectively. It needs people who know what’s on investors’ minds, who are well versed in the issues being discussed, and feel independent and fearless enough to stand up to Redstone when they think he’s wrong.
Does anyone think Norville fits that description? Corporate governance expert Nell Minow of GMI Ratings sure doesn’t. “You don’t want (Norville) to come on and feel intimidated when they talk about the 10K and Sarbanes Oxley” — or other matters such as executive compensation, risk management, or the Foreign Corrupt Practices Act that often baffle people who live in that world — she says. But Minow adds that her “primary concern is the independence issue” — Norville’s willingness to tell the emperor that he has no clothes. Prior to her appointment, Norville did not describe herself as someone who enjoys that role. “I don’t pick fights,” she told the Orlando Sentinel last month when she was in the area to give a speech. “I think I’m pretty low maintenance. I try not to act like anyone other than a member of the team.”
That’s a problem, because Viacom needs more nay-sayers in the board room — including someone who will tell Redstone, who’s 89, that it’s time to spell out a succession plan (for the company and CBS, which he also controls) and explain what would happen to his shares when he’s out of the picture. That’s one of many reasons why GMI gives Viacom an “F” grade for its governance. The group says that it has too many entrenched directors who sit on too many company boards, potentially leaving them with too little time to focus on Viacom. Proxy advisory firm Glass Lewis also notes that it has “significant concerns” with Viacom’s executive compensation practices.
Redstone spent more than 25 years building Viacom into a media colossus. It should be a company that everyone respects. But the chairman makes it hard for people to do so when he treats its board and the people it represents with such cavalier disregard.