Viacom employs a lot of accomplished storytellers. But few of them could dream up a drama that’s more compelling — and potentially important — than the one taking place right now at the company’s own offices in New York and Hollywood.
On Friday night, Sumner Redstone — or people around him — rocked his media empire by kicking Viacom CEO Philippe Dauman and board member George Abrams off of his family trust and the board of his privately held theater chain, National Amusements.
That effectively would give Redstone’s daughter, Shari, control of Viacom and CBS.
How? Sumner Redstone, who turns 93 on Friday, owns 80% of National Amusements, which, in turn, owns 80% of the voting shares of Viacom and of CBS. When he passes, or is deemed incapable of deciding his own affairs, his seven-member trust will control those votes on behalf of Redstone’s five grandchildren and succeeding generations.
This story is important, but complicated. Here are some of the things you’ll need to know to keep up with it:
Q: What happened on Friday?
A: On Friday night, a lawyer representing Sumner Redstone faxed letters to Dauman and Abrams telling them that they’d been kicked off his family trust and the board of National Amusements.
Q: Where do things stand now?
A: Dauman and Abrams today asked the Commonwealth of Massachusetts Probate and Family Court to nullify the decisions, saying that Redstone “suffers from profound physical and mental illness” and was being manipulated by his daughter, Shari.
Q: And Redstone?
A: His camp filed a separate petition asking the Los Angeles County Superior Court to validate the decisions.
Q: Was Friday’s move a surprise?
A: Yes. The executives are among Redstone’s longest and closest allies. He used to refer to Dauman as the “wisest” man he had ever known. And Abrams has been on Viacom’s board since 1987, when Redstone bought Viacom — a deal that Abrams helped to engineer.
Q: The membership of the trust is important. Who’s on it?
A: It’s designed to have four independent members and three representatives of the family. Aside from Dauman and Abrams, independent members include Redstone’s divorce lawyer, Norman Jacobs, and lawyer David Andelman, who’s also on the CBS and National Amusements boards. The family is represented by Sumner’s daughter Shari, who’s president of National Amusements and Vice Chair of Viacom and CBS, her son Tyler Korff, and Leonard Lewin, the lawyer for Phyllis Redstone in her divorce from Sumner.
Q: Who would replace Dauman and Abrams?
A: There’s been no formal announcement, but it’s believed that Redstone will name granddaughter-in-law Kim Ostheimer and a friend, Jill Krutick, to join the family trust. Krutick and National Amusements General Counsel Tad Jankowski would join the theater company’s board.
Q: Will the fight have any impact on short-term initiatives?
A: Redstone said in a statement that he opposes Dauman’s plan to sell a minority stake in Paramount. A deal was supposed to be announced by the end of June. There’s been no word yet about whether anything has changed.
Q: What would it mean for Viacom and CBS if the Redstone effort stands?
A: Dauman will be history. Beyond that it’s hard to say. A change at the top could clear the way for big deals — especially at Viacom, which has lost about half of its market value over the past two years as ratings declined at its core cable channels. Directors might decide to sell the company, either as a whole or in pieces, or reunite it with CBS. (Redstone split them in 2006.)
Q: Why are you so sure that Dauman would be out?
A: He told the Massachusetts court today that Shari is “attempting to illegally hijack her father’s well-established estate plan by removing professional managers” and replacing them with people who “are firmly under her control.”
Q: What does Shari say?
A: She called the charges “absurd,” saying that her father “makes his own decisions.”
Q: Any other losers?
A: Paramount chief Brad Grey has been close to Dauman and might find himself in the cold if the CEO is ousted.
Q: Didn’t a Los Angeles court just find that Redstone was competent enough to withdraw the authority of his former companion, Manuela Herzer, to make his health decisions? She sued, saying that Redstone was a “living ghost” who was incapable of making the decision himself.
A: On May 9, Los Angeles Superior Court Judge David Cowan dismissed the case. He said that a recorded deposition showed that Redstone “seemed very alert” and appeared to not have “any confusion about what he was asked, about his wishes or the reasons for his wishes.” Without specifically ruling about the mogul’s competency, he said that Redstone “is presumed to have capacity.”
Q: What did Dauman say?
A: Redstone shifted the health care authority from Herzer to Dauman in October. The Viacom chief said during the case that in November he found Redstone to be “engaged, attentive and opinionated as ever.”
Q: So Dauman changed his mind?
A: His complaint says that Redstone’s health has “rapidly declined” since November. It adds: “At this point in time, Mr. Redstone, to the extent he can perceive his circumstances, can only understand that his continuing care and health depend on Shari and that he must accept her wishes.”
Q: What evidence does he have?
A: The court filing cites some of the evidence from the Los Angeles case challenging Redstone’s competence. Dauman adds that when he visited Redstone in the first week in March he “appeared almost totally non-responsive, and could not meaningfully communicate at all.”
Q: Is that it?
A: In statements over the weekend, Viacom said that “during an in-depth strategy session of Viacom’s Board Tuesday evening and all day Wednesday, not a sound was heard from Sumner, who was connected by phone.” In addition, Lead Independent Director Fred Salerno said that “despite numerous requests, I, along with the Chair of Viacom’s Governance and Nominating Committee, have been denied access to Sumner for a face-to-face meeting.”
Q: And Sumner?
A: A statement released on his behalf Sunday says he “remains today as Philippe Dauman described him less than six months ago: ‘engaged, attentive, and as opinionated as ever.'” Redstone kicked Dauman and Abrams off the trust and the National Amusements board “based on what Mr. Redstone believes are the best interests of beneficiaries and shareholders.”
Q: Why didn’t he contribute to Viacom’s board meeting?
A: His camp said, in a statement, that Viacom knows Redstone “has significant speech impairment and, for much of the past two years, has not relied on verbal statements at board meeting to make his opinion known.”
Q: Why hasn’t he met with other board members?
A: Redstone’s team says that on May 16 he sent a letter to Dauman, Abrams and Salerno asking “to be briefed concerning management’s plans for improving Viacom’s business outlook and share price. This was an opportunity for direct engagement, but the board leadership did not respond.”
Following the charges and countercharges during the past few days, it’s “problematic to move forward with any direct meeting and briefing as Mr. Redstone had previously requested. However, Mr. Redstone remains intent on receiving the briefing through his advisers — a request that still has not been responded to despite Mr. Redstone’s rights as a director.”
Q: So what’s next?
A: Probably a fight over which court should determine whether Redstone’s competent to make the decisions regarding Dauman and Abrams. It’s easy to see why the Redstone camp favors the court that sided with them in the Herzer case. Dauman’s counsel, Les Fagen, said today that the Redstone trust “is settled in Massachusetts” and calls the California action “Shari’s attempt to run away from the Massachusetts courts and to deflect attention from the real issue: Whether our friend and colleague Sumner is under the undue influence of his daughter, surrounded by a web of unfamiliar lawyers and public relations firms that she directs.”