CBS CBS Corp

   (FROM THE WALL STREET JOURNAL 2/5/16) 
   By Keach Hagey 

In the battle between media mogul Sumner Redstone's daughter and his longtime confidant, the confidant prevailed.

Viacom Inc. said Thursday that Mr. Redstone resigned as executive chairman of the company and will be succeeded by Chief Executive Philippe Dauman, who has been one of the 92-year-old Mr. Redstone's most trusted advisers for three decades.

Mr. Dauman was elected to the post at a Viacom board meeting. The lone dissenter, according to people familiar with the matter, was Mr. Redstone's daughter, Shari Redstone, who has had a tense relationship with Mr. Dauman over the years. But Ms. Redstone, once viewed as a potential successor to her father, didn't seek the chairmanship for herself, these people said.

Though she wasn't able to keep Mr. Dauman out of the chairman's post, Ms. Redstone could still try to counter him within a trust that will take control of Mr. Redstone's voting stakes in Viacom and CBS Corp. once Mr. Redstone dies or is incapacitated, by rallying support from other trustees for her priorities.

Ms. Redstone signaled her opposition to Mr. Dauman's appointment on Wednesday, saying she didn't believe her father's successor at Viacom could be a "trustee of my father's trust, or otherwise entwined in Redstone family matters, but rather a leader with an independent voice."

Ms. Redstone was offered the post of nonexecutive chairman at Viacom, but declined, the people familiar with the matter said.

"Shari is going to continue to advocate for what she believes to be in the best interests of Viacom shareholders," said a spokeswoman for her.

The changing of the guard at Viacom follows Wednesday's announcement that Mr. Redstone had stepped down as executive chairman of CBS, and that CEO Leslie Moonves assumed that title. Mr. Redstone became chairman emeritus of both companies.

Mr. Redstone still overwhelmingly controls Viacom and CBS, which he built in a decadeslong expansion across TV, film and radio. He owns 80% voting stakes in both companies. On his death, or if he is deemed incapacitated, they would pass to a trust with seven trustees, including Ms. Redstone and her son; Mr. Dauman; and four lawyers with ties to Mr. Redstone and his ex-wife, Ms. Redstone's mother.

Speculation about Mr. Redstone's deteriorating health has intensified in recent months. He hasn't spoken on earnings calls, and is rarely seen in public.

Meanwhile, he faces a lawsuit by former companion Manuela Herzer, who alleges Mr. Redstone wasn't of sound mental capacity last October when she was thrown out of his mansion and he removed her as his health-care agent, with authority over his care if he were incapacitated.

Lawyers for Mr. Redstone say the suit is without merit, and are seeking its dismissal.

Mr. Dauman's rise to chairman wasn't a foregone conclusion. Viacom, owner of cable networks like MTV and Comedy Central and the Paramount film studio, faces headwinds in its cable business and its stock price has fallen by a third in the past year. Some investors have expressed displeasure with his leadership, and have pushed for change.

After opening about 5% higher Thursday, as investors anticipated dramatic change at the company, Viacom shares fell back to close at $45.34, up 1.5%, in Nasdaq trading.

"We are disappointed with the company's decision to appoint Philippe Dauman as executive chairman," said activist investor Eric Jackson, at SpringOwl Asset Management, who has argued for Viacom to replace Mr. Dauman as CEO. "It raises questions about the board, corporate governance and fiduciary duties."

Mr. Jackson owns less than 5% of Viacom.

Other investors expressed frustration that Mr. Dauman's election as chairman would ensure he remained CEO.

Mr. Dauman's contract allows him to terminate his employment for "good reason" if Viacom were to "change the parties to whom he reports" or remove him from the board, meaning he could leave if someone else were named chairman. His exit package could be worth as much as $75 million, according to a securities filing.

The company's board, however, stood behind Mr. Dauman. "In choosing a successor to Sumner, the board considered the need for seasoned leadership in this time of unprecedented change, Philippe's business experience and unparalleled knowledge of Viacom, and his long-term vision," said Viacom director William Schwartz.

Viacom's TV channels have been among the hardest hit by the rise of digital video and defection of young viewers from traditional television.

Mr. Dauman also has been embroiled in the lawsuit brought by Ms. Herzer, whom he replaced as Mr. Redstone's health-care agent. Ms. Herzer has described Mr. Redstone as a "living ghost," barely able to follow the thread of conversation, but Mr. Dauman said in an affidavit that Mr. Redstone was "engaged and attentive" during a recent visit.

The judge recently let a medical expert hired by Ms. Herzer examine Mr. Redstone at his home. Mr. Dauman has hired a separate legal team to try to quash a subpoena for him to be deposed in the case.

Mr. Dauman, a lawyer by training, has served on Viacom's board since 1987. His relationship with Mr. Redstone -- he is mentioned at the start of Mr. Redstone's memoir as "my close friend Philippe Dauman" -- was forged in epic corporate battles, like Mr. Redstone's hostile takeover of Viacom and Viacom's takeover of Paramount Pictures.

To tackle the challenges facing Viacom, he has taken steps to reduce its reliance on Nielsen ratings, expand overseas, push deeper into digital distribution and increase Paramount's slate of films.

(END) Dow Jones Newswires

February 05, 2016 02:48 ET (07:48 GMT)

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