Viacom investors pay CEO s lawful bills in Redstone vomited
Simply by Jessica Toonkel
June seventeen (Reuters) - Viacom Inc disclosed on Friday it might foot the bill with regard to embattled Chief Executive Officer Philippe Dauman's legal battle against controlling shareholder Sumner Redstone, even as Wall structure Street cheers the executive's potential departure.
The detach demonstrates the complicated corporate governance challenge Viacom's board is facing in the battle for control of Redstone's $40 billion press empire, including CBS Corp and Viacom, investors and corporate governance experts mentioned.
"I do not think it's suitable to use shareholder money for the suit, " said Ben Strubel, a principal with Lancaster, Pennsylvania-based wealth manager Strubel Expense Management, which owns non-voting shares of Viacom. "I don't think it's suitable to use shareholder money towards his compensation given the company's performance. "
Viacom, which owns Comedy Central, Nickelodeon, MTV and Paramount, has been struggling in order to turn around its ratings. Reflecting some of that weakness, the company's stock is down nearly fifty percent over the past 2 yrs.
On Friday, Viacom said its third-quarter revenue would fall well brief of Wall Street anticipations, citing a disappointing household box office haul from its latest Teenage Mutant Ninja Turtles movie plus disruption stemming from just about all the controversy.
Viacom's share has risen about 15 percent since May twenty, when Redstone removed Dauman and board member George Abrams from the seven-person trust that will ultimately control Redstone's media disposition. About half of that move came on Thursday whenever Redstone ousted Dauman and four others from the Viacom board.
Viacom shares fell 1. 4 % to close at $44. 42 on Friday.
If a judge states the new slate associated with directors, they have the authority to overhaul Viacom management, which may include Dauman. If he could be removed, this website saya individual could potentially receive almost $90 million in severance, according to compensation consultant Equilar.
Still, Viacom's panel, led by lead independent director Fred Salerno, offers argued that 93-year-old Redstone, who they believe is being manipulated by his daughter Shari, is not the particular one making decisions within the best interest of all shareholders.
"On the day that Mr. Redstone's representatives acted to eliminate Mr. Dauman and Mister. Abrams, they made it clear the matter was regarding control of Viacom. It is clearly in the passions of most of Viacom's stockholders that this Massachusetts actions end up being pursued in order to preserve the independence of Viacom's board. inch
The particular fight over control between Dauman and Redstone is playing out in courtrooms in Delaware, Massachusetts plus California.
In a Might 23 lawsuit filed in Massachusetts, Dauman and Abrams are contesting their removal from Redstone's family trust and the board of National Amusements Inc, the holding company for Redstone's voting shares. The rely on will control Redstone's stake after he dies or is declared mentally incompetent.
National Amusements, in the statement on Friday, stated there was "no justification" for Viacom's funding of the legal fight against Sumner Redstone. "The need for strong, independent oversight of Viacom could not be more apparent, inch the statement said.
The fact that the company is financing a lawsuit from its TOP DOG against its controlling aktion�r points towards the complexities associated with having a family run a multi-billion dollar company, said corporate governance consultant Francis Byrd.
"It does seem to be unseemly but these are the types of complications you find with a controlled company where the family drama can easily bleed into the corporate operations, " Byrd said.
Naveen Sarma, a credit analyst with Standard & Poor's, said he would have preferred the board remain out of the energy struggle.
"We would instead they would have remained an observer but these people have chosen to take sides, " he said. The ratings agency last month lowered its corporate governance rating of Viacom from satisfactory to reasonable, due to the uncertainty engulfing the company.
Regular & Poor's is viewing whether or not the power struggle affects the company's operations, Sarma mentioned.
The company itself now acknowledges the legal drama is usually hurting its bottom range.
On Friday, Viacom said its third-quarter earnings will miss Wall Street quotes, marking the first time since October 2008 it has put out such guidance.
The particular company cited the Teen Mutant Ninja Turtles movie and a delay within completing an agreement with an unnamed streaming movie provider. It also blamed the latter on "the recent and highly public governance controversy. "
The media company also mentioned it expects domestic ad sales to decline regarding 4 percent in the particular third quarter ending June 30, a noticable difference from final quarter's decline of 5 percent.
Viacom said this expects adjusted earnings of about $1. 00 in order to $1. 05 per discuss in the quarter. Analysts, normally, were expecting the profit of $1. 37 per share, according to Thomson Reuters I/B/E/S. (Reporting by Anya George Tharakan in Bengaluru and Anna Driver in Nyc; Editing by Nick Zieminski plus Bernard Orr)
