Viacom investors pay CEO s lawful bills in Redstone vomited
Simply by Jessica Toonkel
https://t.co/ June seventeen (Reuters) - Viacom Inc disclosed on Friday it would foot the bill for embattled Chief Executive Officer Philippe Dauman's legal combat against controlling shareholder Sumner Redstone, even as Wall Street cheers the executive's potential departure.
The disconnect demonstrates the complicated business governance challenge Viacom's table is facing in the particular battle for control associated with Redstone's $40 billion press empire, including CBS Corp and Viacom, investors and corporate governance experts said.
"I do not think it's appropriate 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 appropriate to utilize shareholder money towards his compensation given the company's performance. "
Viacom, which owns Comedy Main, 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 50 percent over the past 2 yrs.
On Friday, Viacom said its third-quarter revenue would fall well short of Wall Street expectations, citing a disappointing domestic box office haul from its latest Teenage Mutant Ninja Turtles movie and 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 empire. About half of this move came on Thursday when Redstone ousted Dauman and four others from the Viacom board.
Viacom gives fell 1. 4 percent to close at $44. 42 on Friday.
If a judge states the new slate associated with directors, they have the particular authority to overhaul Viacom management, which might include Dauman. If he is removed, he could potentially receive nearly $90 million in severance, according to compensation specialist Equilar.
Still, Viacom's panel, led by lead independent director Fred Salerno, provides argued that 93-year-old Redstone, who they believe is being manipulated by his child Shari, is not the particular one making decisions in the best interest associated with all shareholders.
"On the very day that Mr. Redstone's representatives acted to get rid of Mr. Dauman and Mister. Abrams, they made this clear the problem 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 in order to preserve the independence of Viacom's board. "
The fight over control between Dauman and Redstone is playing out in courtrooms in Delaware, Massachusetts and California.
In a May 23 lawsuit filed in Massachusetts, Dauman and Abrams are contesting their elimination from Redstone's family trust and the board associated with National Amusements Inc, the particular holding company for Redstone's voting shares. The rely on will control Redstone's risk after he dies or is declared mentally incompetent.
National Amusements, in the statement on Friday, mentioned there was "no justification" for Viacom's funding of the legal fight against Sumner Redstone. "The require for strong, independent oversight of Viacom could not be more apparent, " the statement said.
The fact that the company is financing case from its TOP DOG against its controlling aktion�r points to the complexities associated with having a family operate a multi-billion dollar company, stated corporate governance consultant Francis Byrd.
"It does look like unseemly but these are the types of complications a person find with a controlled company where the family members drama can easily hemorrhage into the corporate procedures, " Byrd said.
Naveen Sarma, a credit analyst with Standard & Poor's, said he would have got preferred the board remain out of the energy struggle.
"We would instead they would have remained an observer but these people have chosen to consider sides, " he stated. The ratings agency final month lowered its business governance rating of Viacom from satisfactory to fair, due to the uncertainty engulfing the company.
Standard & Poor's is viewing whether the power struggle impacts the company's operations, Sarma mentioned.
The organization itself now appreciates the legal drama will be hurting its bottom collection.
On Friday, Viacom mentioned its third-quarter earnings will miss Wall Street estimations, marking the first time since Oct 2008 it has put out such guidance.
The particular company cited the Adolescent Mutant Ninja Turtles film and a delay in completing an agreement with an unnamed streaming video clip provider. It also blamed the latter on "the recent and highly public governance controversy. "
The particular media company also said it expects domestic advertisement sales to decline about 4 percent in the particular third quarter ending 06 30, a noticable difference from final quarter's decline of five percent.
Viacom said this expects adjusted earnings associated with about $1. 00 to $1. 05 per discuss in the quarter. Experts, normally, were expecting the profit of $1. 38 per share, according in order to Thomson Reuters I/B/E/S. (Reporting by Anya George Tharakan in Bengaluru and Ould - Driver in New York; Modifying by Nick Zieminski and Bernard Orr)
