Viacom investors pay CEO s lawful bills in Redstone vomited
Simply by Jessica Toonkel
June seventeen (Reuters) - Viacom Inc disclosed on Friday it would foot the bill for embattled Chief Executive Officer Philippe Dauman's legal fight against controlling shareholder Sumner Redstone, even as Wall Street cheers the executive's potential departure.
The disconnect demonstrates the complicated corporate governance challenge Viacom's panel is facing in the battle for control of Redstone's $40 billion mass media empire, including CBS Corp and Viacom, investors plus corporate governance experts mentioned.
"I don't believe it's appropriate to use shareholder cash for the suit, inch said Ben Strubel, a principal with Lancaster, Pennsylvania-based wealth manager Strubel Investment Management, which owns non-voting shares of Viacom. "I don't think it's appropriate to make use of shareholder money toward his compensation given the company's performance. "
Viacom, which owns Comedy Central, Nickelodeon, MTV and Very important, has been struggling to turn around its rankings. Reflecting some of that weakness, the company's stock is down nearly fifty percent over the previous two years.
On Friday, Viacom said its third-quarter income would fall well brief of Wall Street anticipations, citing a disappointing domestic box office haul through its latest Teenage Mutant Ninja Turtles movie and disruption stemming from just about all the controversy.
Viacom's stock has risen about 15 percent since May 20, 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 the move came on Thursday whenever Redstone ousted Dauman and four others through the Viacom board.
Viacom shares fell 1. 4 percent to close at $44. 42 on Friday.
If a judge affirms the new slate of directors, they have the particular authority to overhaul Viacom management, which may include Dauman. If he could be removed, he or she could potentially receive nearly $90 million in severance, according to compensation consultant Equilar.
Still, Viacom's table, led by lead impartial director Fred Salerno, has argued that 93-year-old Redstone, who they believe has been manipulated by his daughter Shari, is not the particular one making decisions within the best interest of all shareholders.
"On the very day that Mr. Redstone's representatives acted to remove Mr. Dauman and Mister. Abrams, they made this clear the problem was about control of Viacom. It really is clearly in the interests of of Viacom's stockholders the Massachusetts actions become pursued in order to preserve the independence of Viacom's board. "
The particular fight over control in between Dauman and Redstone will be playing out in courtrooms in Delaware, Massachusetts and California.
In a May 23 lawsuit filed within 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 believe in will control Redstone's stake after he dies or is declared mentally inexperienced.
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 really be more apparent, inch the statement said.
The fact that the company is funding a lawsuit from its CEO against its controlling aktion�r points to the complexities of having a family run a multi-billion dollar company, stated corporate governance consultant Francis Byrd.
"It does appear to be unseemly but these are usually the types of complications a person find with a managed company where the family members drama can easily bleed into the corporate functions, " Byrd said.
Naveen Sarma, a credit analyst with Standard & Poor's, said he would possess preferred the board stay out of the power struggle.
"We would instead they would have remained an observer but they will have chosen to take sides, " he mentioned. The ratings agency final month lowered its business governance rating of Viacom bokep jepang from satisfactory to reasonable, due to the uncertainness engulfing the company.
Regular & Poor's is viewing if the power struggle affects the company's operations, Sarma said.
The business itself now acknowledges that this legal drama will be hurting its bottom collection.
On Friday, Viacom said its third-quarter earnings may miss Wall Street estimations, marking the very 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 along with an unnamed streaming video provider. It also blamed the latter on "the recent and highly general public governance controversy. "
The particular media company also said it expects domestic advertisement sales to decline about 4 percent in the third quarter ending 06 30, an improvement from last quarter's decline of five percent.
Viacom said this expects adjusted earnings associated with about $1. 00 to $1. 05 per reveal in the quarter. Experts, on average, were expecting a profit of $1. 38 per share, according to Thomson Reuters I/B/E/S. (Reporting by Anya George Tharakan in Bengaluru and Anna Driver in Nyc; Modifying by Nick Zieminski plus Bernard Orr)
