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Perspectives: ‘Super-Voting’ Stock Has Been Good for Media Firms

Should CBS’S independent shareholders be subject to the Redstone family’s “super-voting stock?”

Acting out a boardroom drama that has spilled over into Delaware Chancery Court, Shari Redstone may impose her voting will, if necessary, to reconsolidate Viacom and CBS — which her father, Sumner Redstone, separated into two companies — by using her votes to change the CBS board.

So, let’s reconsider “super-voting stock,” which is legal, but as it affects the responsibilities of media companies.

I’m a passionate supporter of such stock when a company founder or founding family needs that level of insulation from political or financial opportunists who pressure managements for quarter-by-quarter results in an industry under great change.

Tight Control Allows for Risks

Thank you, Sulzberger family. Your supervotes maintain an honorable, fearless — though financially endangered — The New York Times, which helps protect American society.

Thank you, Rupert Murdoch’s super-votes for the opposite political speech and vigorous practice of editorial democracy on TV and in print, even if it hurts quarterly results.

And three cheers to John Malone, whose media holdings are generally apolitical but whose financial genius and engineering have brought outsize results to his lesser-voting outside shareholders.

Super-voting stock has probably the greatest disbalance between economic ownership and voting rights at Comcast. Nevertheless, the Roberts family has fearlessly taken bold risks and managed brilliantly to create the modern Comcast, greatly improving its antecedents at AT&T, RCA, GE, NBC, MCA and Universal.

I have followed Viacom carefully since first proposing that its pre-Redstone management acquire Nickelodeon, MTV, et al, when Steve Ross’s Warner Communications (one share, one vote) was under shareholder pressure because of Atari’s early ’80s failure. Redstone finessed the management buyout, taking over the company with super-voting stock he controlled.

Then, Sumner Redstone was still mentally and physically vigorous, but gave no hints of Viacom media’s social responsibility, public good and extraordinary value for common shareholders.

Meanwhile, as cable/satellite diluted broadcast networks and CBS founder William S. Paley aged, successor Larry Tisch tried to keep CBS, known as “the Tiffany network,” alive and more efficient (vulnerable to a single class of stock). Their corporate heirs avoided Ted Turner’s grasp by merging CBS with Westinghouse — a fading industrial company that managed TV and radio stations extremely well. CBS then re-merged with Infinity Broadcasting, with Infinity’s Mel Karmazin in charge. Karmazin proposed merging CBS and Viacom, despite Redstone’s super-majority of the combined company. Redstone soon fired Karmazin.

Redstone had fired Viacom’s able CEO, Frank Biondi, and then fired his very creative successor, Tom Freston. He eventually shuffled the components slightly and installed his personal attorney, Philippe Dauman, as CEO of the “fast growth” Viacom.

Viacom soon became the poster child for executive turnover, loss of momentum and exorbitant compensation at the top, not-so-incidentally including Redstone himself.

By that time, Redstone was ailing, but Les Moonves’s brilliant stewardship of “slow growth” CBS made retaining Moonves the key to reconsolidation (even camouflaging Redstone’s similar duplicate CBS pay package).

Shari Redstone emerged from her family soap opera to change Viacom’s board with super-majority stock and deposed Dauman. After that, Bob Bakish applied his international success to stabilize Viacom domestically.

Accountability Is Key

A case can be made for one share, one vote, keeping managements on edge quarter-to-quarter: see Disney’s great long-term success under Michael Eisner, Frank Wells, Tom Murphy and Bob Iger, as ABC/ESPN was acquired by Capital Cities, which was sold to Disney.

Or see Jeff Bewkes’ methodical liquidation of Time Warner — having rewarded shareholders with spinoffs of Time Warner Cable/Charter, plus AOL/Verizon, plus Time/Meredith, plus lots of cash and AT&T stock, assuming the likelihood of a favorable court decision.

The glaring, single truth that emerged from the Redstone family’s control is that father and daughter have done little economically or creatively to justify their super-voting stock status. Yet, Shari persists with the “droit de seigneur.”

For decades, until digital technologies transformed every industry, American society was very well-served by its legacy media companies, whether their shares were equal or super-voting. Alas, that is not the Redstone family legacy.

Edward Bleier was a senior executive of ABC TV for 15 years and of Warner Bros. Inc. for 35 years, and has served on the governance committees of three public media companies.