Viacom CEO Philippe Dauman is out and will be replaced by Thomas Dooley, currently COO, as part of an agreement ending the battle for control of the media company that has been won by 93-year-old mogul Sumner Redstone and his daughter Shari Redstone, according to sources familiar with the situation.
According to a report in the Los Angeles Times, Dooley will serve until the company’s board meeting in September but could be asked to continue in the job.
Dauman was one of the highest paid CEOs in the U.S., but in recent years Viacom’s business has been bad, with ratings dropping at its cable networks and ad revenues declining. Its stock hit new lows earlier this year.
Shari Redstone was a rival of Dauman’s for control of her father’s $40 billion media empire, which includes CBS. She also criticized Dauman and opposed his election as chairman earlier this year.
The deal was approved by Viacom's directors Thursday night, but some elements needed to be signed off on before an official announcement can be made.
The settlement would end lawsuits in Massachusetts and Delaware and allow the Redstones to add five new directors to Viacom’s board. The new directors include Judith McHale, former president of Discovery Communications, Ken Lerer, an investor in companies including BuzzFeed, and Nicole Seligman, formerly president of Sony Entertainment.
Five current board members who sided with Dauman will depart over the next few months.
While Viacom’s stock has risen as it appeared more likely that Viacom would be under new management, the company’s problems remain large.
“There’s no visibility in trends to give us comfort that things are turning around any time soon—even with a new management team,” Wells Fargo analyst Marci Ryvicker said in a note after Viacom’s earnings announcement earlier this month. “We don’t think Viacom is a quick or easy fix no matter who runs it.”
Redstone’s family holding company National Amusements owns 80% of the voting stock in Viacom and CBS. Over the past few months, Redstone has attempted to remove and replace Dauman and other Viacom directors likely to side with him from the board of National Amusements, the board of Viacom and as trustees of the trust that will control the assets when the 93-year-old Redstone dies or is deemed incompetent to make business decisions.
In statements, Redstone has opposed Dauman’s plan to sell a 49% stake in its Paramount Pictures movie studio, one of Redstone’s favorite assets.
Dauman and some of the other Viacom directors have contested the ejections in courts in Massachusetts and Delaware claiming that Redstone is incompetent and under the undue influence of his daughter Shari Redstone. Shari Redstone is a director of Viacom, CBS and National Amusements.
Trials had been scheduled for October, first in Massachusetts, where the National Amusements trust was established, then in Delaware, where Viacom is incorporated.
A long-time legal advisor to Redstone, Dauman helped the mogul buy Viacom and Paramount Pictures. Dauman joined the company as a counsel and rose to be deputy chairman but had to leave when the company merged with CBS, then run by strong-willed Mel Karmazin. Dauman reportedly received $150 million in severance and started a private equity firm with Dooley called DND Capital Partners.
He stayed on the company’s board and was named CEO in 2006 after CBS was spun off and Redstone fired Tom Freston, one of the founders of MTV. Dauman never enjoyed Freston’s reputation as a creative leader at the company.
Dauman has been among the highest paid corporate executives. Last year he received total compensation of $54 million. His exit package is expected to be worth another $72 million.
Dauman’s administration has been criticized for being too slow to adjust to the changing digital entertainment landscape. One analyst, Todd Juenger of Sanford C. Bernstein, famously likened Viacom under Dauman to Kodak in the days when digital technology was taking over the camera business, eliminating the need for film.
He has also been criticized for buying back Viacom stock instead of investing in assets that could grow Viacom’s business and make it more tech-savvy.
Many of Viacom’s cable networks are youth oriented, and their ratings have been hard hit as young consumers turn to digital devices for entertainment. The ratings drop has led to falling ad revenues and hurt its leverage with distributors. Some analysts say Dauman hurt Viacom’s Nickelodeon kids business by licensing its programs to Netflix, gaining short-term revenue while building a powerful long-term competitor for young eyeballs.
Viacom’s earnings in the quarter ended June 30 were down 27% to $432 million. Falling ad revenues, a subscription VOD licensing deal that wasn’t renewed and the poor performance of the latest Teenage Mutant Ninja Turtles movie were blamed.
Although Redstone was known for turning on senior corporate executives, the deterioration of the relationship between Redstone and Dauman is still shocking.
When Redstone’s former live-in companion Manuela Herzer last year accused Redstone of being mentally incompetent, Dauman was among his defenders.
In court papers, Dauman said that “although Sumner has a substantial speech impairment, I speak with Sumner several times a week by telephone regarding both business and personal matters. I also visit him in person on a monthly basis.” During one visit last October, “We had an extensive business discussion regarding articles that had appeared recently in the New York Times and the Wall Street Journal, and we also discussed personal matters,” Dauman said. He visited Redstone again in November. “On both occasions, he was engaged, attentive and opinionated as ever.”
In December, Dauman told an investor conference that Redstone maintained his “incredible will to live” and his “enjoyment of life.” He urged people to look in a mirror and to exercise some humanity when talking or writing about the ailing mogul. “We should retain a sense of decency here.”
Redstone frequently introduced Dauman during Viacom earnings calls by calling the CEO “the wisest man I know.” That stopped as Redstone’s health declined and he no longer spoke on the calls.
On Viacom’s February earnings call, after Dauman succeeded Redstone as chairman, he thanked Redstone, calling him his “colleague, mentor and friend.”
Dooley has been COO of Viacom since May of 2010. Like Dauman, Dooley is a New Yorker. He earned a Bachelor of Science from St. John’s University and an MBA at NYU.
He joined Viacom in 1980, rising to executive VP and deputy chairman. When Viacom merged with CBS, he left with Dauman to form DND Equity Partners, which invested in media and telecommunications businesses.
On earnings calls, Dooley was usually responsible for reporting on the company’s debt and cash flow. He also tended to provide projections and guidance for upcoming quarters and the remainder of the year.
Even with the settlement, the legal activity surrounding the Redstone media empire might not be over.
Sumner Redstone’s granddaughter—and Sheri Redstone’s niece—Keryn Redstone on Thursday said she plans to continue her part of the Massachusetts lawsuit challenging her grandfather’s ability to make decisions.
“Keryn has not participated in any of the settlement negotiations and has no information about its terms,” her lawyer, Pierce O’Donnell, said in a statement. “Keryn will carefully review any settlement presented to Judge George Phelan in the Massachusetts litigation to assure that it is in the best interests of her fellow trust beneficiaries and herself. At the present time, without any resolution of her claims, she will press forward to trial.”
In previous statements, Keryn Redstone has contended that her grandfather is no longer competent and that Shari Redstone is pulling his strings.
“No one from the outside has seen my grandfather in many months,” Keryn said in a statement in July. “When I last visited him on Valentine's Day before Shari banned me from his house, he was listless and had a melancholy, vacant look, lacked any affect, and sobbed uncontrollably. He kept asking 'Where is Manuela? I miss her.' I am very worried about his healthcare and what Shari has done to him.”
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