Vincent Shen: Back in early April, Sean and I had discussed some of the high-level drama
at Walt Disney when Thomas Staggs, who was then the Chief Operating Officer of the company
and who appeared to be the natural choice to replace CEO Bob Iger after his retirement,
he ended up actually resigning rather abruptly, and he threw the established succession plan
into question. There were some reports that touched on the behind-the-scenes conversations
that may have been happening among the management team and board of directors at Disney that
may have led to Staggs' departure after working at the company for about a quarter century.
This kind of corporate drama is, really surprisingly, not that uncommon among even some of the world's
largest publicly-traded companies, and today Dan and I will be looking at the scene that's
currently unfolding at Viacom. Just to give our listeners some high-level perspective
of the story here, the setting is Viacom, which has suffered about a 45% decline in
its share price over the past two years. The company operates via two primary segments,
its media networks, so think about channels like Nickelodeon, Comedy Central, MTV, Spike,
and then also its filmed entertainment business with Paramount Studios, and they have some
pretty well-known franchises like Mission Impossible and Transformers. Both these businesses
are facing headwinds, I think on one hand cord cutting among its television networks,
and then on another hand its lack of steady movie franchises for its film business.
Then now to the actors that we have involved, so first that's the founder of the company,
Sumner Redstone, so the media mogul. He acquired Viacom back in '87 and is the ...
Dan Kline: He bought the company when it was still part of CBS, and then eventually they
were split into two. To dial it back, Sumner Redstone controls about 80% of the voting
shares in Viacom through a trust, and that's where the intrigue is starting to happen.
Shen: Absolutely, yeah. Thank you for clarifying. I realize not quite so much a founder, but
the person who's brought Viacom and curated it to the business that it is today.
Kline: He's been the unquestioned kingpin of Viacom and CBS, no matter what his title
has been. He's been CEO, he's been chairman, he's been super-duper chairman, sort of whatever
title. I just made that last one up, but whatever title you need, he's had, and now the question
is, is he still the one calling the shots? He's had some major health issues, and recently
there was a court case where his long-time caretaker and partner sued and basically said,
“Hey, I should be making his decisions, that's what he wants, he's not capable.”
He was actually seen by a geriatric psychologist -- I may not be getting that title exactly
right -- who determined that, while he clearly had some dementia, he was capable of deciding
who would take care of him. Now, what wasn't ruled upon -- and that's
very important here -- is it was not decided if he was actually competent to be making
business decisions. That's something that the Viacom board would like to force, but
it has not happened yet. Shen: Yes, yes. You know, beyond Sumner Redstone,
I think, the really important people who are involved in this drama right now are his daughter,
Shari Redstone, and then CEO and executive chairman -- which is a title that he got somewhat
recently, earlier this year -- Philippe Dauman, and then the rest of the board of directors
at Viacom. Kline: Well, the challenge here, so Shari
Redstone will eventually own all of her father's stock or have control of it through a trust,
and what has been happening is Dauman and another trustee have been kicked off the trust,
and they're suing to prevent that. The reason this is important is whoever controls that
trust eventually controls Viacom and CBS, and you can look at this one of two ways.
The Viacom board is alleging that Shari Redstone is orchestrating all this, that she wants
to replace these people so she can have control. Shari Redstone is saying, “No, this is what
my father wants, he's not happy with the performance at Viacom”, which could ultimately lead
to a major change on the board there and even Dauman losing his job.
That's something that the independent directors on the board have been fighting, so there's
a lot of sort of policy intrigue here. The big question is -- and we talked about this
a little while ago -- is it good business sense? Is it that Viacom's not doing well,
so, “Hey, let's make some changes”, and that's what both Shari and Sumner want, or
is this Shari Redstone saying, “Hey, I'm going to use this as a way to consolidate
my power base, kick this guy out and then I'll be the puppet master behind the throne?”
It's really hard to know, because Sumner Redstone has been held in seclusion.
Shen: Yes, absolutely. From what I saw, he actually hasn't made a public appearance,
I think, since his birthday, his 92nd birthday party last year, and he actually just turned
93 on Friday. Kline: Yeah, and I think it's worth talking
about, so I read the transcript of his interview for this court case, and at times he ... he
needed to work through an interpreter. At times he was completely unaware. He used language
that I would say was salty even by construction-site standards. He was definitely not the in-command
media mogul we know, so just by reading the transcript, it's very clear that Sumner Redstone,
while you can't make a judgment of whether he's aware of what's going on, he's clearly
diminished. He's not the person he once was, so we don't
know. Is he calling the shots? Is Shari Redstone calling the shots? Should Dauman be replaced?
The company has not done very well, and the big issue is Dauman and the board want to
sell a stake in Paramount, and supposedly Redstone is against that, or Sumner Redstone
is against that. Shen: Yes, yes. He has generally been a big
supporter of the idea of keeping all of Paramount ownership in house. It comes down to, with
Dauman and another director, George Abrams, being essentially removed from the trust,
so from seven to five people, and essentially the idea that Shari will probably fill those
two spots, if she does, with people who kind of support what she wants.
Kline: She's actually named her daughter and another close confidant to those spots.
Shen: There you go. Kline: That said, this is the Redstone family
trust. Who would you expect to be named to it? I mean, I was hoping, but my name did
not come up. Once again, I think if I had to look at this as an analyst, I would say
it's probably a little from Column A, a little from Column B. Of course Shari Redstone wants
to make the decisions, but I think she's also at least trying to interpret what her father
wants. How much of that he's stating and how much she's guessing or trying to infer, we
don't know, but Dauman obviously doesn't want to lose his job, so he's going to work hard
to keep the board independent and try to fight any of this.