Sumner Redstone Has Power to Remove Viacom CEO From His Trust

Sumner Redstone has the power to remove Viacom Inc (VIAB.O) Chief Executive Philippe Dauman, but not his daughter Shari, from the trust that will control his $40 billion media empire after his incapacitation or death, according to two sources familiar with the matter.

There is no evidence that Sumner Redstone is considering replacing Dauman. But the fact that Shari Redstone has a more secure position on the seven-person trust, which has not previously been reported, could embolden her in efforts to wield more influence at Viacom as it struggles with falling ratings.

Shari Redstone, who sits on Viacom's board, voted against Dauman's elevation to executive chairman of Viacom to replace her father in February, arguing that a member of the Redstone trust should not serve as executive chair of Viacom or CBS (CBS.N), the other media company majority owned by her father. Sumner Redstone supported Dauman taking the new role.

A spokesman for Dauman and Viacom declined to comment. Shari Redstone declined to comment through a spokeswoman. Leah Bishop, Redstone's estate lawyer at Loeb & Loeb, did not reply to requests for comment.

The matter of standing on Redstone's trust may end up being moot. If Redstone dies or is incapacitated and the trust takes effect, the only way a trustee can be replaced is if they die or if the beneficiaries of the trust - Redstone's five grandchildren - appeal to a judge. That effectively puts Shari Redstone and Dauman on a level footing.

But while Sumner Redstone is alive and able, and he retains ultimate power over his empire, it raises the question of who has the most influence over him.

Shari, who at times has been estranged from her father, has recently been spending 30-40 percent of her time with him at his Los Angeles mansion, a spokeswoman for her said in response to a question.

In April, Redstone gave Shari and a friend of the family authority over his health care if he becomes incapacitated, sources have told Reuters, replacing Dauman and Viacom's chief operating officer, Thomas Dooley.

At the same time, Dauman still has deep ties to Sumner Redstone, who has called Dauman "the wisest man I've ever known" and "a great friend." The two men have worked together for more than 30 years.

Dauman said in a court declaration late last year that he spoke with Redstone several times a week over the phone and visited him monthly.

Balance of Power Unclear

The Sumner M. Redstone National Amusements Inc Trust owns about 80 percent of Redstone's privately held movie theater company, National Amusements Inc, which in turn owns 80 percent of the voting rights in both Viacom and CBS.

After Redstone dies or is incapacitated, the trust will determine all matters that come to a shareholder vote at both companies, including potential mergers or acquisitions.

It is unclear whether Shari Redstone or Dauman have the majority support among the members of the trust, which include Shari's son, lawyer Tyler Korff; and David Andelman, another lawyer who has worked with the Redstone family and is on the CBS board.

The other members of the trust are George Abrams, who also sits on the Viacom board; Norman Jacobs, Sumner's divorce lawyer; and Leonard Lewin, an attorney who represented Redstone's first wife, Phyllis, in her divorce from Sumner. Calls and emails to the trustees were not returned.

Viacom, like other media companies, has suffered from falling ratings at its cable networks as younger viewers migrate to online and mobile video.

Dauman has taken steps to woo advertisers by using data to better target commercials. Last month the company renewed a multi-year distribution contract with satellite TV provider Dish Network Corp (DISH.O).

Investors, including Mario Gabelli, the second-largest owner of voting shares of Viacom, have welcomed Dauman's plans to sell a minority stake in movie studio, Paramount. Dauman said last month he expects to announce a Paramount deal by end of June.

 

(Reporting By Jessica Toonkel in New York; Additional reporting by Lisa Richwine in Los Angeles; Editing by Eric Effron and Bill Rigby)