Sumner Redstone, the 92-year old founder and Executive Chairman of Viacom was deemed incapable of running the company, but he still receives a salary of $2 million.
SpringOwl Asset Management demanded the Board of Viacom to replace Mr. Redstone and its CEO Philippe Dauman. The activist investor claimed that company’s CEO is overpaid, and suggested that he is no longer mentally capable of making decisions. Mario Gabelli (who is a large shareholder) had previously expressed concerns about Redstone’s running of the company.
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The activist investor also emphasized that Viacom has the “oldest directors on average compared to any of their media peers at 66 (except for CBS).
“We believe almost 75% of the VIAB [Viacom’s ticker symbol] board are not independent by a reasonable definition,” according to Spring Owl Asset Management.
In a regulatory filing with the Securities and Exchange Commission (SEC), Viacom revealed that the annual compensation of Mr. Redstone was reduced by 85% to $2 million last year from $13 million in 2014.
The company also said that Mr. Redstone was no longer eligible to receive a bonus beginning in fiscal 2015. He was ineligible to receive an annual equity award since 2012.
Viacom also disclosed that Mr. Dauman’s bonus dropped 30% to $14 million last year from $20 million in 2014. His salary and annual equity award were substantially unchanged.
Last year, Mr. Dauman’s salary was $4 million compared to $3.9 million in 2014 and his annual equity award was valued $18.9 million, down from $19.9 million a year earlier.
Viacom Chairman’s health
Mr. Redstone health has been the subject of investors’ speculations since he stopped speaking during the company’s earnings call and attending events last year. His former girlfriend Manuela Herzer claimed in a lawsuit that he was “mentally vacant, listless and prone to uncontrollable crying spells” when he signed the documents that removed her as healthcare agent.
Mr. Redstone controls 80% of the voting stock of Viacom, the owners MTV, Nickelodeon, and Comedy Central. According to SpringOwl Asset Management Viacom underperformed its peers and it is demanding changes including a new CEO. However, any changes in the company require the approval of Mr. Redstone as the controlling shareholder.
In response to the activist investor, the company said its Board and management team are “completely focused on delivering long-term value for shareholders.”
Mario Gabelli also questioned if Mr. Redstone is still mentally capable to perform his duties as Chairman of the company. He said, “It would be appropriate for a company trading on the New York Stock Exchange to basically make a statement with some kind of veracity. Is he or isn’t he in the position where he should be chairman emeritus or something?”