Tensions between Viacom and controlling shareholder Sumner Redstone escalated Friday after the media company disclosed it had agreed to pay for CEO Philippe Dauman’s costs in his legal fight against Redstone.
According to a regulatory filing, the Viacom board entered into an indemnification agreement with Dauman and board member George Abrams on Monday — three days before Redstone moved to oust Dauman, Abrams and three others from the board.
“Viacom will pay or promptly reimburse Mr. Dauman’s and Mr. Abrams’ costs and expenses (including attorney’s fees, expert witness fees and fees of public relations and other consultants) actually and reasonably incurred” in connection with their legal effort to invalidate their removal by Redstone from the seven-person trust that will ultimately control his media empire, the filing said.
Dauman and Abrams allege that the 93-year-old Redstone is ailing and acting under the “undue influence” of his daughter, Shari Redstone.
National Amusements, the Redstones’ family investment vehicle, said the indemnification agreement shows that under Dauman’s leadership, “Viacom is diverting valuable corporate resources to mount a legal and PR campaign against Sumner Redstone .”
“There is no justification for Viacom to use company dollars to fund Dauman’s and George Abrams’ unfounded attack on Redstone’s lawful decision to remove them as trustees from Redstone’s trust,” National Amusements said in a statement.
Redstone and his daughter said Thursday they were replacing the five board members with a slate of new slate of directors. The changes, which must be affirmed by a Delaware judge, have been described by Viacom’s lead independent director as “a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom.”
Under the indemnification agreement, Dauman and Abrams would have to repay Viacom if a court determines they breached their fiduciary duty in bringing their lawsuit.
“I don’t think it’s appropriate to use shareholder money for the suit,” Ben Strubel, a principal with Viacom shareholder Strubel Investment Management, told Reuters.
Viacom also announced on Friday that its third-quarter profit would fall well short of Wall Street expectations. “The need for strong, independent oversight of Viacom could not be more apparent,” National Amusements said.