Sumner Redstone in 2013
Photograph by Frazer Harrison—Getty Images
By Peter Elkind
May 21, 2016

Sumner Redstone, it seems, has at least one power move left in him—and he appears to be using it to benefit his daughter, Shari.

This evening he ousted his longtime protégé, Viacom CEO Philippe Dauman, as well as Dauman’s presumed ally, longtime Viacom director George Abrams, as trustees of the entity that will assume voting control of Viacom (VIAB) and CBS (CBS) upon Redstone’s death or incapacity, according to two sources familiar with the matter. The move is a big victory for Redstone’s daughter, who is vice chair of both companies, in a developing power struggle over her father’s $40 billion media empire.

“These steps are invalid and illegal,” countered a spokesman for Dauman in a statement to Fortune. “They are a shameful effort by Shari Redstone to seize control by unlawfully using her ailing father Sumner Redstone’s name and signature. As she knows, and as court proceedings and other facts have demonstrated, Sumner Redstone now lacks the capacity to have taken these steps. Sumner Redstone would never have summarily dismissed Philippe Dauman and George Abrams, his trusted friends and advisors for decades.”

A lawyer for Redstone, Michael Tu of Orrick, Herrington & Sutcliffe, issued his own statement asserting that Redstone “took decisive and lawful action today which he firmly believes is in the best interest of Viacom Inc. and its stockholders.” The statement noted that Dauman testified less than six months ago that Redstone is as “‘engaged, attentive and as opinionated as ever” and said Redstone removed Dauman and Abrams because he had expressed concerns about Viacom’s performance and “received no response from them.”

Shari Redstone also issued a statement, which consisted of a single sentence: “I fully support my father’s decisions and respect his authority to make them.”

The decision by the 92-year-old Redstone came in the form of a faxed notification to Dauman and Abrams, the sources tell Fortune, as well as to CBS and Viacom. With this document, Redstone replaces the two men both as directors of National Amusements, the private holding company that now holds Redstone’s 80% voting stake in the two companies, and on the seven-person irrevocable trust that will govern that stake when he dies or is deemed incompetent.

Removal will virtually assure majority control by his once-estranged daughter, Shari. She, along with her son Tyler, and her mother’s divorce attorney are already among the seven members of the trust. Dauman and Abrams presumably would be replaced with Shari Redstone partisans.

It’s not clear how these changes would affect the embattled Dauman’s status as CEO and executive chairman of Viacom. Shari cast the sole “no” vote against Dauman’s ascension to the chairmanship earlier this year and might be inclined to push him out as CEO.

It’s also not clear what options Dauman has at his disposal. One possibility: He could move to have Redstone declared incapacitated; if successful, that might allow him to revoke the billionaire’s action to remove him and Abrams.

Redstone has for years stood by Dauman, who has been with him since he acquired Viacom and often seemed to be more of a favorite than Redstone’s actual children. But Dauman’s leadership has come under fire in the face of Viacom’s sagging stock price and sluggish performance. Redstone has other cause to be unhappy. He was reportedly displeased with Dauman’s plans to sell a minority stake in Paramount Pictures, which Redstone purchased in a hard-fought takeover battle two decades ago. The Viacom board this week also cut off Redstone’s compensation, following a lawsuit by an ousted companion that challenged his mental capacity. A Los Angeles judge dismissed that case without reaching any finding about Redstone’s mental competence.

In early February, days after an expert medical examination in that case, Redstone stepped down as executive chairman of both Viacom and CBS, but remains on the boards of both companies. The Viacom board gave his title to Dauman.

Shari Redstone had long been estranged from her father, but has rebuilt her ties with him after his two live-in female companions were pushed out last year.

 

This story has been updated.

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