Philippe Dauman’s Last Stand

June 20, 2016, 10:41 AM UTC
Annie Tritt for Fortune

Philippe Dauman’s fate as CEO of Viacom is now in the hands of a Delaware court, which must decide whether 93-year-old Sumner Redstone is mentally competent to make business decisions.

I sat down with him Friday – one day after Redstone moved to oust Dauman and four other Viacom directors – to ask a different question: Given the company’s poor performance in recent years, why should shareholders want him to stay? The same day, the company issued a gloomy profit outlook for the current quarter, due in part to the weak results for its Teenage Mutant Ninja Turtles movie.

But sitting in his office at 44th and Broadway, with a 180-degree panoramic view of New York, Dauman was calm, showed little emotion, and made no apologies. He said he deserves to keep his job because he has “realigned this company for the future.” He cited the company’s increased investment in original content; its success in securing affiliate deals; its successful performance selling advertising in the recent television up fronts; and its rapid growth overseas.

Excerpts from my interview with Dauman – the only interview he has granted in the midst of the current legal battle – follow below.

Murray: “As a shareholder, I might be inclined to look at the last ten years and say, well, wait a minute, what have I gotten here? In terms of return to shareholders, you’ve way underperformed Fox, Time-Warner, CBS, Disney. “

Dauman: “We were over performing until two years ago, when we started to go through this transition. We take a long view. We have made these strategic moves for the future.”

Murray: “Your stock price has fallen about fifty percent; your revenues have been falling for two years.”

Dauman: “Anybody smart will look forward to what’s going to happen in the very near term based on everything that we are doing now.”

Murray: “That’s a kind of ‘Trust me, the bad times are behind us’ approach.”

Dauman: “Its not a ‘trust me.’ People who are in the know…We have one investor (Capital Research) who went from nothing to become the biggest shareholder of Viacom, with a larger position than National Amusements.”

Murray: “One of the knocks against you has been that you owned this young audience, but the audience moved to digital, and you haven’t moved to digital quickly enough.”

Dauman: “We have moved to digital. We have our content everywhere. We have close relationships with all the social media companies. We have two brands on the Snapchat Discover platform… We were the first company to engage with SVOD companies like Netflix, and Hulu and Amazon. We were the first to put our content on mobile in a significant way. We are in conversations with all the digital players, and we are working to revolutionize measurement of the digital audience.”

Murray: “Data is a big part of your strategy.”

Dauman: “We supplement the traditional data with proprietary information about well over a hundred million consumers, married with other data bases. Most recently we did a deal with American Express to use their data to help with targeting for the benefit of marketers.”

Murray: “I don’t see your shows in the top ten lists that people are talking about.”

Dauman: “In cable, we have more top shows than anybody else across our family of networks. For example, Nickelodeon now has nine of the top ten shows for children. BET has the top shows for African American audiences, bar none. Comedy Central with Amy Schumer is a top show. Lip Synch Battle is a big global hit on Spike and now in in 90 countries.”

Murray: “So you don’t buy the notion you are in a creative lull?”

Dauman: “No. We have a lot of good people. Remember we have more networks than anyone else. We are number one. No one is bigger than us. We have the biggest reach and that’s by Nielsen measurement, which misses a lot of the audience. That’s getting lost in all of this.”

Murray: “So what’s wrong with your shareholders? The biggest upward movement recently has come from the expectation that you may be leaving?”

Dauman: “A stock price at any given moment is a snapshot. The stock goes up and down. No one likes drama, nor do I… A good investor invests for the long run, and sees what’s unfolding.

“Whenever you transform a company for the future, there is a transition

Murray: “Is the problem that the market is not sufficiently valuing long-term initiatives?”

Dauman: “The market will get to the right place eventually. Our job is to make the right operational moves for the company to succeed in this new world we are entering….We have laid the groundwork for what I believe will be better performance than our peers in the future.”

Murray: “Your pay, relative to shareholder performance, has been a big issue. It was $54 million last year, during this period of stock price decline.

Dauman: “What people fail to see there is that the vast majority of my so-called compensation is based on performance, so that it’s recorded according to Black-Scholes value when it is granted, but I don’t realize that unless the stock performs. So when the stock does not perform, I do not in fact collect the money that I’m being reported as having received.

“In fact I have suffered, along with shareholders, because I have a lot of shares myself. In reality, I have lost far more than the $54 million in this period. That’s not inappropriate. I will be rewarded if and when the stock recovers.”

Murray: “How is this legal fight going to play out?”

Dauman: “We will find out. I hope it doesn’t take long, because it puts a lot of stress on the organization.

Murray: “You met with Redstone in November and testified he had his wits about him.”

Dauman: “The issue at hand there was about his health care. And as I said, he was attentive and engaged. But this context is totally different. We weren’t addressing significant business decisions.”

Murray: “What’s the big thing people are missing in all of this? “

Dauman: “The press loves drama. People are missing the business story. This is a great place to work. We have great values. Creativity is at the center of it. We want to do good while we do well. We attract great millennial talent. We talked about data….we’ve attracted data scientists who could easily get jobs at the biggest tech companies around. Why? Because it’s a fun environment to be in.

“We have a great organization, and we hope we don’t lose too much of that during all this. This will pass, and the company will endure.”


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