At the end of our last episode (meaning yesterday’s Power Sheet), we applauded Dave Cote’s just-announced succession plan at Honeywell and recalled Masayoshi Son’s recently collapsed succession plan at SoftBank. (For a deeper look into that one, see Erin Griffith’s exclusive interview with non-successor Nikesh Arora and today’s news about a reported SEC investigation of Arora.) Today, underscoring the importance and eternal difficulty of getting succession right, we turn to the latest in the increasingly tangled and tragic saga of Sumner Redstone.
A Massachusetts judge will hold a hearing today on a suit by Viacom CEO and chairman Philippe Dauman and director George Abrams. Both were also directors of National Amusements, the company through which Redstone controls Viacom, and trustees of Redstone’s health care trust until Redstone pushed them out of those positions. They want to be reinstated. But wait, there’s more. Redstone is also trying to unseat Dauman, Abrams, and three other directors from Viacom’s board, and lead independent director Frederic Salerno has sued in Delaware to stop that attempt. Any ruling in the Massachusetts case could affect the Delaware case.
There’s much more legal wrangling going on, but we’ll avoid it for now.
The issue that won’t go away is whether Redstone, 93, is mentally competent to do any of what he appears to be doing, or whether he is merely a puppet of his daughter Shari Redstone, as Dauman and Abrams contend. The transcript of a video deposition Redstone recorded last month certainly casts doubt on his mental competency, but that isn’t a satisfactory basis for any ruling.
Another angle: While Redstone is waging war on Dauman, he hasn’t uttered a peep lately about the other media behemoth he controls, CBS, or its CEO, Leslie Moonves. Why not? Let me take a guess. Since Redstone took both companies public in 2005, Viacom stock is up 13%; CBS stock is up 107%. The big divergence happened under Dauman and Moonves. Which one would you be trying to fire?
The tragedy is that Viacom, the company that most needs managerial attention, is instead almost leaderless and is distracted by turmoil that seems intractable. Even CBS investors and employees, understandably concerned about Redstone’s capacity, have to wonder what would happen if he turns his attention to their company. All because Redstone cannot bear to let go.
This is an ironic echo of the history of CBS, from which Viacom was spun off in 1971. Founder-CEO William S. Paley was another leader who couldn’t leave. Over the years he named five designated successors, none of whom succeeded him. (Disclosure: Eons ago I worked for Paley on the team ghostwriting his memoir.) He was a great entrepreneur and a great industry pioneer, but he was not a great leader. Because he couldn’t relinquish control to younger, more perceptive managers in the 1980s, CBS fell behind in cable programming and distribution in ways that hobble the company to this day.
If the Redstone saga drags on, he could do just as much damage.
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What We’re Reading Today
Boris Johnson will not run for U.K. prime minister
The former London mayor, who became the leading voice in the Leave Brexit campaign, made the announcement after Michael Gove, another powerful figure in the Leave camp, announced he would run for the position because he didn’t believe Johnson could unite Parliament. Five candidates have entered the contest to replace David Cameron, with early odds favoring Home Secretary Theresa May, a Remain advocate. BBC
Nikesh Arora under investigation
The Securities and Exchange Commission is investigating whether former SoftBank president Arora held conflicts of interests before stepping down suddenly last week. Arora had been CEO Masayoshi Son‘s designated successor, but the two parted ways amicably after Son decided to remain in charge for another five to ten years, according to statements from both men. Fortune
GE no longer ‘too big to fail’
The announcement by General Electric that its finance arm, GE Capital, would lose its government-imposed “systemically important” designation achieves CEO Jeff Immelt‘s goal in shedding nearly $200 billion of assets. The strategy was meant to focus GE on industrial businesses and escape restrictions from regulators. NYT
Facebook changes its News Feed
It will prioritize family and friends’ posts, which could push down publishers’ content. For publishers that rely on Facebook for clicks, the change could slash traffic numbers. The decision by Mark Zuckerberg‘s company seems a response to allegations last month that the News Feed suppressed conservative-leaning content. CNNMoney
Building a Better Leader
If you have an overly nice boss…
…getting honest feedback can be difficult. Admit you know you have room for improvement, then ask if he or she can help. WSJ
Ask your employees what they would change about the company
Clicktale CEO Tal Schwartz created a company hackathon after asking employees what it could do to stir creativity. Fortune
Remember: The first salary offer is never the best one
A prospective employer that says so isn’t being honest. Negotiate, and face-to-face is always better. Careerealism
Nearly all U.S. banks pass stress tests…
…except Deutsche Bank Trust Corporation and Santander Holdings USA. Those banks have now failed their second and third tests, respectively, which means they may not return funds to their parent companies until the deficiencies are corrected. While James Gorman‘s Morgan Stanley passed the test and may increase payouts to shareholders, the Fed wants improvement in its internal processes by the end of the year. Reuters
Visa bites back at Walmart
In a court filing, Charles Scharf‘s Visa claims Walmart was acting in “bad faith” by setting up payment terminals to accept only customer PINs, not signatures. Doug McMillon‘s Walmart has sued Visa over the security of its debit cards. Visa believes Walmart should be allowing signature use to confirm transactions, while the retailer wants to use only PINs. Fortune
Exxon Mobil encourages the oil industry…
…to support a carbon tax. Rex Tillerson‘s company has long stated that a carbon tax is the best way to fight climate change, but it has not been active or vocal in advocating one. Exxon may want to raise its profile on climate issues as it’s being investigated by two states over whether it covered up what it knew about global warming. WSJ
Up or Out
Alphabet has added TIAA CEO Roger Ferguson to its board. Fortune
Fortune Reads and Videos
IBM announces it will help Blackboard move to the cloud
Making the partnership slightly awkward, IBM will move Blackboard to Amazon’s cloud, not IBM’s. Fortune
GM is halving prices for its in-car wireless plans
The logic is that if more people use the network, GM can sell them more services. Fortune
A man has sued Apple for $10 billion…
…claiming he patented the iPhone back in 1992. Fortune
Sam Adams maker Boston Beer has filed to trademark …
…the word ‘Brexit’ for a potential cider. Fortune
Quote of the Day
“I have come, reluctantly, to the conclusion that Boris cannot provide the leadership or build the team for the task ahead.” — U.K. Justice Secretary Michael Gove announcing today he will run for prime minister. Hours later, former London Mayor Boris Johnson announced he will not. NYT