Here’s What’s Really Going on Inside the Fractious Battle for Viacom

Philippe Dauman’s protector has turned against him and now, it seems, the CEO’s days are numbered.
June 3, 2016, 3:55 PM UTC
Illustration by Mike McQuade
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June 3, 2016

Philippe Dauman’s protector has turned against him and now, it seems, the CEO’s days are numbered.

Shari Redstone, the vice chair of Viacom (VIAB) and CBS (CBS), wept for joy in the hallway of a Los Angeles courthouse. It was May 9 and a judge had just dismissed a suit challenging the mental competence of her 93-year-old father, Sumner, the billionaire who controls the two media giants. “I am grateful to the court for putting an end to this long ordeal,” Shari said in a statement that day. “I am so happy for my father that he can now live his life in peace, surrounded by his friends and family.”

But living in peace is not the Redstone way. A mere 11 days later, the family rekindled the battle over the mogul’s ­competence—with exponentially higher stakes. On May 20 a lawyer for Sumner Redstone delivered a preemptive strike, triggering the corporate equivalent of thermonuclear war. The action transformed the conflict from a tawdry contest for personal control (and money) inside Redstone’s mansion to a brute fight inside multiple boardrooms and courtrooms for dominion over a $42 billion media empire.

Redstone booted his longtime protégé, Viacom CEO Philippe Dauman, 62, as well as a Viacom director seen as the CEO’s ally, from the seven-member trust that will control Redstone’s holdings after he dies or is declared incapacitated. Both men were also replaced on the board of National Amusements, the movie-theater company that holds Redstone’s stakes in Viacom and CBS.

Today the main question is when—not if—Redstone will move to push Dauman from his CEO perch. As the billionaire put it in a statement that left little ambiguity about his intentions: “I have picked those who are loyal to me and removed those who are not.”

It’s a stunning reversal. For three decades Redstone treated Dauman as a son, and Dauman’s greatest attribute as CEO was his closeness to the man who controls 80% of the voting shares of Viacom and CBS. In effect, Dauman had a constituency of one, and he played to it masterfully.

For more on Sumner Redstone, read our three-part series “The Disturbing Decline of Sumner Redstone.”

How else to explain his ability to remain CEO for nearly a decade—during which Dauman has routinely placed near the top of CEO pay lists with, for example, $54 million in 2015 compensation—despite a record that ranks somewhere between anemic and abysmal? Viacom’s shareholders can only dream of the riches that Dauman has amassed for himself, a total of $396 million during his time as CEO.

Meanwhile, the company’s stock has swooned by 50% over the past two years; as of late May, it had returned a total of 38% during his tenure, far less than rivals and the market as a whole. The surest sign of investors’ low regard for Dauman: When rumors surfaced that Redstone would remove him as CEO, Viacom’s share price surged 13% in a week. (Viacom spokesman Carl Folta says the stock price doesn’t reflect Dauman’s achievements and that Viacom’s shares “trade more on the news flow than on the fundamentals.” He adds, “The significant decline recently obscures a much better performance for the majority of his tenure.”)


Redstone’s latest moves have given Shari, his previously estranged daughter, a majority on the trust and the National Amusements board, effectively handing her the keys to his kingdom. Shari had reclaimed access to Redstone in October, after the ejection of his two live-in female companions, ending the latest schism between daughter and father. Shari then gradually gained his favor while spending much of her time at Sumner’s side in his Beverly Hills mansion.

Now Dauman must fend off two Redstones if he wants to save his job. He blasted his ouster from his patron’s trust as “shameful” and “an unlawful corporate takeover” orchestrated by Shari at a time when her father “lacks the capacity to have taken these steps.” He quickly filed suit to reverse the removal; a hearing is scheduled for June 7.

In essence, Dauman is accusing Shari of exploiting Sumner, echoing the accusations she directed against Redstone’s former companions. Dauman’s suit claims that Shari has “taken over his life, isolated him from contact with others,” and “manipu­lated” him, all to attain her “long denied wishes for control of his businesses.”

Sumner Redstone, it seems, is a ghost of his former self, and whether it’s Dauman, Shari, or Sumner’s female companions, the players have exerted power by influencing the declining nonagenarian. The brawling conjures the image of a wrestling match inside the booth that controls the Wizard of Oz. One of the combatants grabs the lever for a period, and the Great Oz spits out fiery pronouncements in that person’s favor. Shari Redstone has now taken the handle—and this time Dauman may not be able to get it back.

The contest between Shari and Dauman has its roots in the fact that Sumner Redstone has always cared far more about business than family. Psychologists could spend years untangling the motivations of the three principals (who each answered questions only through spokespeople) and the shifting currents of filial and parental affinity and betrayal. To some people, Shari is asserting what she views as her birthright: command of Viacom and CBS. “She has described herself as ‘controlling shareholder’ for a year,” says a source familiar with Dauman’s view. (A spokesperson for Shari denies this.) “It’s a personal thing between her and Philippe. It goes back to family issues and daddy issues: Why did he pick him, not me? Nothing is going to satisfy her other than getting rid of Philippe.”

Redstone’s blood relationships have always been, well, bloody. Multiple Redstones sued one another over the family’s National Amusements Inc. (NAI) business. Sumner’s son Brent filed a suit in 2006 accusing his father and sister of freezing him out. Brent took a reported $240 million buyout; father and son haven’t spoken since. Shari, who runs NAI and holds a 20% stake in it, expected a central role: Sumner’s 2002 divorce agreement provided she would succeed him as chair of his companies.

Viacom CEO Philippe Dauman, left, and Viacom Chairman Sumner Redstone photographed at Redstone's ho Redstone (right), in a ­photo from 2007, was closer to Dauman than he was to his own children.Photograph by Mel Melcon — LA Times via Getty Images

But after naming Shari vice chair of ­Viacom in 2005 and touting her as a “great businesswoman” and his likely successor, Sumner began denigrating her. They battled over many issues. She wanted to expand the theater company internationally; he wanted to sell it. He sought unsuccessfully to buy her out. Shari absorbed many slights, and according to a source close to the family, more than once Redstone chose to transmit those messages to his daughter via an icily polite and formal messenger: Philippe Dauman.

If Redstone’s relationship with his daughter was remarkably troubled, his relationship with Dauman was remarkably steadfast. Redstone dispatched three highly regarded potential successors for committing one or more of what he considered unpardonable sins: insufficient deference and poor stock performance. Yet Dauman, who scored a perfect 1600 on his SATs—at the tender age of 13—seemed impervious. Dauman is stiff and cerebral, nobody’s idea of a people person, yet he and Redstone connected.

Dauman, a corporate lawyer, met Redstone in 1986, just before the takeover fight for Viacom. He became Redstone’s consigliere and was ushered onto the boards that oversee the mogul’s holdings. Dauman was often described as “the son Sumner ­wishes he had.” Redstone regularly introduced him on Viacom’s earnings calls as “the wisest man I have ever known.” Dauman assiduously reciprocated. In a 90th-birthday tribute, he called Redstone “my inspiration, my guiding light, my mentor, and a great friend.”

By 2006—when Dauman became CEO—­Viacom and CBS were heading in new directions. After Viacom bought CBS in 2000, Redstone split it off again in 2006. It was a stock play, driven by his desire to liberate shares of Viacom from the market drag of the stodgy network-TV business. He believed Viacom—with such prized assets as MTV, Nickelodeon, and Paramount—would grow rapidly and soar, while CBS would appeal to value investors.

But the opposite happened: CBS has thrived and Viacom stagnated. Tectonic shifts in media consumption are partly to blame. The youthful viewers of Viacom’s top channels—MTV, VH1, Comedy Central, and Nickelodeon—were quick to migrate to mobile devices and online content, cutting into subscriber fees, ratings, and ad revenue.

By contrast, CBS’s much older core ­audience—seen as a handicap in attracting advertisers—has stuck with traditional TV. And as one of the four big networks, with a mass audience and live sports, CBS remains an essential part of every cable package.

The companies’ divergent results also reflect their performance. Leslie Moonves, CBS’s gravelly voiced CEO, has aggressively built new revenue streams, starting with fees from pay-TV providers and local affiliates. Alert to the threat of “cord cutters,” CBS has developed its own Internet streaming service, luring subscribers as the exclusive home for a planned new Star Trek series. Moonves has also spun off CBS’s slow-growing billboard business and announced plans to shed its radio stations.

Most of all, Moonves, a charismatic former actor who rose as an ace programmer, has generated a remarkable run of hits. CBS has been the top-rated network for the past eight years. (It now even claims the most viewers in the 18-to-49 age bracket.) It’s profiting further through ownership stakes in nearly all of its new shows. Moonves has also made Showtime a serious rival to HBO.

Premiere Of CBS Films' "Seven Psychopaths" - Arrivals CBS CEO Les Moonves, right, preserved his tenure through strong performance.Jason Merritt — Getty Images

Dauman, by contrast, has underwhelmed, stumbling when it comes to delivering compelling content. Once the favorite of a generation, MTV largely abandoned music for the crowded realm of reality shows; Nickelodeon faces growing competition for children’s eyeballs from Netflix’s (NFLX) kiddie library; Comedy Central’s ratings have plummeted with the exodus of marquee performers, including Jon Stewart, John Oliver, Stephen Colbert, and Key & Peele. Paramount has performed terribly for years.

Dauman was inartful at dealing with talent. He offended the duo behind South Park by pinching pennies and halving a requested $1 million investment in The Book of Mormon. Unlike many media chiefs, Dauman seemed disinclined to court and lavish attention on stars. When an executive once suggested he go downstairs to MTV’s studio to greet Beyoncé, who was on the premises, Dauman responded, “You need to bring Beyoncé up to see me. Because she needs to know she can meet the ultimate CEO of Viacom.” (A Viacom spokesperson denies this happened.)

Dauman was slow to embrace digital initiatives. He terminated Viacom’s early relationship with Vice Media, now worth billions. And he fought a futile war against YouTube (GOOGL), unsuccessfully suing it for copyright violations and keeping Viacom’s content off the platform for years. Despite being an M&A specialist, he made no game-changing content acquisitions.

Instead he poured a staggering $18.6 billion into stock buybacks; that’s more than twice what Disney (DIS) spent on Marvel Entertainment and Lucasfilm combined.

Facing big ratings declines, Dauman tried to compensate with gimmickry, jamming so many ads into Viacom’s shows that he was forced to abruptly reverse course. In April 2015, he announced a $784 million charge, organizational changes, and a programming reboot. He dumped reruns and doubled down on original programming—including MTV’s return to music.


Some ratings have recently ticked up. Dauman has properly claimed credit for expanding Viacom’s international business. He has backed new technology to better target advertising. And he has promised a turnaround at Paramount. (Dauman’s profligate spending on stock buybacks—recently halted, given Viacom’s ballooning debt—has prompted him to seek a minority investor for the studio at a time when its weak performance seems likely to draw a low price.)

In the past the combination of declining profits and falling stock price would have meant the corporate guillotine for the CEO of a Redstone entity. As late as April, Dauman remained exempt from such a fate. Part of that, perhaps, was because Redstone had receded from his business over the past decade. He had relocated to a Beverly Hills mansion, where he monitored his empire by phone from his study, lined with giant tanks containing saltwater fish. Redstone remained chairman of both companies, receiving as much as $93 million in one year (2013) for what mostly amounted to ­periodic phone calls with the CEOs and the boards.

Redstone was increasingly focused on more social pursuits. After his second divorce he courted a string of decades-younger companions. Manuela Herzer and Sydney Holland became by far the most important. By 2013, both were living in Redstone’s home. Holland, then 42, was his girlfriend; Herzer, 49, had dated him a decade or so earlier, then remained a friend. The two helped run Redstone’s life, and each received more than $70 million in gifts: homes, stocks, cash, and jewelry. Both considered themselves part of his “family.”

Redstone’s actual family wasn’t keen on this development. By 2014, Shari and her kids were estranged from Redstone. They say they were barred at the gate to his home—which they blame on Holland and Herzer. Herzer says Sumner didn’t want to see his daughter and told her he hated Shari.

Sumner Redstone's daughter Shari Redstone leaves a downtown courthouse in Los Angeles Shari Redstone (with water bottle) with her son Brandon, behind her outside a Los Angles court that heard a case focused on her father’s competence.Kevork Djansezian — Reuters

That September a bout with pneumonia precipitated a dramatic decline in Redstone’s health. Unable to eat, struggling to swallow his own saliva, he was now dependent on a feeding tube to keep him alive. He labored to utter a sentence. He was incontinent and unable to stand or walk. Redstone needed 24-hour nursing care. Herzer later described it as “a virtual ICU” inside his mansion.

Shari, then her son, began receiving secret daily emails from one of her father’s nurses. The dispatches, beginning in September 2014, offered a distressing portrait. Everyday events left Redstone “confused,” the nurse wrote. “He has the tendency to ask the same question over and over.” At 3:55 p.m. one day, Redstone told the nurse, “I want to die.” Asked why, he explained simply: “Too many problems.”

None of this troubling intelligence seems to have made its way to the boards of Viacom or CBS, though Shari served as vice chair of both, with a duty to share material information. Instead, she assured the nurse by email, “I will never tell anyone anything.” (Shari’s spokesperson declined to comment on this issue.)

The boards had their own evidence of Redstone’s decline. During 2014 he was seen and heard at investor events for the last time. At CBS’s shareholders meeting that May, a curtain hid Redstone—too proud to use a wheelchair—as burly men carried him onstage and deposited him into a seat beside the other directors.

Redstone attended his last company board meetings in person in 2014. According to a witness, he dozed and drooled during the proceedings. At subsequent events directors were routinely advised that he was listening in by phone. But according to his nurses’ logs, sometimes he just slept.

The question of Redstone’s capacity finally exploded last year—but not because the boards of his companies raised the issue. Instead, the event that set off the contest for corporate control emerged from the fury of a deposed Redstone companion.

Last September he named Herzer as his sole agent to make medical decisions if he became unable to make them. He also increased his planned bequest to her to $70 million. (By this point Redstone had jettisoned Holland, who had admitted having an affair.)

Six weeks later Redstone had Herzer removed from his home, replaced her as his health care agent, and cut her out of his will. Herzer sued to be restored as health agent and charged that ­Redstone—till then of sound mind—was mentally incapacitated and under undue influence by the time he threw her out.

Dauman swore out a declaration, asserting he detected no evidence of incapacity during visits with Redstone before and after Herzer’s ouster. Claimed Dauman: “He was engaged, attentive, and opinionated as ever.” (Herzer, present for the first meeting, in October, ridiculed that account. She said Redstone sat “gazing somewhat vacantly” and characterized the meeting as “a monologue by Mr. Dauman that Sumner did not appear to comprehend.”)

2nd Annual An Evening of Environmental Excellence Recognizing Al Gore and Lyn Lear Sydney Holland (left), Sumner Redstone, and Manuela Herzer in 2013.Billy Bennight —

Herzer’s suit led to months of mortifying revelations and legal sparring. Finally, she won the right to have her own expert, a geriatric psychiatrist, examine Redstone. The exam was conducted on Jan. 29 and conclusions were presented to the court under seal. They were devastating, observers inferred, because only days after the exam, Redstone stepped down as chairman of CBS and Viacom. Neither company had taken steps to force the move.

At CBS the transition was handled smoothly. Shari had reached an accommodation with Moonves and joined a unanimous vote to name him executive chairman. Redstone kept his board seat, the title of chairman emeritus, and a reduced salary of $1 million a year.

Things were different at Viacom. Criticism of Dauman had intensified. An activist investor had issued a blistering 99-page analysis of his performance. Despite Viacom’s woes, the board had hiked Dauman’s pay 22%, to $54 million. (The company tried to spin the move but did so in a ham-handed way, which only sparked more criticism: Viacom announced that it was reducing Dauman’s pay by $7 million, then filed a proxy statement days later revealing that Dauman was also getting a $17 million bonus for signing a new contract, raising his overall compensation by $10 million.)

Shari Redstone opposed Dauman’s promotion, but she was the lone dissenter. Sumner Redstone, as always, backed “the wisest man” he had ever met. It seemed nothing could shake their bond.

Still, Dauman was showing signs of stress. After Viacom reported a 10% drop in quarterly profits—and missed analysts’ revenue expectations for a fifth straight quarter—he sounded defensive on an earnings conference call. “Our outlook and the facts,” he said, “have been distorted and obscured by the naysayers, self-interested critics, and publicity seekers.” One analyst asked the CEO to identify the “noise” he said was obscuring Viacom’s performance. “Well, if you haven’t been listening,” Dauman snapped, “you don’t know what the noise is. I think it is obvious to everybody what the noise is.” By the end of the day Viacom’s shares had plunged 21%, to a five-year low.

A power struggle between Shari Redstone and Philippe Dauman had erupted, and the next front was the trust that would wield Redstone’s voting shares after he died or was deemed incompetent. The voting balance was uncertain. In addition to Shari and Dauman, the trustees included two presumed Shari votes (her son Tyler and Leonard Lewin, her mother’s divorce attorney); two expected Dauman votes (Norman Jacobs, Sumner’s divorce lawyer, and George Abrams, a Viacom director since 1987); and David Andelman, a CBS director who has done legal work for the Redstones since the 1970s. Andelman’s allegiance was unclear.

Shari, who lives in Boston, had begun spending much of her time in L.A. with her father. He began to reverse course on multiple issues. He had previously denied, in writing, barring Shari’s family—only to turn around and say the opposite. A new letter voiced shock at communications, “purportedly at my authority,” which “prevented all of you from visiting me.” Such materials, the letter stated, “should be considered withdrawn, terminated, voided, cancelled, inaccurate and of no effect whatsoever.”

Redstone still had moments when he rallied. His testimony in the Herzer suit, in which he called her a “fucking bitch,” persuaded the judge to dismiss the case. (Never mind that Redstone couldn’t recall his birth name and Herzer’s expert concluded he’s suffering from dementia.) Her lawyers, who plan to appeal, filed a second suit accusing Shari of using a “spy network” to turn Redstone against her.

Big Brothers Big Sisters Of Greater Los Angeles 2012 Rising Stars Gala - Arrivals Redstone, left, with his daughter and Philippe Dauman in 2012.Frederick M. Brown — Getty Images

But the far larger game was Viacom and CBS. The revelations about Redstone’s health increased pressure for action. The trust’s mental-incapacity mechanism requires either the finding of a court or the signature of three doctors who have concluded that Redstone is “unable to manage his affairs in a competent manner.” Launching this process requires a majority vote of the five NAI board members (excluding Redstone), which included both Dauman and Shari Redstone. A finding of incapacity would activate the trust, whose members then couldn’t be removed.

Ironically, a rare action by Dauman against Redstone seemed to trigger the shake-up in the trust. On May 18 the Viacom directors terminated Redstone’s $2 million in pay, the last action available to them. (They can’t fire the person who owns 80% of the voting shares.) Two days later Redstone ejected Dauman and George Abrams from the NAI board and the trust. Redstone had finally turned on his closest ally. Days later, Dauman fired back with the suit alleging that Redstone was incompetent and manipulated by his daughter.

Redstone, he now asserted, was unable to “participate in meaningful conversation,” including “communications concerning his business or personal affairs.” It was precisely the sort of communication Dauman claimed to have engaged in just six months before. In December, Dauman offered a similar message, telling conference attendees, “I talk to Sumner frequently, several times a week.”

In the suit, Dauman explained his past defense as an attempt “to help his longtime friend and colleague maintain his choice of health care agent”; he’d actually made “no observations about Mr. Redstone’s capacity to make significant business decisions.” Besides, the suit added, his health “has rapidly declined since that time.” Dauman stated that when he had visited Redstone in March, he “appeared almost totally nonresponsive.” He was now, Dauman suggested, a helpless prisoner of his daughter, whose power play would violate Redstone’s long-held desire to “empower professionals, rather than family members who did not share his business acumen.”

The replacements tilted the Redstone trust in Shari’s favor. Jill Krutick, a friend of Shari’s and a former Citigroup analyst, was named to both the trust and the holding company board. Tad Jankowski, who reports to Shari as general counsel of NAI, filled the second trust position. Kimberlee Ostheimer, Shari’s daughter, got the second spot on the NAI board.

A flurry of statements ensued. Redstone’s spokesman insisted he’s still competent and making his own decisions. He had turned against Dauman, the spokesman explained, out of anger at the decision to cut off his pay, the plan to sell a piece of Paramount, and the decline in Viacom’s shares. Shari’s rep called it “absurd” to accuse her of “manipulating her father.”

Now the parties are girding for the inevitable: The move to force Dauman out, and the court fights and hyperbolic media wars that will entail. The Redstones will attempt to do that by replacing four board members, according to a source familiar with the matter, with the new members then presumably voting to fire Dauman. Shari recruited former Viacom CEO Tom Freston to join the Viacom board, but he declined. Freston tells Fortune he advised Shari he supports “her efforts to oust Dauman and clean up the mess he will have left behind,” but that, for him, “it’s hard to go backwards.”

Viacom’s six independent directors have vowed a court challenge to any move to oust them, saying it would be undermined by “the inexplicable assertion that Sumner was acting of his own free will and with the mental competency to do so.”

Still, even if Dauman loses, he wins: His expected exit package runs to $75 million. Sources close to the companies speculate that, should she prevail, Shari Redstone might eventually try to reunify CBS and Viacom, with Moonves as CEO.

Nobody can know whether Sumner Redstone will be alive to see that happen. But by the time he passes from the earthly realm, his legacy will consist not so much of assembling a storied media empire—but of spawning a colossal corporate conflict. 

A version of this article appears in the June 15, 2016 issue of Fortune with the headline “The Fractious Battle for Viacom.”