Regardless of how the sturm und drang at Viacom Inc. plays out, one thing is certain: CEO Philippe Dauman will get paid — a lot.
To recap: Media mogul Sumner Redstone removed Dauman from the Viacom board last week, raising two big questions: Will Redstone’s next move be to advocate for Dauman's removal as CEO? And how much would that removal cost Viacom?
Only Redstone and the Viacom board (of which membership is in flux right now) can answer that first question. But Dauman’s latest contract, which was signed in 2010 and extended last year through 2018, stipulates that his employment can be terminated “for cause” for a variety of reasons, mostly dealing with criminal activity or neglect of duties — none of which, we stress, Dauman is being accused of.
However, there’s also a clause that says he can get the ax for “willful misfeasance having a material adverse effect on the company.” In this case “willful misfeasance” could refer to mismanagement resulting in financial harm. But legal sources say that even the disappearance of half the company's market capitalization over the last few years might not be enough to qualify. And if Dauman’s employment is terminated without “cause,” he stands to possibly receive more than $100 million.
The contract states that, if Dauman is fired without cause, or Dauman resigns with “good reason,” he’s owed three times his yearly salary, three times his bonus and a metric ton of shares. Or, if there’s less than three years left on his contract, the multiple shrinks to, essentially, how many months are left in the agreement.
Dauman’s current salary is $4 million per year, and the target for his bonus is $20 million per year. He is also granted $7.5 million a year in a certain type of stock, with another $7.5 million a year in stock options. He’ll also start receiving 300,000 units of another kind of stock tied to the company’s financial performance at the end of September.
If he’s given the boot without cause within the next month, then, it is entirely possible Viacom would have to fork over north of $108.5 million, not accounting for the taxes Viacom would have to cover as part of the severance agreement. That’s nearly twice the total lifetime gross of “Zoolander 2,” produced by Viacom-owned Paramount Pictures.
When Redstone on June 16 dropped the bomb that he was removing Dauman and four other directors from Viacom’s board, it wasn’t exactly a surprise to industry observers. The 93-year-old media mogul had also recently said that, in the event of his death or incapacitation, he was removing Dauman from a trust that would have control over National Amusements Inc. (NAI), the Redstone family investment vehicle that owns 80 percent of CBS and Viacom voting shares. The immediate reaction last week was speculation on when Redstone would attempt to have Dauman removed as CEO.
All of these removals are subject to court approval, and Dauman and the other Viacom board members Redstone booted at the same time have filed various petitions to stop the actions.
Dauman and George Abrams’ suit petitioning against their removal from Redstone’s trust alleges Redstone is “in the grip of a neurological disorder,” and therefore he can’t make these decisions.
Viacom’s lead independent director, Frederic Salerno — among the five directors Redstone wants removed from the board — sent out a statement laying the blame for Redstone’s moves at the feet of Redstone’s daughter, Shari, who Salerno says is wielding undue influence over her father. Redstone, in a letter distributed by a spokesperson, said he no longer trusts Dauman or the Viacom board to act in the company’s best interests.
At least three different courts, in Los Angeles, Massachusetts and Delaware, will have to rule on these issues. But if all these moves do hold, and Redstone’s intention is, as rumored, to have Dauman removed as CEO of Viacom, it’ll cost a pretty penny.