Investors sue Viacom, CBS, and some of their executives for prioritizing its 92-year-old executive chairman, Sumner Redstone, over its shareholders. The plaintiff, E.F. Greenberg, sued the companies on behalf of other shareholders Tuesday in Delaware Chancery Court.
According to The Hollywood Reporter, the lawsuit against the companies states that Viacom CEO Philippe Dauman, CBS CEO Leslie Moonves, along with other board members since October 1, 2013 has "put their personal loyalty to Mr. Redstone well ahead of their loyalty and respective fiduciary duties they owe and owed to Viacom and/or CBS and their respective shareholders."
CNN reported that the lawsuit follows the complicated legal battle regarding the health of the ageing executive chairman and controlling stockholder. It started in October when Redstone decided to leave Manuela Herzer, who used to be his companion and caregiver. He then deprived Herzer the deciding control on his health. Redstone gave this responsibility to Dauman, but Herzer filed a lawsuit arguing that the ailing tycoon "lacked the mental capacity" to push through with the decision. Herzer failed to win deposition from the two executives.
This lawsuit raised concern about his ability to lead his company. However, Viacom insisted that Redstone is still in full mental control.
Reuters wrote that the lawsuit accuses both companies of improperly paying millions of dollars for Redstone who "was physically and mentally incapacitated" while serving as the executive chairman. The lawsuit claimed that the payments to the elderly chairman were "for services not rendered" and it led to the bad faith between the two boards.
Derivative lawsuits such as this are difficult to win, but this would pave way to a new public forum that would let outsiders question Redstone's abilities to lead the company.
New York-based Viacom owns MTV, Comedy Central, and Nickelodeon. The cable network company has suffered weak ratings and is heavily criticized for the mental condition of its 92-year-old leader. Redstone's holding company, National Amusement, holds 80 percent of Viacom and CBS' voting stock.
Join the Conversation