Viacom Inc., CBS Corp., and respective board members were sued by an investor for prioritizing the interests of the companies executive chairman, Sumner Redstone, over that of their shareholders.
The lawsuit filed on Tuesday in Delaware court alleges Sumner Redstone, the companies' 92 year old mogul, is incapacitated and should not have been paid millions in compensation. The investor also call for changes to the companies' board and management.
The suit, first reported by The Hollywood Reporter, was filed by E.F. Greenberg, who has owned CBS and Viacom shares since 2010, on behalf of other shareholders. The lawsuit states that Viacom CEO Philippe Dauman, CBS CEO Leslie Moonves and board members "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."
The plaintiff is objecting to millions of dollars in bonuses paid to Redstone "while he was physically and mentally incapacitated." The lawsuit said Sumner Redstone was unable to communicate reliably or competently manage his own health care, and certainly unable to fulfill the responsibilities for which he was paid.
In the lawsuit, the shareholder stated that Redstone was paid $24 million from Viacom and $22 million from CBS over a two year period. The shareholder lawsuit said that compensation decisions could "not represent the product of bona fide business decisions."
The plaintiff, representated by attorney Timothy Dillion, demands repayment of the tens of millions, an order that the board must acknowledge Redstone's alleged incapacity, and termination of compensation to Redstone.
Redstone is in poor health condition and struggles to speak intelligibly. He is largely confined to his mansion in Los Angeles and has not participated in public corporate events for more than 18 months.
According to LA Times, Redstone's private physician has testified, despite Redstone's difficulties speaking, that he is mentally competent. Viacom also said Redstone is in full mental control.
Viacom, whose networks include Nickelodeon, MTV and Comedy Central, said the lawsuit was without merit and it would compete vigorously.
Law expert says such shareholder lawsuits are difficult to pursue. But it would provide a new public forum from outsiders to question Redstone's abilities, Reuters reported.
The lawsuit over Redstone's condition follows a court action in November last year by Redstone's ex-girlfriend, Manuela Herzer. Herzer filed a lawsuit seeking to have Redstone examined to see if he was mentally able to make decisions for himself. The lawsuit raised questions about Redstone's capability.
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