Coverage: Sumner Redstone resigns as chairman of CBS

He swore to never abandon his throne, but 92-year-old media mogul Sumner Redstone resigned Wednesday as executive and chairman of CBS.

The decision comes after Redstone faced increasing pressure from shareholders about his mental competence. Current CBS chief executive Leslie Moonves was appointed to replace him.

Roger Yu of USA Today had the day’s news:

Sumner Redstone has resigned as board chairman of CBS Corp. and has been replaced by CEO Leslie Moonves, the company announced Wednesday, providing clarity on the future leadership of CBS.

Redstone, 92, formally resigned Tuesday and was named chairman emeritus of CBS, the company said. Speculation about Redstone’s health has intensified in recent months, triggering concern among investors of CBS and Viacom, another media company whose board Redstone chairs.

“The Viacom Board of Directors is scheduled to meet tomorrow,” the company said in a statement Wednesday. Viacom owns MTV, Nickelodeon, VH1, Comedy Channel, BET and Paramount Pictures. Viacom didn’t elaborate, but investors and analysts expect the meeting is likely for a vote to elect a new chairman of the board.

Moonves, who will stay on as president and CEO of CBS, was nominated by Redstone’s daughter and vice chair of CBS’ board, Shari Redstone. CBS said Moonves’ appointment was confirmed by a unanimous vote.

“I want to thank Sumner for his guidance and strong support over all these years. It has meant the world to me,” Moonves said in a statement.

Emily Jane Fox of Vanity Fair explained how the Redstone family will still have considerable power at CBS and Viacom:

Redstone’s daughter, Shari Redstone, who has served as vice-chair of CBS since 2005, was first offered what is now Moonves’s position, according to CBS’s statement. She turned down the offer “in light of her other professional and personal responsibilities.” Shari will continue with her duties as vice-chair, while the senior Redstone will stay on as chairman emeritus.

It was not that CBS deemed Moonves, who has been at the company for more than 20 years, less capable or Shari Redstone a better fit for the position. Rather, it’s an indication of just how big of a hand the Redstone family will continue to have over the company even after the patriarch’s departure.

Redstone’s 80 percent stake in the company is protected by an irrevocable trust, and that trust specified that Shari should succeed her father as chair of both CBS and Viacom, a fact confirmed by Shari on Wednesday. She explained her decision to nominate Moonves, despite the trust’s stipulation.

“It is my firm belief that whoever may succeed my father as chair at each company should be someone who is not a trustee of my father’s trust or otherwise intertwined in Redstone family matters, but rather a leader with an independent voice,” she said in a statement. This suggests Dauman, Viacom’s C.E.O. and a fellow trustee, will not succeed Redstone as that company’s chairman as Moonves will for CBS. Viacom’s board is set to meet Thursday.

Redstone still commands 80 percent of the holding company National Amusements, which controls both Viacom and CBS. Shari controls the remaining 20 percent. That share will rise dramatically when her father dies, despite his vow to live forever. Shari will then become a trustee, giving her an even greater hold over the fate of both companies’ fate.

Emily Steel of The New York Times offered insight into the background drama surrounding Redstone’s departure:

The battle for Mr. Redstone’s empire has featured Shakespearean twists and turns. There was the divorce from his wife of 52 years, a second marriage and a string of girlfriends, and bitter public disputes with his children. More recently, the lawsuit challenging his mental capacity has put forth embarrassing claims about his physical condition, his sexual appetite and what it portrays as the “ineffable tragic mental collapse of a great man who enjoyed stupendous business success and fame.”

Operating underneath him at his companies were richly paid executives at the top of the two companies, each making alliances and angling to secure their positions for the long term even as the entertainment industry faced sweeping change. Mr. Redstone’s prized companies have faced turmoil of their own; share prices have plunged about 30 percent at Viacom and 15 percent at CBS over the last year.

Another consideration in the succession planning was the employment contracts of Mr. Moonves and Mr. Dauman, both of whom have clauses stipulating that they report directly to their respective boards after Mr. Redstone’s departure. If that does not happen, Mr. Moonves is entitled to a payout totaling about $223 million and Mr. Dauman a payout of about $88 million, according to company filings.

The shift at CBS came after Mr. Redstone sent a letter Tuesday to Mr. Moonves and CBS directors announcing his resignation, according to two people briefed on the developments who spoke on the condition of anonymity.

The board subsequently met on Wednesday and first offered the chairman position to Shari Redstone. Ms. Redstone declined and instead nominated Mr. Moonves, whom the board approved unanimously. Mr. Moonves has been president and chief executive of CBS since 2006. He will continue in those positions.