It is a tough job but somebody has to be overpaid to do it. Over the weekend, Viacom resolved its tawdry C-suite battle between management and the Redstone family that controls the company. Embattled chief executive Philippe Dauman chose to step aside as multiple lawsuits between the company and Redstone were settled. Mr Dauman was paid $72m to go away — after receiving $100m for his labours in 2014 and 2015. Viacom shares are down nearly half in two years, and Mr Dauman’s stewardship has been fairly questioned. Yet the company has replaced him with Thomas Dooley, another long-serving insider who was previously chief operating officer with 30 years’ company experience.
Mr Dooley’s reign may be limited. A revamped board will select a permanent Viacom head by the end of September. Given the company’s underlying problems — earnings fell 30 per cent in the most recent quarter — a breath of fresh air is needed. Its most acute challenges are concentrated at its cable networks such as MTV and Comedy Central. But its Paramount studio took a big hit this summer as a reboot of the Teenage Mutant Ninja Turtles flopped.
A new CEO has big decisions to make. Over the objections of the Redstone family the company had been trying to raise cash by selling a piece of Paramount. In a world of cord-cutting, Viacom still has to figure out the most profitable means to distribute its content. Traditional pay TV is not going to provide the answer. Mr Dauman loved borrowing to buy back shares. But with earnings falling, Viacom’s debt to earnings ratio will soon exceed a worrying four times.
As determined as the Redstones were to dump Mr Dauman, it is odd to give the permanent job to another insider. The right person should have digital media expertise, a deft way with the meddling family and the resilience to weather a long turnround. The reward is a job that pays exorbitantly, seemingly irrespective of performance.
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