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Viacom Vice Chair Shari Redstone in New York on March 29, 2017. CBS Corp. has filed a lawsuit intended to thwart Redstone's effort to push through a merger of CBS and Viacom Inc.

Viacom Vice Chair Shari Redstone in New York on March 29, 2017. CBS Corp. has filed a lawsuit intended to thwart Redstone's effort to push through a merger of CBS and Viacom Inc. (Stephen Smith/Sipa USA/TNS)

Stephen Smith

In a day of high drama even for the media industry's most combative family, Shari Redstone spent Wednesday furiously trying to outmaneuver CBS in a brawl for control of the storied media company.

The day ended in a Delaware courtroom where the judge, Chancellor Andre G. Bouchard, issued a protective order to prevent further changes to CBS or its board, according to a person close to the situation who was not authorized to comment.

About an hour before the hearing, the Redstone family, through its investment vehicle, National Amusements Inc., said it had amended CBS' bylaws to stipulate that any changes or authorizations of dividends would require a supermajority of board members. The move appeared aimed at preventing the board from voting Thursday to weaken the Redstones' hold over the company. They are locked in a dispute with CBS over a proposed merger with Viacom.

The high-stakes showdown came after several months of behind-the-scenes tensions between Leslie Moonves, CBS' chairman and chief executive, and Shari Redstone, the daughter of Sumner Redstone who also serves as vice chair of CBS.

Shari Redstone wants to merge CBS with another media company the family controls, Viacom, which owns MTV, Comedy Central, BET and Nickelodeon. CBS does not want to be saddled with the troubles of the weaker Viacom, and on Sunday a special committee of the CBS board determined that such a merger was not in the company's best interest.

That conclusion was a rebuff to Redstone, who believes the two companies would be stronger together as traditional media compete with such technology giants as Facebook, Google, Netflix and Amazon.

The judge is expected to swiftly decide whether CBS can move forward with a rare corporate maneuver to strip the Redstone family of their control over the company, treating them like ordinary shareholders.

CBS has planned to hold a special board meeting Thursday to issue a dividend that would dilute the Redstones' control over the company's affairs. The family's voting stock would be reduced from nearly 80 percent of the shareholder vote to 17 percent.

CBS said there was a provision in its charter that allows for such a dividend. It asked the judge to block the Redstones from making any changes to its board before Thursday's vote could take effect.

"National Amusements Inc. believes the irresponsible action taken by CBS and its special committee put in motion a chain of events that poses significant risk to CBS," the Redstone family said in a statement midday Wednesday. "Due to the magnitude of this threat, NAI was compelled to take this measured step to protect its position while also mitigating further disruption to CBS."

CBS has said it feared that the Redstone family would unilaterally make changes that would harm CBS shareholders. The Redstones' bylaws change reinforces the company's concerns, CBS said.

"The latest step by NAI provides further evidence of why we concluded that we had no choice but to file our action in the Delaware courts, in order to protect the interests of all CBS shareholders," CBS said in a statement after the bylaws change.

CBS sued the Redstone family Monday, alleging that Shari Redstone was trying to force a merger with Viacom Inc. even if it would harm CBS shareholders.

The Redstones filed a brief in the case late Tuesday, calling CBS' attempts to eliminate their voting control "egregiously overbroad and unjustified" and said the move would be "an unprecedented usurpation of a controlling stockholder's voting power."

The Redstones' National Amusements asked the judge to deny CBS' request to block the Redstones from making changes at CBS before Thursday's board meeting.

There is deep distrust on both sides. Moonves has bristled over media reports that Shari Redstone has been conducting a stealth search to replace him.

Moonves prides himself on his successful 12-year run managing the broadcasting company with little management oversight from the Redstones. But that changed in the last two years as the family patriarch, Sumner Redstone, who turns 95 next week, became ill and Shari Redstone began taking a more active role in Viacom and CBS.

Legal experts have called CBS' gambit to dilute the Redstones' power the "nuclear option." The Redstone family told the judge that such a severe remedy was not warranted, saying there was no clear evidence that Shari Redstone planned to make changes to the board.

National Amusements called CBS' effort "extraordinary both in scope and finality in response to unsupported allegations."

"NAI does not have, and has never had, any intention of replacing the CBS board or taking other action to force a merger," the company said in its Tuesday brief.

According to National Amusements, CBS has overreacted based on "unsourced media reports," that have cited knowledgeable people who have said that Shari Redstone was prepared to replace CBS board members with ones that were aligned with her views.

CBS, in a response filed Wednesday morning, said it "was not seeing ghosts."

"Five independent directors of undisputed renown - former CEOs and senior business executives along with the former dean of Harvard Law School - determined that (Shari Redstone) was such a serious threat to the corporation and all its stockholders that their fiduciary duties required action," CBS said in its court papers.

Shari Redstone already has one close ally on the CBS board: Robert Klieger, a Los Angeles attorney who served as Sumner Redstone's personal lawyer when the patriarch was sued by a former female companion. Klieger successfully represented Sumner Redstone in that fraught 2016 court case when the former companion, Manuela Herzer, tried to get Sumner Redstone declared mentally incapacitated. In 2017, Klieger joined the CBS board.

Last Friday, Klieger approached another board member, Bruce Gordon, and said National Amusements wanted a third board member, Charles Gifford, removed from the board before CBS' annual shareholders meeting Friday. In its brief, National Amusements said it had concerns with Gifford that stemmed from unspecified "incidents" that occurred in 2016 and 2017. (Gifford, 75, is a former Boston banker who has served as chairman emeritus of Bank of America Corp. since 2005.)

Earlier this week, National Amusements said the board member, whom it now revealed as Gifford, had engaged in "bullying and intimidation."

Gifford was not immediately available for comment. CBS defended Gifford on Wednesday, saying in a statement that he has "always conducted himself with courtesy, integrity and staunch dedication to all of our shareholders."

"It is unfortunate and revealing that NAI has resorted to baseless personal attacks against a member of CBS' board," CBS said in its statement. "The allegations regarding him are not only vague and unsubstantiated, they are utterly inconsistent with our knowledge of him."

CBS noted that Shari Redstone had previously supported Gifford's involvement in an important CBS board committee. In addition, six weeks ago, National Amusements said in a regulatory filing that it planned to support the reelection of all current CBS board members, including Gifford.

The corporate wrangling comes just two years after National Amusements unilaterally made sweeping changes to Viacom's board - moves that were announced via a fax that arrived in the office of Viacom's then-chief executive late one Friday in May 2016.

That dispute also wound up in a Delaware court, and Viacom Chief Executive Philippe Dauman eventually resigned. That helped clear the decks for Shari Redstone to install Bob Bakish as the new chief executive of Viacom.

Talks about a Viacom-CBS merger broke down over her push to have Bakish serve in an influential role at the combined company.

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