Viacom: Redstone's Pay Was Appropriate Despite Illness

Viacom Inc. and its board members told a Delaware state court judge Tuesday that salary and bonus payments made to an ailing Sumner Redstone in 2014 were not the actions of a disloyal board because the executive had provided valuable benefits to the company and that a stockholder derivative suit over the outlays should be dismissed, reports Law360.

During a hearing in Wilmington, Viacom attorney Stuart J. Baskin of Shearman & Sterling LLP told Chancellor Andre G. Bouchard that even though Redstone’s health began deteriorating rapidly in July 2014 when he was 91, he still earned his $13 million in compensation that year for services rendered in his role as executive chairman of Viacom’s board.

Baskin said the board’s compensation committee, composed of independent directors, recognized Redstone’s years of service to the company, his role as its founder and his efforts to avoid upheaval and maintain business relationships in spite of his own physical ailments.

Sumner Redstone

“Case law says these are perfectly valid reasons to compensate someone,” Baskin said of the “soft values” for which Redstone received $10 million in bonus payments in 2014.

In the next two years, Redstone’s compensation was drastically reduced as his role in the company was minimized due to health concerns, which included several hospitalizations, the installment of a feeding tube, the loss of his ability to speak and a requirement for around-the-clock care.

The board did not act disloyally or in bad faith by awarding Redstone the $13 million in compensation for 2014, Baskin argued, because the health issues didn’t crop up until the last quarter of the compensation period, which ended Sept. 30, 2014. In subsequent years, Redstone did not receive bonus payments and his salary was scaled back before he was terminated from his executive position in May 2016 and resigned his board seat in December.

The derivative suit, launched in July 2016 by shareholder R.A. Feuer, alleged the board acted disloyally by providing compensation to Redstone when he could not have had an active role with Viacom to earn such a large salary and bonus payments. The suit alleges the board also acted in bad faith and thus the payments constituted waste of corporate assets.