The top two executives at Viacom Inc (VIAB.O) have reserved their legal right to resign “with good reason” to protect millions of dollars in severance pay. The battle for control of Viacom has caused a rift between Sumner Redstone, backed by his daughter, and his long-time lieutenant Chief Executive Philippe Dauman. Redstone filed actions to remove and replace five members of Viacom’s board of directors on June 16. The others ousted from the Viacom board were George Abrams, Blythe McGarvie, William Schwartz and Frederic Salerno.
The filing was made through Redstone’s privately held movie theater company National Amusements Inc. National Amusements holds 80 percent of Viacom’s voting shares. The filing, which gave no reason for the removals, is being contested in the Delaware Chancery Court.
According to regulatory filings made public on Monday, if a judge issues a final order approving Redstone’s action to remove Dauman and four other directors from Viacom’s board, Dauman and Chief Operating Officer Thomas Dooley reserve the right to resign. Dauman and Dooley’s employment agreements state they can resign with good reason if there are changes to Viacom’s board. According to Dooley, his employment contract says “good reason” was created because “the majority of the members of the Board, the Compensation Committee and the Nominating and Governance Committee would no longer be comprised of Original Independent Directors and ‘Qualified Replacement Directors’ (as such term is defined in the Employment Agreement).”
The two men explain in their letters to Viacom General Counsel Michael D. Fricklas that the letters were intended to reserve their rights. The move is meant to protect tens of millions of dollars in potential severance pay. Executives are generally entitled to receive severance pay if they resign with good reason. Dauman could receive more than $90 million in severance compensation and Dooley could receive more than $30 million, according to the numbers in the company’s most recent proxy filing.
According to the terms of their employment agreements, Dooley and Dauman were required by to file their letters within 30 days of a “good reason event” to be eligible for their severance packages. Invoking the right July 15, the duo said their resignations could become effective as soon as August 15. In their letters to Viacom’s general counsel, both Dauman and Dooley said that they intend to leave only if the changes in the board are upheld by a court. Both men said they will remain at their posts if the court rules against the changes.