In his youth, 92-year-old Sumner Redstone, executive chairman of Viacom, Inc. and CBS Corp, cut a dashing swath.
Young Redstone graduated first in his class at Boston Latin School, graduated from Harvard College and Harvard Law, served as an Army lieutenant in World War II and went on to become a multi-billionaire with media investments in Columbia Pictures, Twentieth Century Fox, Orion, Paramount and finally, Viacom, which he acquired and led after a hostile takeover.
For more than half a century, there was no more powerful figure bounding across the entertainment landscape than Sumner Redstone. But today, even though Redstone continues to serve in executive capacities at both Viacom and CBS and controls nearly 80 percent of the companies’ voting shares, by all reports, the nonagenarian commands all the power of a cumquat.
In fact, beyond a reported “perpetual desire for steak and sex” — neither of which he apparently is able to tolerate — Redstone doesn’t do much of anything but sit in a darkened bedroom in his 15,000-square-foot Beverly Hills mansion.
And therein lies the problem, especially if you’re a Viacom or CBS shareholder. (which, in full, despondent disclosure, I am!).
Redstone, and those who control his affairs, have steadfastly refused for him to step down from his executive chairmanship. The Viacom board claims he remains “mentally capable.” At the center of the confrontation between corporate managements and shareholders — certain to evolve into imminent lawsuits — is the question of a company’s obligation to disclose the state of top management’s wellness to shareholders.
It’s a public relations issue that has confounded corporate managements, communications counselors and securities regulators for decades.
An obligation to inform
Regulations regarding executive illness are fuzzy. The Securities and Exchange Commission has effectively punted on requiring companies immediately to announce the status of an executive’s physical or mental health. The SEC does require disclosure when a CEO is “unable to perform his or her responsibilities.” This is the “out” Viacom has used, acknowledging that while Executive Chairman Redstone hasn’t been to the office in two years, he still “listens via phone to Viacom and CBS board meetings.”
Without regulation to guide them, the guiding principle for public relations professionals as to whether and how much to announce is that of “materiality” — whether announcing the state or change of health will impact the buying, selling or holding of a stock.
In Redstone’s case — his former live-in girlfriend has charged in a lawsuit that the Viacom executive chairman is imprisoned in his room, surrounded by plain-clothes security guards, can’t eat or drink, must be carried to and from the bathroom and has all the mental acuity of a cricket — the board does, indeed, have a fiduciary obligation to inform the shareholders.
Steve Jobs’ secret cancer
Redstone’s isn’t the first high profile illness that has been kept secret from shareholders. The most famous recent case was that of Steve Jobs.
The Apple founder may have been a legendary creative and marketing genius, but he cared little for corporate governance and shareholders. As Fortune once put it, “Steve Jobs is considered one of Silicon Valley’s leading egomaniacs.”
As a consequence, Jobs was equally legendary for being secretive about his physical condition. After a bout with pancreatic cancer in 2004 that shook Apple’s stock and shareholders, Jobs and Apple steadfastly refused to update the public on his health.
Cognizant of the reality, the Atlantic wrote that, “Every time he sneezes, shares of Apple catch a cold.”
Ultimately, Jobs and his impotent board — just like the feckless board members drawing large monthly checks at Redstone’s Viacom — decided that the executive’s health was nobody’s business; not even the shareholders who, certainly in Jobs’ case, depended on the CEO’s health to sustain the company’s value.
Jobs was so intent on hiding his illness from the public that in 2009, when The New York Times asked him if the rumors his cancer had returned were true, the CEO denied it and said he suffered from a “hormonal imbalance.”
A day later, Apple “corrected” that falsehood to reveal that Jobs’ medical problems were “more complex.” For the next two years, Apple tiptoed through the raindrops in response to increasing questions about the founder’s health, right up until the moment in 2011 when Jobs took his final “leave of absence” from Apple and died a few months later from the fatal disease he and his company had tried so vigorously to hide for a decade.
Over time, other more enlightened, shareholder-friendly CEOs have taken a decidedly different tack. When Berkshire Hathaway CEO Warren Buffet contracted prostate cancer in 2012, he immediately announced it. So did JPMorgan Chase CEO Jamie Dimon when he was diagnosed with throat cancer in the summer of 2014.
Buffet and Dimon correctly recognized that they work for their shareholders, not vice verse. And their communications counselors recognized that public companies have a responsibility to share such material announcements with the public.
Still, Redstone’s companies resist. Viacom CEO Philippe Dauman, according to the Los Angeles Times, claims he “calls Redstone several times a week to discuss company business.” The Times doesn’t say whether Redstone even answers.
In any event, what’s obligatory now is that Viacom and CBS stop the charade and immediately terminate Sumner Redstone’s management responsibilities on the grounds that he is no longer mentally capable.
They owe nothing less to the shareholders for whom they work.
* * *
Fraser P. Seitel has been a communications consultant, author and teacher for 40 years. He may be reached directly at firstname.lastname@example.org.