MIAMI A substantial majority of Viacom Inc's (VIAB.O) independent shareholders on Monday voted to re-elect the media company's directors and rejected a move to extend voting rights to all shareholders, going against recommendations by the leading proxy advisory firm.
By backing the directors and rejecting the proposal, investors are effectively giving Viacom Chief Executive Philippe Dauman more time to improve sliding viewer ratings at the company best known for owning MTV, Nickelodeon and Comedy Central.
The shareholder vote comes as no surprise given that 80 percent of Viacom's Class A voting shares are owned by 92-year-old longtime leader Sumner Redstone, through his holding company National Amusements Inc. Viacom's more numerous Class B shares, which make up most of the stock's day-to-day trading, do not have voting rights.
In preliminary numbers disclosed on Monday, the proposal for a single share-class structure, which would have given all shareholders voting rights, won about 4 percent of the total vote, representing about 20 percent of the independent voting shareholders, assuming all holders of Class A shares voted. The final tally will be disclosed in a securities filing in the next few days, according to a spokesman.
Kevin McManus, vice president of proxy adviser Egan-Jones, said the support from independent investors to the proposal appeared to be significant, given it was the first year for the measure. "It’s a shot across the bow" for management, he said.
Viacom's shares closed up 1.2 percent at $39.76 on Monday.
The meeting, at Viacom's new international studios in Miami, was sparsely attended, with only about 30 people present. Redstone did not show up, the second year in a row he has not attended. He has not spoken on an earnings call since 2014. His daughter Shari Redstone, a member of Viacom's board, was present, but did not speak.
Viacom has faced mounting investor concern about Redstone's mental competence after ex-girlfriend Manuela Herzer filed a lawsuit referring to the media mogul as a "living ghost," incapable of making decisions when he removed her last year as his health care agent in favor of Dauman.
At the meeting on Monday, one investor expressed concern that Dauman's appointment as Redstone's health care agent might be a conflict of interest.
"My concern is that it seems that the market is punishing the stock specifically because of (Dauman’s) involvement in his health care," said the investor, Mark Herold, during the meeting.
"I think the litigation is what's weighing on the stock price," Herold said following the meeting, referring to Herzer's lawsuit. CBS Corp (CBS.N), also majority owned by Redstone, "isn’t having these problems," he added.
SHAREHOLDER QUESTIONS DUAL-CLASS STRUCTURE
Herold, who has owned voting shares of Viacom since 1995 and has a small stake, said after the meeting that he supported the single-class structure and voted against all of the directors except for Shari Redstone. "Ms Redstone is the only person who seemed to be standing up against this conflict," he said, referring to the issues with Dauman's appointment as Redstone's health care agent.
Dauman replied that he did not seek to be put in charge of Redstone's health care and said Redstone "is getting the absolute best in medical care and enjoying life."
As for the company, Dauman said it was investing in a number of initiatives including programming, data analytics and its international business as it seeks to turn around its performance.
"This is an exciting time for Viacom and we are confident in our strategy," he said. "Many of our initiatives we have discussed will take time to bear fruit ... but others already are."
Last month, Dauman replaced Redstone as executive chairman of Viacom. Redstone is now chairman emeritus.
Days after Redstone stepped down, Institutional Shareholder Service, which advises big institutional investors on how to vote their shares in corporate elections, recommended that Viacom shareholders withhold support for six of the media company's directors.
Sal Muoio, whose investment firm also is a top owner of voting Viacom shares, declined to comment on how he voted, but he questioned the value of a dual-class structure at Viacom.
"If the company were open to selling ... having a single-class structure does help them negotiate for the highest price," Muoio said.
(Reporting by Jessica Toonkel; Additional reporting by Ross Kerber; Writing by Bill Rigby; Editing by Cynthia Osterman)