WILMINGTON, Del. (CN) – A Delaware chancellor ruled a shareholder can sue CBS Corp.’s board of directors over its decision to pay Sumner Redstone $13.5 million after he became medically incapable of running the company.
In a ruling handed down April 19, Chancellor Andre Bouchard said plaintiff R.A. Feuer had sufficiently alleged well-pled facts demonstrating that Redstone’s contributions over the last two years of his chairmanship ” were so disproportionately small that continued payment of the executive chairman salary was a decision beyond the range of what any reasonable person might be willing to trade for such ‘services’.”
Further, Bouchard said, Feuer, “has adequately pleaded that the Chairman Emeritus payments made to Redstone were wasteful and thus lacked justification.”
Redstone, a lifelong businessman and media magnate, made his initial fortune through ownership of the National Amusements theater chain.
In 1971, he purchased Viacom International, which had been spun off from CBS Corp. after the FCC ruled television networks could not syndicate their successful programs after their initial run.
Over the next several years, Redstone continued to snap up media properties, including Paramount Pictures and, eventually, CBS itself.
Redstone held the title of executive chairman at both CBS and Viacom under early 2016. In February of that year, at age 92, he resigned both chairmanships following a court-ordered examination by a geriatric psychiatrist.
But Feuer claims Redstone’s contributions to the well-being of the company — and its shareholders — end at least two years earlier, when the first reports of his failing health began to emerge.
Prior to those reports, the ruling says, the CBS board of directors clarified Redstone’s duties to include his being a “sounding-board/counselor to CEO on issues of strategic importance,” ensuring “strategic plans are up-to-date” and offering “effective communications with [the] Board” among other duties.
But in the late summer of 2014, Redstone was stricken with pneumonia and required hospitalization.
From this point forward, Feuer claims, the board failed in its duties.
Despite the Redstone’s fading health, Feurer says, he was given a $9 million bonus on top of his $1.75 million salary. He continued to receive that salary under he resigned.
While Bouchard held the case can move forward, he did throw out Feuer’s claims related directly to the 2014 bonus payment. According to Bouchard, the board was perfectly within its rights to award the aging magnate for his last impact on the media empire he assembled.
In a statement provided to Courthouse News, a spokeswoman for CBS said the network and its board “are reviewing the decision and considering next steps.”