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Viacom President Resigns; CBS and MTV Heads to Run Company

BY Admin  June 1, 2004 at 3:42 PM EDT

The move comes as the company — owner of the CBS and MTV networks, among others — prepares for the departure of its 81-year-old chairman and chief executive officer, Sumner Redstone.

Two senior Viacom executives, Tom Freston, head of MTV Networks, and CBS chairman and CEO Leslie Moonves were appointed co-presidents and co-chief operating officers to replace Karmazin.

Karmazin, 60, will stay on for two months to facilitate the transition.

Viacom described the sudden management changes as part of a corporate succession plan under which Redstone will step down as CEO within three years.

“Obviously, Tom (Freston) and Les (Moonves) are the leading candidates to be the next CEO of Viacom,” Redstone said in a Viacom press statement.

Karmazin said in a statement that he was leaving for “personal and professional reasons” in order to “pursue other challenges.” He did not elaborate on his future plan, but because his contract does not have a non-compete clause, Karmazin would be free to join a competitor after he leaves Viacom.

Karmazin’s resignation comes amid persistent reports of management tensions between Redstone and Karmazin. The two men have reportedly clashed at various times after they engineered the merger between CBS and Viacom in 1999.

But Redstone rejected suggestions that Karmazin had been forced out.

“Nobody asked for Mel’s resignation,” Redstone said in a conference call with Wall Street analysts. Redstone said Karmazin had been “frustrated” over Viacom’s stock price and the poor performance of Infinity Broadcasting, the radio division that Karmazin ran for many years before becoming president of CBS. But Viacom’s CEO thanked Karmazin for his “enormous” contributions in the four years since Viacom and CBS merged.

In a press statement, Redstone said both Freston and Moonves have each “presided over phenomenal growth stories, Les in broadcast and Tom at the cable networks, and each has served as an integral member of Viacom’s senior management team.”

In addition to MTV Networks, Freston will oversee other Viacom cable networks, including Showtime and BET, as well as Viacom’s book publisher Simon & Schuster and its motion picture division, Paramount Pictures. Moonves will continue to be responsible for the company’s CBS and UPN broadcast television networks, along with Paramount TV, Infinity Broadcasting and Viacom Outdoor. Both will report directly to Redstone.

Moonves, the former president of CBS’s entertainment division, has been the chairman and CEO of CBS since 2003. Under his leadership, CBS — which traditionally lagged behind competitors ABC and NBC networks — became the most-watched broadcast for the 2003-2004 season and, for the first time since 1980, attracted the most viewers in the coveted age 25-54 demographic.

Despite Viacom’s efforts to cast the move as a positive step, some Wall Street analysts did not immediately welcome news of Karmazin’s sudden departure.

In a note to investors, Merrill Lynch analyst Jessica Reif Cohen called Karmazin’s departure “a very significant negative” factor for the company since he was “an extremely talented operating executive.”

In early morning trading on the New York Stock Exchange, Viacom’s stock price dropped as much as 4 percent but recovered slightly to trade at $37.24, down 3 cents a share, just before noon.