Wednesday afternoon, Viacom (VIAB) trumpeted in a press release that it was improving its governance standards. It is creating a new position on its board called "Lead Independent Director." The new role will involve "coordinating the activities of the independent directors and to serve as a liaison between the Executive Chairman, President and Chief Executive Officer and other independent directors."
The company went on to say the addition of a Lead Independent Director "will enhance Viacom's corporate governance practices, which already include a majority of independent directors and board committees that are comprised solely of independent directors."
The reason Viacom is doing this is because ISS, for 2 years running now, has recommended shareholders vote against six Viacom directors. There are only 11 this year, so if shareholders had followed ISS, more than half the Viacom board would be out of a job.
Whom did ISS say Viacom shareholders should vote against? All the members of the Compensation Committee, including Chairman Fred Salerno, because of "a continuing misalignment between executive compensation and company performance."
This past Monday in Miami, Viacom shareholders voted. Afterwards, Viacom said a substantial majority of the class A shareholders had re-elected all the directors. This isn't surprising, given that Sumner Redstone controls 80% of the shares.
But Wednesday night, Viacom released the actual voting results. About 37% of the class A shares not controlled by Redstone voted against (or through a broker non-vote) the re-election of five of the 11 directors.
That's an unusually high "against" vote. Typically, corporate directors are re-elected with 98% majorities.
Back in 2007, after I ran a "vote no" campaign against Yahoo!'s (YHOO) compensation committee at the time, shareholders voted somewhere between 32% and 35% against its members' re-election. A couple of days after the vote, then-CEO Terry Semel quit, in part because he was embarrassed by the results.
It's unfortunate that Viacom's CEO, Philippe Dauman, isn't more easily embarrassed.
The director on Monday who got the most "against" votes was Salerno, the Compensation Committee chairman.
Then, a couple of hours before the voting results were released in an 8-K filing with the Securities and Exchange Commission, Dauman -- perhaps not surprisingly -- named Salerno as "Lead Independent Director."
If the person responsible for paying Dauman's compensation for the last few years is now responsible for serving as "Lead Independent Director," it's a sure sign to all shareholders and employees that Viacom's governance is never going to change as long as Dauman is in control.
Will ISS need to recommend shareholders vote against a majority of Viacom directors for three years in a row before things change? Five years in a row? Ten years in a row?
Wednesday's news is not nearly enough, especially after the shareholder vote results from Monday.
