Sumner Redstone and
(Simon & Schuster)II.All those who know Redstone tell us he is "driven" (even his grandchildren call him "Grumpy"). Sixty hours on the operating table, taking a year to learn to walk again did not leave him untouched. It was only after his siege of agony that he turned from being a ho-hum chief executive of a mildly successful drive-in theatre chain into a man driven passionately (his words) to dominate an entire segment of America's entertainment industry. It changed him so much that, not long ago, his wife of some fifty-odd years filed for divorce. She's also asking for $3,000,000,000 --- but that's another story.
To do what Redstone has done in the corporate world is astonishing. He has not only driven himself and everyone around him relentlessly, he has also had to bet the whole farm to match his vision. This is not the same Redstone who, during the twenty-five years he ran National Amusements, paid cash on the barrelhead: instead of leasing lots for his drive-in theatres, he tells us, he bought the land outright, along with the buildings and their equipment. Thus the company grew slowly and always had the assets to back up any expansion.
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Sumner Redstone runs what those in the trade call a "large cap" corporation. It has a total debt of $13,000,000,000. That's thirteen billion dollars. By contrast, Exxon Corp has a debt load of $7,500,000,000; Coca-Cola, $5,500,000,000, GE $1,800,000,000. The number of Viacom's common stock outstanding is 1,780,177,881. That's one billion seven-hundred eighty million shares (with almost 200,000,000 newly issued in the last year alone). By contrast, GM has slightly over 500,000,000 shares; Dow Chemical, less than a billion. All that paper floating around is astonishing for a company which scarcely registered on the world's financial radar screen two decades ago.
Redstone doesn't lack for personal assets. Last year he paid himself $2,000,000 --- with a $15,000,000 bonus (not counting stock options). But for some of us who will probably never understand the mysterious world of assets and liabilities and sinking fund debentures and options, to have a company with such a huge float of stock and such a massive debt does seem a bit overwrought. The members of Barrons semi-annual investor advisor's roundtable have consistently sneered at Redstone's operating techniques. Looking at the figures, one might conclude that he might be stretching the concept of "success" a bit far.
"Was this ordeal a seminal event in my life?" Right question. "I hadn't changed." Wrong answer. "I had the same value system, after the fire that I had before." Wrong again.
Having raised all these issues, I should point out that I am not a CPA, and that maybe Redstone is on to something great. He has the business and personal assets to be wrong and still get away with it, for Grumpy has, in a couple of decades, built a paper empire which, as of this writing, has a value of over ninety billion simolians.
As long as American shareholders continue to have faith in him, to believe that he and his company are impregnable --- he's in fat city.
Even if he manages to convince most (but not all) of us that the disaster that overtook him twenty-two years ago hasn't touched him, hasn't affected his business sense a bit.
--- W. W. Walsh, PhD