In 1994, Sumner Redstone’s Viacom paid $10 billion for Paramount Pictures after a bruising bidding war. In 2000, flush with confidence, Viacom bought CBS for $35 billion. Then came the splits, the re-mergers, the strategic pivots — decades of boardroom manoeuvring by executives who always had a compelling reason to do the next deal.
Last year, the combined wreckage sold for $6.6 billion. Plus $15 billion in debt.
A hypothetical investor who bought Viacom stock in 1990 and held through every merger, split, and recombination would have achieved a total return — across 32 years of the greatest bull market in human history — of negative 21 per cent.
The shareholders owned the company. Management burned it down anyway.
David Bahnsen’s Dividend Cafe last week dissected how this happens. His analyst, Ishan Chhabra, identified the pattern: “Viacom’s leadership repeatedly sacrificed dividend policy and share repurchases to fund acquisitions, signaling to investors that management prioritised empire-building over shareholder value creation.”
The contrast was Comcast — same sector, same period, 13 per cent annual returns. The difference wasn’t smarter executives or better content. Comcast paid dividends. Growing dividends, every year, through every acquisition cycle. That commitment to returning capital to owners functioned as what Bahnsen calls a “governor” — a mechanical constraint on management ambition. Before chasing the next deal, Comcast executives had to find the cash to pay shareholders. That discipline forced prioritisation. It made empire-building expensive.
Viacom’s executives faced no such constraint. They could retain earnings, issue stock, take on debt — all in service of strategic visions that somehow never delivered returns to the people who actually owned the business. The owners were an abstraction. The deals were real.
The principle isn’t limited to corporate finance. Wherever agents spend other people’s money, the same dynamic applies. The relationship between those providing capital and those deploying it must contain structural tension — mechanisms that force accountability regardless of how reasonable management sounds or how compelling the next initiative appears.
Remove that tension and you get Viacom. Thirty years of sophisticated people making sophisticated arguments for value destruction.
In Australian local government, ratepayers provide capital through compulsory rates. Councils are elected to represent those ratepayers and govern the organisation. Administrations are employed to execute.
The system requires tension between these roles. Councillors scrutinise administration. Ratepayers scrutinise councillors. That scrutiny is not a breakdown in relationships — it is the relationship working. The discomfort is the point.
Some council executives take a different view. They speak of council and administration as “a single organisation” with “complementary roles.” They suggest elected members should engage with officers before forming public views. They describe scrutiny as making things “more difficult for staff.”
This is the Viacom model applied to local government. Management and board aligned, owners a distant abstraction, capital deployed toward whatever administration considers strategic. Everyone comfortable. No tension. No governor on the machine.
The pitch sounds reasonable. Collaboration. Professionalism. Constructive engagement. But the question for ratepayers is simple: whose interests are served when the people spending your money and the people overseeing that spending see themselves as a single team?
Councillors are not elected to make friends with administration. They are elected to represent ratepayers — to maintain the tension that prevents institutional drift, to scrutinise outcomes rather than accept briefings, to ask uncomfortable questions precisely when officers would prefer they didn’t.
Ratepayers might reasonably ask their councillors: when did you last require administration to demonstrate returns on existing programs before approving new ones? When did scrutiny precede expenditure rather than follow it — if it followed at all?
The alternative is harmony. Everyone aligned, everyone comfortable, everyone agreeing that the next initiative makes strategic sense.
Viacom’s shareholders had thirty years of harmony. They can tell you what it cost.