Cablevision Founder Replaces Directors
By GERALDINE FABRIKANT
In a sign of the escalating battle between the founder of Cablevision, Charles F. Dolan, and his son, James L. Dolan who is the chief executive, Charles Dolan said last night that he was replacing 3 of 13 directors with 4 new members.
Joining the board of Cablevision Systems Corporation are John C. Malone, chairman of Liberty Media; Frank J. Biondi Jr., the former chief of Viacom and Universal Studios; Dr. Leonard Tow, the former chief executive of Citizens Communications; and Rand Araskog, the former chief executive of the ITT Corporation. Cablevision acquired Madison Square Garden from ITT when it was led by Mr. Araskog.
The new directors will succeed William Bell and Sheila Mahoney, who recently retired as company officers; Steven Rattner, the Quadrangle Group managing principal; and the late John Tatta.
The move appears to be aimed at adding directors who are friendly to Charles Dolan and his dream of building Voom, the HDTV service.
Cablevision had no comment last night. Mr. Dolan, whose office put out the announcement, could not be reached for comment.
It is not clear whether the company and Cablevision's board had any recourse in stopping this move.
Mr. Dolan's statement last night said the changes were approved by a majority of the Class B shareholders. Mr. Dolan has control of the family trust that owns those shares.
People close to the situation said that Mr. Dolan was unhappy with Ms. Mahoney and Mr. Bell - who had voted against the continued financing of Voom - considering them disloyal after he had given them major roles at Cablevision.
He was also said to be unhappy with Mr. Rattner, who had refused to side with him on Voom.
In the Sarbanne-Oxley era, such unilateral decisions are likely to receive intense scrutiny and critics are likely to argue that Voom, an undertaking that has already cost hundreds of millions, may not be in the best interests of shareholders.
Charles Elson, who leads the Weinberg Center for Corporate Governance at the University of Delaware, said that the situation not only paralyzed the company but created problems on the board. He pointed out that the new directors had a fiduciary responsibility to the company, not to Mr. Dolan.
In his statement last night, Mr. Dolan also said that the Class B shareholders would exercise their right to nominate and elect 75 percent of the directors at the next meeting, in May.
Cablevision recently voted not to continue to finance Voom and although Mr. Dolan had said he would assume the assets, he and the company did not come to terms by Monday, which was the deadline. At that point Cablevision said it was shutting the service. Mr. Dolan issued a statement that he was still interested in buying the assets.
The maneuvering has left the future of the high-definition television business uncertain. Cablevision has said it will shut Voom, angering Charles Dolan who has said it is the wave of the future.
In a separate development, Cablevision employees received an e-mail message instructing them not to destroy any e-mail messages relating to Rainbow Programming because of an investigation by the Securities and Exchange Commission. The company said it was being investigated by the S.E.C. in connection with improper accounting.
The company declined to comment on both matters. However, in June 2003 Cablevision said it had found accounting flaws after an internal review of the company's Rainbow Media subsidiary found accounting irregularities. That subsidiary consists of cable networks including Independent Film Channel; WE: Women's Entertainment; and American Movie Classics. At the time it fired 14 employees including Kate McEnroe, the president of the classic movie network.
A month later, the company said the S.E.C. was investigating the matter. While investigations can continue for years, it is not clear why the company sent out an e-mail message yesterday. The company has declined to comment.
By GERALDINE FABRIKANT
In a sign of the escalating battle between the founder of Cablevision, Charles F. Dolan, and his son, James L. Dolan who is the chief executive, Charles Dolan said last night that he was replacing 3 of 13 directors with 4 new members.
Joining the board of Cablevision Systems Corporation are John C. Malone, chairman of Liberty Media; Frank J. Biondi Jr., the former chief of Viacom and Universal Studios; Dr. Leonard Tow, the former chief executive of Citizens Communications; and Rand Araskog, the former chief executive of the ITT Corporation. Cablevision acquired Madison Square Garden from ITT when it was led by Mr. Araskog.
The new directors will succeed William Bell and Sheila Mahoney, who recently retired as company officers; Steven Rattner, the Quadrangle Group managing principal; and the late John Tatta.
The move appears to be aimed at adding directors who are friendly to Charles Dolan and his dream of building Voom, the HDTV service.
Cablevision had no comment last night. Mr. Dolan, whose office put out the announcement, could not be reached for comment.
It is not clear whether the company and Cablevision's board had any recourse in stopping this move.
Mr. Dolan's statement last night said the changes were approved by a majority of the Class B shareholders. Mr. Dolan has control of the family trust that owns those shares.
People close to the situation said that Mr. Dolan was unhappy with Ms. Mahoney and Mr. Bell - who had voted against the continued financing of Voom - considering them disloyal after he had given them major roles at Cablevision.
He was also said to be unhappy with Mr. Rattner, who had refused to side with him on Voom.
In the Sarbanne-Oxley era, such unilateral decisions are likely to receive intense scrutiny and critics are likely to argue that Voom, an undertaking that has already cost hundreds of millions, may not be in the best interests of shareholders.
Charles Elson, who leads the Weinberg Center for Corporate Governance at the University of Delaware, said that the situation not only paralyzed the company but created problems on the board. He pointed out that the new directors had a fiduciary responsibility to the company, not to Mr. Dolan.
In his statement last night, Mr. Dolan also said that the Class B shareholders would exercise their right to nominate and elect 75 percent of the directors at the next meeting, in May.
Cablevision recently voted not to continue to finance Voom and although Mr. Dolan had said he would assume the assets, he and the company did not come to terms by Monday, which was the deadline. At that point Cablevision said it was shutting the service. Mr. Dolan issued a statement that he was still interested in buying the assets.
The maneuvering has left the future of the high-definition television business uncertain. Cablevision has said it will shut Voom, angering Charles Dolan who has said it is the wave of the future.
In a separate development, Cablevision employees received an e-mail message instructing them not to destroy any e-mail messages relating to Rainbow Programming because of an investigation by the Securities and Exchange Commission. The company said it was being investigated by the S.E.C. in connection with improper accounting.
The company declined to comment on both matters. However, in June 2003 Cablevision said it had found accounting flaws after an internal review of the company's Rainbow Media subsidiary found accounting irregularities. That subsidiary consists of cable networks including Independent Film Channel; WE: Women's Entertainment; and American Movie Classics. At the time it fired 14 employees including Kate McEnroe, the president of the classic movie network.
A month later, the company said the S.E.C. was investigating the matter. While investigations can continue for years, it is not clear why the company sent out an e-mail message yesterday. The company has declined to comment.
