VIACOM, MANAGEMENT, CEO SUMNER REDSTONE, PRESIDENT MEL KARMAZIN

After months of executive-suite clashes between CEO Sumner Redstone and president Mel Karmazin, Viacom is facing a deepening management crisis that is likely to be addressed at a board meeting of the media giant scheduled for tomorrow.

According to people inside the company, tensions between Redstone and Karmazin have now trickled down to Viacom's top-tier operating executives, resulting in jockeying among CBS boss Leslie Moonves, MTV chief Tom Freston and Paramount studio boss Jonathan Dolgen.

The conflict between Karmazin and Redstone began almost as soon as Redstone's Viacom completed its $36 billion acquisition of CBS, where Karmazin had been CEO, 17 months ago. At issue: management control of the nation's second-largest media company. In recent comments, the two have unconvincingly declared that they work well together and dismissed any notion of a power struggle. Viacom had no additional comment.

But differences between the Redstone and Karmazin are said to have escalated in the past two weeks as stories about the tension appeared in the press, including major pieces on Jan. 21 in the Wall Street Journal and the New York Times.

Since then, the operating executives have entered the fray, choosing sides as a way of enhancing their own power. According to people close to the matter, Moonves and Freston are both jockeying to succeed Karmazin, 58, whom they are said to believe may soon lose his power struggle with the 78-year-old Redstone. Freston runs Viacom's MTV empire, which includes Nickelodeon, VH1, Black Entertainment Television and other cable programming networks. Moonves runs the CBS unit.

Meanwhile, Paramount boss Dolgen, according to the sources, is pushing for the formation of a high-level management committee that would include the three executives. Such a committee "would keep the other two guys from being above him," according to a high-level insider.

The escalating crisis, according to witnesses, has even prompted outsiders to choose sides. Karmazin supporters are circling their wagons. According to the high-level insiders, several investment-fund managers who held CBS shares before the Viacom takeover have threatened to consider suing Viacom if Karmazin is fired. Karmazin has wide support on Wall Street because of his reputation for increasing shareholder value. Redstone, however, has voting control of Viacom. "It's a nightmare," says one pivotal insider. "There's a real power struggle within the firm."

Tomorrow's New York city board meeting was previously scheduled, and the management crisis was probably not on the original agenda. But with the upheaval now so public, the directors "have to address the issue," one high-ranking person said.

Yet the matter may be difficult for even the board to address, given the corporate limits within which it has to maneuver. Under Viacom's bylaws, the board is comprised of 18 directors, eight of whom must be CBS appointees and presumably are Karmazin partisans. The bylaws grant Karmazin absolute control of Viacom's operations, with MTV's, CBS's and Paramount's executives reporting directly to him.

Redstone has voting control of Viacom with a 68 percent stake. And Redstone's son and daughter as well as his longtime personal attorney, George Abrams, sit on the board of directors.

But the bylaws dictate that firing Karmazin or diluting his operating control requires approval by 14 of the 18 directors--a threshold that would appear difficult to achieve with a bloc of Karmazin supporters on board. Those circumstances are set to change in May 2003, however, when Redstone has the right to change the board lineup and usurp Karmazin's power or, for that matter, dismiss him.

For a company is turmoil, though, May 2003, is a long way away.