CBS.A CBS Corp

By Keach Hagey and Joe Flint 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 16, 2018).

CBS Corp. sought to turn the page on a tumultuous stretch when it said last month that Leslie Moonves was stepping down as chairman and chief executive amid sexual-harassment accusations and that the media company was settling litigation with its controlling shareholder.

Instead, the boardroom drama continued. On Sept. 25, the company announced that its lead independent director, Bruce Gordon, was stepping down, surprising many people close to the company. He quit over the decision to name an interim chairman, feeling that it sidelined his role and compromised the board's ability to recruit a strong CEO who might want the chairman title, according to people familiar with the matter.

Another director, William Cohen, also left the board, because he was upset at the portrayal of him in the press as a staunch supporter of Mr. Moonves, the people said.

Meanwhile, the investigation the board launched into Mr. Moonves's alleged misconduct and CBS's company culture is also examining the conduct of individual board members during the saga, including Mr. Gordon, the people familiar with the matter said. All directors have been interviewed in the probe, the people said. Even the law firm working for the board has become a protagonist.

The upheaval could have significant implications for the broadcaster's future. The two open board slots won't be filled, the people familiar with the matter said. Mr. Gordon was among the directors who sued controlling shareholder National Amusements Inc., led by Shari Redstone, to strip it of voting control and block a merger with sister company Viacom Inc. The litigation was settled last month. Mr. Cohen was a vocal supporter of Mr. Moonves, who resisted a merger. Given these stances, their absence could make a merger more likely, some analysts say.

Mr. Moonves's possible payout also hangs in the balance. He stepped down as part of the settlement in September, but whether he gets his severance depends on the results of the investigation. The board must examine the flow of information among Mr. Moonves, directors and a law firm working for the board to see whether the former CEO misled the board or stymied the probe. If so, he could be deemed as fired for cause and lose $120 million in possible severance, according to his contract and the terms of the settlement at the time of his ouster. Mr. Moonves has denied allegations that he sexually assaulted or harassed women and harmed the careers of those who rebuffed him.

All of this is playing out as the board searches for a permanent chief executive. Longtime Chief Operating Officer Joe Ianniello is the acting CEO.

As part of CBS's settlement with National Amusements in September, six CBS board members were replaced. Mr. Gordon remained and the settlement secured his place on the board through 2020, which is why his departure two weeks later caught his fellow directors off guard.

Although National Amusements, which has nearly 80% voting stakes in each of CBS and Viacom, agreed under the settlement not to push a merger of the companies for two years, a merger could still take place if two-thirds of CBS board members not affiliated with National Amusements agree to it. The departures of Messrs. Gordon and Cohen leave the board with 11 people and reduce the number of independent directors who would have to vote for such a transaction from eight to six.

Guggenheim Securities analyst Michael Morris said the board changes "could increase the potential that independent board members revisit a possible recombination with Viacom."

Mr. Gordon was upset over the decision to name veteran media executive Richard Parsons interim chairman of the board late last month, and expected to play a more prominent role in the wake of the board shake-up in early September, the people familiar with the matter said. He was also miffed that National Amusements and CBS went back on their announced intentions that the chairman post would be kept open until the company named a new permanent chief executive, they said.

Mr. Parsons is likely to be made permanent chairman at the meeting in December, though no official decision has been made, one of the people said.

One person familiar with the decision to give the interim chairman post to Mr. Parsons, who has been close to Ms. Redstone, said his appointment had more to do with facilitating boardroom protocol and procedure.

Messrs. Gordon, Cohen and Parsons didn't respond to requests for comment. CBS declined to comment for this article.

When rumors that media organizations were looking into allegations against Mr. Moonves began to swirl late last year, Mr. Gordon tapped Michael Aiello, chairman of the corporate department of the law firm Weil Gotshal & Manges LLP, to look into it.

Mr. Aiello's role was complicated. The independent directors of CBS had earlier tapped him for advice when Ms. Redstone renewed her interest in exploring a Viacom-CBS merger. The directors and Mr. Moonves were skeptical of such a deal and wound up aligned in the legal fight against Ms. Redstone and National Amusements. Mr. Aiello represented the independent directors in that suit. Now he was being asked to probe any possible minefields in Mr. Moonves's past.

During a January phone call between Mr. Aiello and Mr. Moonves to discuss the rumors, Mr. Moonves told Mr. Aiello about an allegation from a woman in Los Angeles who had filed a complaint with police in the fall of 2017 stemming from an incident in the 1980s, according to the people familiar with the matter.

Mr. Moonves also told Mr. Aiello that an actress requested a job in exchange for staying silent about her alleged experience of sexual harassment from him, people familiar with Mr. Moonves's thinking said.

Mr. Aiello then held a call with the board's nominating and governance committee to brief them on the conversation with Mr. Moonves, according to people familiar with the matter. The lawyer said there had been some accusations against Mr. Moonves, but that they were unsubstantiated and not a cause for concern, some of the people said. He didn't mention anything about the police's involvement or the actress's allegation, one of the people said. The Los Angeles Police Department ultimately dropped its investigation because the statute of limitations had passed.

Some directors wouldn't have supported Mr. Moonves and the suit against National Amusements had they known about the specific allegations, people familiar with their thinking said.

Mr. Aiello believes he didn't withhold information about Mr. Moonves from the board, according to people familiar with his thinking. Reached by phone, Mr. Aiello said he couldn't discuss his conversation with Mr. Moonves or what he told the directors, citing attorney-client privilege.

People familiar with board matters at CBS say it is unlikely that the Weil law firm would continue to do work for CBS or its independent directors. Weil's general counsel, Mindy Spector, declined to comment.

Write to Keach Hagey at keach.hagey@wsj.com and Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

October 16, 2018 02:47 ET (06:47 GMT)

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