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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