CBS Tells Holders Stock Will Recover With Economy
June 09 2009 - 2:17PM
Dow Jones News
CBS Corp. (CBS) Chief Executive Les Moonves sought to instill
confidence at the media company's annual shareholders meeting in
New York Tuesday as the company faces an economic and advertising
slump, competition from the rise of digital media and unprecedented
financial stress.
Shares of CBS lost nearly three-quarters of their value last
year. The company slashed its dividend and Standard & Poor's
recently lowered its debt rating to one notch above junk, even
after the company took steps to alleviate some pressure by buying
back debt with near-term maturities and issuing longer-dated
bonds.
Moonves said the company's ability to restructure its debt in a
difficult financial environment "reinforced the confidence the
financial community has in CBS."
He said the company's stock performance doesn't reflect its
underlying business performance and predicted when the economy
improves "our stock price will as well." CBS' class B shares have
gained 49 cents so far this year, through Monday, and a number of
analysts on Wall Street have recently said the stock is poised to
perform well in an economic recovery.
On Tuesday, those same CBS shares fell 3.6%, or 31 cents, to
$8.37.
For his part, Moonves reiterated his view that the advertising
market is showing signs of stabilizing.
"It's too soon to call it a recovery, but the trends and the
pacing are encouraging as we look to the back half of the year," he
said.
Despite all the pressures weighing on it and its traditional
media counterparts, CBS did manage to increase its audience ratings
in 2008, while overall audiences shrank at rival networks.
The company has been aggressively touting its position as the TV
network with the largest audience as it negotiates with advertisers
on upfront deals for the upcoming TV season. It has advocated for
broadcast TV as the best form of mass media even as some question
the longevity of its business model and media consumption habits
change.
In its downgrade last week, Standard & Poors said the extent
and pace of a revenue recovery at CBS, particularly at its local TV
and radio stations, is highly uncertain amid permanent changes in
media markets wrought by the rise of the Internet.
Shareholders at the meeting voted overwhelmingly to approve the
company's slate of directors and its various governance proposals,
though the results were a foregone conclusion as the company is
controlled by media mogul Sumner Redstone's firm, National
Amusements Inc., through a dual-class share structure.
Meanwhile, CBS has faced criticism from shareholder advocates.
Proxy advisory firm Glass Lewis & Co. gave CBS an "F" grade for
its executive compensation practices in 2008 for the fourth year in
a row, saying the company "paid significantly more than its peers,
but performed worse than its peers." It recommended that
shareholders vote to withhold support from the four directors on
the company's compensation committee.
For his part, Moonves took a pay cut last year, with his cash
salary and bonus declining to $13 million from the nearly $24
million he earned in 2007.
Redstone, who serves as chairman of CBS and Viacom Inc. (VIA),
saw his salary and bonus increase to $6.5 million from $6.2
million. He voiced support for Moonves and his team at the meeting
and said CBS' "prospects are bright." He didn't address the status
of the debt restructuring at National Amusements, which was forced
to sell a portion of its non-voting stake in CBS and Viacom last
fall after its decline in value tripped loan covenants on the
National Amusements' debt burden.
In addition to the compensation committee, Glass Lewis
recommended withholding support for Frederic Salerno, the former
chief financial officer of Verizon Communications Inc. (VZ), whose
daughter works for CBS while he sits on its audit committee, which
Glass Lewis believes "should consist solely of independent
directors."
It noted Salerno sits on the audit committee of five corporate
boards, giving him a heavy work load, and he was a member of the
finance and risk committee on the board of Bear Stearns before the
investment bank's collapse last year.
Glass Lewis also recommended a vote against CBS' "2009 Long-term
Incentive Plan," which it estimates will authorize the company to
issue 71.6 million shares that would dilute current shareholders by
9.6%.
In contrast, RiskMetrics Group - another shareholder advisory
service - recommended a vote for all the CBS directors and the
company's proposals.
-By Nat Worden, Dow Jones Newswires; 201-938-5216;
nat.worden@dowjones.com