More Unwanted Drama at CBS
(Bloomberg Opinion) -- Time’s up for CBS Corp.—in more ways than one.
On Friday, the New Yorker published a damning article about Les Moonves, the longtime CEO of CBS and esteemed industry leader, confirming a rumor that’s been swirling around for months in the entertainment world that such a story was coming. In it, six women accuse Moonves of sexual harassment, including forcible touching or kissing and threatening to hinder their careers, between the 1980s and late aughts. Shares of CBS dropped 6 percent, their biggest one-day decline since 2011, as the 68-year-old Moonves becomes the latest powerful businessman and Hollywood presence to face allegations of sexual misconduct amid the rise of the #MeToo movement.
In part of his statement to The New Yorker, Moonves said:
“I recognize that there were times decades ago when I may have made some women uncomfortable by making advances. Those were mistakes, and I regret them immensely. But I always understood and respected—and abided by the principle—that ‘no’ means ‘no,’ and I have never misused my position to harm or hinder anyone’s career.”
CBS was already mired in drama this year as Moonves tussled with Shari Redstone, 64, the daughter of ailing 95-year-old media mogul Sumner Redstone who now effectively controls CBS and Viacom Inc. and is vice chairman of both TV-network operators. Moonves is the CBS chairman. The younger Redstone has been trying to recombine CBS and Viacom in a step toward achieving greater scale, which the businesses need as rivals get bigger and viewers switch to internet-based TV offerings (led by Netflix Inc.), putting pressure on traditional advertising revenue and the affiliate fees earned from cable packages. Moonves has opposed the merger proposal.
Things came to a boil in May when Moonves and other directors attempted to dilute Redstone’s voting power to the point of her family losing control over the company. Redstone made a preemptive strike, changing the bylaws to require that a minimum of 90 percent of the board approve any such stock-dilution plan. They are set for an October trial to have a judge rule on the matter. Well, they were at least.
It’s hard to see how Moonves remains at company. And without him leading the charge, the power would shift back to Redstone, enabling her to finally carry out the Viacom deal. Viacom investors are hopeful, giving a pop to the stock price Friday afternoon, which I’m guessing is because of the news regarding Moonves—and not the other news that Viacom is nearing a deal for AwesomenessTV, a money-losing venture that’s happily being discarded by Comcast Corp., Verizon Communications Inc. and Hearst Corp.
It’s been clear that one of them—Moonves or Redstone—would have to go, and that it was a battle Moonves would likely lose. CBS’s statement Friday said what companies usually do in these situations, that the allegations will “be taken seriously” and the board will “take appropriate action.” But then it went on to remind shareholders that the report comes “in the midst of the company’s very public legal dispute” and that “while that litigation process continues, the CBS management has the full support of the independent board members.”
The board appears to be simultaneously throwing its support behind Moonves in one matter as they vow to investigate another involving his potential misconduct. Furthermore, the board must have been at least somewhat aware of the coming accusations and bracing for impact because the New Yorker story, while it hadn’t yet been published, became an open secret in journalism, entertainment and Wall Street circles in recent months.
In another show of poor corporate governance at CBS, Redstone herself—a powerful billionaire—has faced astonishing disrespect and sexism from another director, Charles Gifford, 75, who one day allegedly grabbed her face “directing her to listen to him,” according to a legal complaint filed in May by her family’s entity, National Amusements Inc. He later told Redstone that “he meant no offense, and that was how he treats his daughters when he wants their attention,” the complaint said. Gifford is still on CBS’s board, and the company said that National Amusements had "resorted to baseless personal attacks."
While the accusations against Moonves certainly strengthen Redstone’s cause, I imagine this isn’t how she wanted things to go down with him and the company. After all, Moonves has managed CBS well through the wave of cord-cutting and introduced a rather successful over-the-top app. Ideally, CBS and Viacom would have been merged and integrated under Moonves’s leadership, with him priming a successor—say, Bob Bakish, Viacom’s chief— to take over the combined company in a couple of years or sell it to a larger conglomerate.
But as we learned with Matt Lauer, one of the biggest take-downs of the #MeToo movement up to now, no one is irreplaceable, no matter how much money he makes for the company. If the accusations against Moonves are true, the company and its shareholders would be better off without him.
For years Viacom was considered the problem child in the Redstone empire. It turns out CBS has more than its share of problems, and it starts at the top. With everything out in the open now (hopefully), the company can move on and prepare for a far bigger battle: carving out its place in the messy, competitive, less profitable world of digital entertainment. There’s no time for any more drama.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.
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