CBS Corp. board members and controlling shareholder Shari Redstone have engaged in on-again, off-again settlement talks in recent weeks to resolve a nasty legal dispute and pave the way for the departure of longtime Chief Executive Leslie Moonves, according to several knowledgeable people.
The settlement would end a lawsuit over control of CBS that has consumed the media company since it was filed in May. It would also hand a victory to Redstone, who has been agitating for change at the top of CBS, and mark a stunning reversal of fortune for one of Hollywood’s most prominent and successful executives.
Moonves, 68, has run the CBS broadcast network since 1995 and has been the media company’s chief executive since 2006 during a period of upheaval in the media industry. Moonves, a former actor and former Broadway producer, transformed CBS from a laggard to a leader — it has been the nation’s most-watched TV network for more than a decade with such fan-favorite fare as “Survivor,” “NCIS” and “The Big Bang Theory.”
Discussions have focused on the size of a severance package for Moonves — a payout could be in excess of $200 million — and whether he would segue into a producer role, two people familiar with the talks said. His contract, which was renegotiated last year, was due to expire in June 2021. It contains a provision that would allow Moonves to remain affiliated with CBS with a production deal financed by the company.
The talks, however, have been complicated by allegations contained in a New Yorker article in late July that Moonves made unwanted sexual advances toward several women decades ago. Moonves has expressed regret for past behavior but has denied forcing himself on women or hurting their careers.
After that report, CBS hired two high-profile attorneys — former Securities and Exchange Commission Chairwoman Mary Jo White, who’s now with Debevoise & Plimpton, and Nancy Kestenbaum of Covington & Burling — to investigate the allegations and complaints about CBS’ workplace culture.
The findings of the investigation could determine how large a settlement Moonves receives.
“Who knows what these two law firms are going to come up with — but [Moonves] may well suspect that it is not going to be good,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management. “It would be wise for him to step down before any certification of misconduct by one or both of the firms. It is certainly time for a change.”
CBS and a representative for Redstone declined to comment.
Redstone and CBS’ independent board members have been at odds since May, when the board took the extraordinary step of filing a lawsuit in Delaware to strip the Redstone family of its voting control. The board members were worried that Shari Redstone was angling to replace several of them in an effort to merge CBS with the weaker media company Viacom Inc., which her family also controls. The board members approved a special dividend to dilute the Redstones’ voting control of CBS to 17% from nearly 80%.
In addition to the broadcast network, the company owns a string of television stations, a growing television production studio, the Showtime premium channel, the Simon & Schuster publishing house and a 50% stake in the CW network.
The Redstone family investment vehicle, National Amusements Inc., quickly changed CBS’ bylaws to require that any major board vote receive the approval of 90% of the board. Because Shari Redstone has two allies on the board, the move ensured that Redstone would have effective control.
The lawsuit was headed for an October trial, which has given urgency to the settlement discussions. Any settlement would probably provide a dramatic overhaul of CBS’ board by installing new directors who might be more closely aligned with Redstone.
CBS’ board currently is divided over how any settlement with Redstone would be structured, according to two people familiar with the matter. There is a chance that no deal could be reached.
Another person familiar with the matter said the parties were interested in crafting a “global settlement” that would end the disputes that have consumed the company for much of this year. Finding a solution to the thorny disputes has added to the complexity of reaching a deal, that person said.
Redstone, who is vice chair of CBS, has been pushing for several board members to step down as part of the settlement, another person said.
As part of any deal, CBS board members want a commitment from Redstone that she would not force a merger with Viacom unless CBS’ board agrees that it would be in the best interests of the company, another person said. The board, in turn, would abandon its effort to strip the Redstone family of their voting control.
A resolution "will only occur with a global settlement of all of these issues," said C. Kerry Fields, a finance professor at the USC Marshall School of Business. "It's clear that Moonves will be out, the independent directors will mostly be out and there will be a stand-down agreement between CBS and National Amusements, in which National Amusements agrees to leave CBS alone for a period of perhaps two to three years."
The Redstones have good reason to avoid a trial that would invite more scrutiny into the condition of the ailing 95-year-old Sumner Redstone, who still controls National Amusements.
The Delaware judge has already expressed skepticism about the mogul’s mental state, concerns that were heightened after he viewed a video taken in January by a CBS board member. The video showed that Redstone could not answer such basic question as who controls CBS.