The fight for control of CBS Corp. took a more personal turn Tuesday with the Redstone family alleging that CBS Chairman and Chief Executive Leslie Moonves has long been bent on running the company on his own terms — and that he has chafed under the power of Shari Redstone.
The Redstone family filed a 66-page lawsuit in Delaware that alleges CBS has no legal right to strip the family of its special voting privileges, which give the family great sway over CBS' affairs.
The suit takes aim at Moonves, saying he has tried twice before to get the Redstones to relinquish their voting power — in 2006 and 2015. Both times he was turned away, but Moonves prospered for more than a decade working for the Redstone regime — collecting rich compensation packages that, over the years, total more than $700 million. Moonves consistently has been the highest-paid executive in media.
The suit contends that Moonves this year gave CBS' board an ultimatum: Vote to strip the Redstone family of their voting control, or he would resign. Moonves has leverage, including his standing on Wall Street and his contract, which gives him a $180-million "golden parachute" should he exit the company, the suit says. The Redstones, in a footnote in the lawsuit, also said that they "reserve all rights to contest any payments to Mr. Moonves under his employment agreement."
The lawsuit is the latest flare-up between the two sides, which have sparred over a plan to merge CBS with Viacom, the other company the Redstone family controls.
CBS' special board committee decided that a merger is not in the best interests of shareholders. The company's independent directors sued the Redstones and their investment vehicle, National Amusements Inc., on May 14, taking the first step to try to dilute the Redstones' voting shares. The family enjoys nearly 80% of the vote even though they own just 10.3% of CBS.
CBS' independent directors then voted May 17 to adopt a dividend that would give rank-and-file shareholders a vote. That move, should it be upheld by the courts, would dilute the Redstones' authority by reducing the family's voting power to 17%.
The Redstones are challenging the action in court.
"The only cogent, but manifestly improper, explanation for the [company's] unprecedented action is that Leslie 'Les' Moonves, CBS's long-time CEO, has tired of having to deal with a stockholder with voting control and has taken particular umbrage that the exercise of such stockholder's control has migrated from Sumner Redstone to his daughter, Ms. Redstone," says the suit filed Tuesday by National Amusements.
Sumner Redstone, 95, has been ailing for the last four years. Since 2016, Shari Redstone has been calling the shots.
National Amusements, in its suit, also sought to undermine CBS' argument that Shari Redstone had breached her fiduciary responsibility to shareholders by pushing for CBS to merge with Viacom Inc. The suit said that Shari Redstone abandoned her support of the merger because of CBS' resistance just a few days before CBS filed suit against her.
"NAI and Ms. Redstone did not, and do not, intend to force a CBS/Viacom merger, whether by removing and replacing CBS directors or otherwise," according to the suit.
It further states that Moonves initially agreed with Redstone that the merger of Viacom and CBS made sense because both are medium-sized companies in an industry increasingly dominated by giants. But then Moonves balked, even after Shari Redstone dropped her demand that Viacom Chief Executive Bob Bakish have a role in the combined company as his successor.
CBS stock has lost more than 10% of its market value this year due to investor worries that Moonves might leave and that CBS would get saddled with Viacom's cable channels at a time when people are cutting the cable cord.
In a statement Tuesday, CBS said that its own lawsuit against the family "details the ways in which [National Amusements] misused its power to the detriment of CBS shareholders, and was submitted after careful deliberation by all involved."
The board also voted 11 to 3 to strip the Redstones of their voting control. Only CBS Vice Chair Shari Redstone and her two allies on the board — who both are family attorneys — voted against the measure.
"We continue to believe firmly in our position," CBS said.
5 p.m.: This article was updated with additional details from the Redstone family lawsuit.