Les Moonves’s Long, Slow, Potentially Lucrative Walk Down the Plank

You might think that the defenestration of Les Moonves as Chairman and C.E.O. of CBS should be, or would be, quick and surgical at this point. After all, Ronan Farrow’s devastating exegesis of Moonves’s alleged mistreatment of six women was as detailed as it was shocking. (In a 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.)

You might also be wondering why the guy isn’t just gone already. At the very least, many observers were surprised to learn that Moonves would speak at the CBS quarterly earnings call on Thursday.

But this is an extremely complicated situation, and the board is well advised by Marty Lipton, a founding partner of Wachtel Lipton, to be careful, thorough, and deliberative. Here are a few of the issues they are likely considering, in one man’s view of the order of their importance.

First, if the CBS board decides that Moonves has to go, and go relatively quickly in order to allow CBS to heal and to move out of the #MeToo media spotlight, they will probably have to pay him a meaningful amount of money. Moonves has a new and immensely intricate 87-page contract, which he signed last May, that delineates how and why he can be relieved of his job, and the ensuing compensation structures. In the contract, among other things, CBS can terminate Moonves “for cause,” which would likely allow the company to avoid significant severance, with a myriad of definitions listed regarding what “cause” might be. The sixth definition—if Moonves willfully and materially violated a CBS policy that is applicable to all employees or company officers, including policies on insider trading or sexual harassment—could possibly be relevant to his current imbroglio. The seventh—a failure to participate in a company investigation after being directed to do so by the board of directors—also might apply.

But it’s not necessarily that simple. There is no evidence Moonves has declined to participate in the forthcoming investigation into his behavior. And it’s not entirely clear that any of the allegations against Moonves occurred when he was the C.E.O. of CBS, or worked as an executive at the company. It’s also not clear, from a legal standpoint, if the allegations against Moonves represented a willful and material violation of CBS’s sexual harassment policies.

Moreover, if the board removes Moonves as C.E.O. or chairman for reasons other than “cause,” he may be able to terminate his employment for “good reason.” Moonves may invoke the “good reason” clause in his contract, including if his $70 million annual compensation is reduced or his role and responsibilities are reduced. (This could explain why he is participating in the earnings call.) If he invokes the “good reason” clause, then he is likely entitled to a huge payout, something in the range of $184 million.

Moonves is the highest ranking executive to be enmeshed in the #MeToo movement, and whatever he gets paid to leave CBS—either as a compromise or under the terms of his complex contract—will surely infuriate many advocates. But it is the realpolitik of the situation. Top executives hire brilliant and expensive lawyers to prepare for unforeseen outcomes, and ensure that their interests are protected. The CBS board likely recognizes this, and probably faces one of two general options. They can fight over, say, if and when Moonves violated the sexual harassment policy in a “willful” or “material” way, a process that will require time and extensive legal fees, or perhaps they can dangle some meaningful dollars in front of Moonves to just make the whole thing go away. That can either happen now, or after a legal team begins an investigation, or they can wait until the law firm completes its investigation. But it will almost certainly happen, and usually the sooner it happens the better. (A spokesman for CBS did not return a call seeking comment.)

This leads us to CBS’s second major consideration. Is Joe Ianniello, Moonves’s likely successor, ready to take over the top job? And how will shareholders react to the appointment? If shareholders aren’t on board for Ianniello, who by all measures seems ready to ascend, there could be a meaningful additional sell-off in the CBS shares. The key shareholder that must be pleased, of course, is Shari Redstone, who controls her family’s holding company and its nearly 80 percent voting stakes in CBS and Viacom. Shari appears uninspired by Ianniello. During her latest attempt to re-merge CBS and Viacom—which started a year ago and ended in May, after the CBS board voted 11-3 to issue new dividends designed to massively dilute the Redstones’ stake in CBS—Shari made clear, as noted by The Wall Street Journal, that she wanted Bob Bakish, her hand-picked C.E.O. of Viacom, to be Moonves’s No. 2, presumably greasing his path to the top job.

If Moonves goes, will Shari permit Ianniello to succeed him? Or will she insist on Bakish? And if she does insist on Bakish, will that lead to an insurrection at CBS? Or will a third approach come into play, where an outsider is brought in to succeed Moonves? From the board’s perspective, is it worth making Moonves walk the plank before a successor is identified?

Problem three is the Delaware litigation. On a relative basis, this is probably the easiest problem to solve. Where once upon a time the betting seemed to suggest that CBS might very well prevail in the Delaware Chancery Court in its effort to dilute the Redstones’ voting stake in CBS from 80 percent to around 17 percent, Farrow’s story puts that very much into doubt. But the air will probably go out of the litigation balloon if and when Moonves departs. The trial over the legality of the proposed dividend payments is not scheduled to begin until October, but I’ve got to believe it’s just going to go away quietly now. I wouldn’t be the least bit surprised if the CBS board decided to just drop the plan altogether.

The fourth reason why Moonves is still lurking around Black Rock, CBS’s Eero Saarinen-designed headquarters on Sixth Avenue, is more complex. Moonves still has loyalists on the board and within the company, many of whom became quite rich under his stewardship. Since he took over as C.E.O. in 2006, the company’s stock price, at its peak, nearly tripled, as he turned around the network’s news and entertainment divisions and made Showtime a competitive force against the likes of HBO. Their fealty is of course yet another reason why the Farrow allegations have proved so devastating.

Whether any of these factors will be raised on the earnings call tomorrow remains to be seen. It also remains to be seen whether Moonves actually shows up to participate on the call and answer questions from research analysts. Either way, my bet is that the only way Moonves leaves CBS quickly and easily is if he gets a large payment in settlement of his contract.

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