Leslie Moonves, president and chief executive officer of CBS Corp., arrives for the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 10, 2018. Photo: David Paul Morris/Bloomberg

Last weekend marked not only the end of Leslie Moonves' illustrious career as the top executive at CBS Corp., but it also brought about a detente in a longstanding corporate power struggle.

For the past several months, Shari Redstone, president of CBS's controlling shareholder National Amusements Inc., has fought for control of CBS. The battle included a lawsuit against Redstone filed by the New York-based media giant, vehement disagreement over the company's future and #MeToo allegations against Moonves.

Corporate Counsel spoke with corporate governance experts about some of the lessons to be learned from the fallout of the Redstone-Moonves war.

Appeal to an Independent Director

At the heart of the feud between Redstone and Moonves was the former's desire to merge with Viacom Inc., a move Moonves opposed.

Last May, CBS and five directors sued Redstone and National Amusements, a privately held theater chain company. The suit aimed to end the Redstone family's controlling influence over CBS and block the merger with Viacom–though National Amusements had previously said it would only support the merger if the transaction had buy-in from both sides.

The truce reached this past Sunday night called not only for Moonves' departure but also for the appointment of six new board members. According to the Los Angeles Times, Redstone was involved in choosing this new crop of directors. 

“The real question is, 'Was there a point prior to the filing of the lawsuit that an independent director could have stepped in to negotiate?'” said Cornell Law professor Charles Whitehead.

The fallout may have been mitigated, Whitehead said, had an independent director acting on behalf of the shareholders' interests respectfully intervened to try to get the parties on the same page. (An independent director is a board member with no material relationship to the company.)

Eliminate Dual-Class Stock

National Amusements owns 80 percent of the voting stock of CBS and Viacom but only 10 percent of the economic interest—a dual-class stock structure that allowed Redstone to undermine CBS's management, the company argued in its suit.

Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance, said this structure turned out to be a “petri dish” for conflict at the network. 

“This whole situation arose because of the disparity between economic interests and voting interests,” he said. “The board was caught between two forces, and this is the result. They couldn't function like a normally acting board because due to that structure, they were stuck between one master, Redstone, and the CEO.”

Fully Disclose the Fundamentals

As if an existential disagreement over the future of the company weren't contentious enough, rumors that Moonves sexually assaulted or harassed multiple women began to surface last January, six months before the bombshell New Yorker article that detailed these accusations was published, according to a Wall Street Journal report.

Also in January, the Journal reported, Moonves disclosed to members of CBS's nomination and governance committee, but not to all directors, the existence of a sexual assault complaint that had been filed against him with the Los Angeles Police Department stemming from an alleged incident in the 1980s.

This information, however, should have been shared with the entire board, Whitehead said. While he acknowledges that Moonves and perhaps some of his board allies may have been operating under a “siege mentality” and did not want the information to fall into Redstone's hands, “the full board should have known.”

“What's worse than deliberately slighting someone? The perception of deliberately slighting someone,” Whitehead said of Moonves' limited disclosure. “Because this is so fundamental, the right decision would have been to disclose it to the entire board.”

The story has been updated to clarify National Amusements' position on the proposed Viacom-CBS merger.