During the near 60-year reign of CBS founder William Paley, it was celebrated as “The Tiffany Network” not due its current fragility, but in praise of its superior quality. The network’s two chief broadcasting rivals at that point—NBC and ABC—both grew out of appliance equipment maker RCA, initially a GE/Westinghouse joint engineering venture. Paley pioneered quality content in news and entertainment, not just the showcasing of evolving technology. While CBS has long had rocky succession, on this 90th anniversary of CBS founding, Paley would have been horrified by saga around the exit of scandalized CEO Les Moonves. Joseph Ianniello will serve as president and Acting CEO of CBS Corporation.
So far a total of 13 proclaimed victims have charged Moonves with alleged horrifying sexual harassment in detailed and apparently corroborated accounts going back decades. The stories involve vulgar forced sex acts upon employees with threats of retribution for resistance. Much of this covers the 24 years where Moonves served as an executive and even, it seems, over the 14 years he served as CEO. Perhaps due to the overlay of a Delaware Chancery court governance battle between Moonves supporters and their 80% owner, Sheri Redstone and National Amusements, the board failed to respond promptly. Moonves attempted to reduce Redstone’s control from 80% to 17% through a questionable dilution devise. Amazingly, Moonves remained in office for seven weeks after the reports were published by the New Yorker.
Without evidence, some have suggested Redstone may have planted the reports of misconduct, which came out in two waves. Some say the board failed to respond promptly because the allegations were not yet legally proven facts and thus the highly regarded CEO deserved due process. There were whispers that the casting couch was common in the old culture of old media companies. Yet others felt a premature move by the board to terminate or diminish Moonves’ role could trigger a $200 million severance package which was contractually guaranteed. There was concern that the presumed hanging party fervor sparked by the #MeToo movement could derail justice for Moonves.
But what about justice for the victims, CBS employees, and investors? If Moonves had done only what he admitted to in the New Yorker piece, that was a gross violation of decades-old legal standards of sexual harassment established by the EEOC. He admitted to sexual relations with subordinates, but presumed them to have been consensual. Just one such case properly cost a past CEO of Boeing his job. The casting couch has long been condemned and the “bro culture” of Silicon Valley reminds us that such misconduct is not unique to old media companies.
Finally, the even the business performance myth of Moonves has been a shared delusion of the board and analyst. Sure he was a great show picker with hits like “CSI,” “Survivor,” and “The Big Bang Theory,” but that should not have been his job as CEO. Through micromanaging, he moved CBS to the top of the dying business of prime time series TV. Moonves took over a firm with a $15 billion market cap in 2005 and only took it to $21 billion, with declining shareholder returns this past year. For that he was paid a generous $70 million. Bob Iger at Disney, however, took over as CEO of the same year and took market cap from $45 billion to $165 billion with soaring total shareholder returns and paid half of what CBS paid Moonves. Iger has developed platoons of talents as he built and acquired new assets while still producing top hits like “Frozen,” “Black Panther,” and the “Star Wars” series.
CBS should have suspended Moonves and conducted a more prompt investigation, let alone not given him the keys to the company’s pay vault and the weapon of governance litigation to fight board oversight. They are now on a much better course, retaining the best of recent directors and adding six revered, new, skilled professionals, such as Brian Goldner of Hasbro, Strauss Zelnick of Take Two Interactive, and Dick Parsons formerly of Time Warner and Citigroup. Let’s hope they do as well in selecting the successor Moonves.