Courtesy of Pam Martens
Leslie Moonves, Chairman and CEO of CBS Corp.
A few minutes before midnight last night, CBS News announced that the Board of its parent corporation, CBS Corp., was putting two outside law firms in charge of investigating the sexual harassment allegations against its Chairman and CEO, Leslie (Les) Moonves and other executives in its CBS News division. Those two law firms are Covington & Burling and Debevoise & Plimpton. According to the statement from CBS, the investigation at Covington & Burling “will be led by Nancy Kestenbaum and at Debevoise & Plimpton it will be led by Mary Jo White.” The selection of Mary Jo White is not likely to instill confidence among institutional holders of CBS stock who are familiar with her tenure as Chair of the Securities and Exchange Commission (SEC) during the Obama administration.
The sexual allegations were revealed in an in-depth article by Ronan Farrow at The New Yorker magazine, who won a Pulitzer Prize for his earlier reporting on the Harvey Weinstein sexual assault scandal. Debevoise & Plimpton was also hired by the Weinstein Company Board to investigate the allegations against Weinstein, but its work was cut short when the Weinstein Company ran out of cash and filed for bankruptcy in March. The investigation was further rendered moot when prosecutors filed charges against Weinstein.
CBS is a publicly-traded company on the New York Stock Exchange. On the day Farrow’s article broke, Friday, July 27, the stock of CBS opened at $57.80 and closed at $54.01. Volume in the stock went from 1.5 million shares the day prior to the news to 15.4 million shares on the day the news broke. CBS stock opened this morning at $52.45, potentially registering shareholder discomfort that the Board is allowing Moonves to remain at the company while the outside law firms investigate – a dangerous move at best for guaranteeing an unobstructed investigation.
Debevoise is not exactly an independent arbiter in the matter. It was selected in 2016 to represent Viacom in a potential merger with CBS. The merger did not happen in 2016 but if and when it does happen, the advising law firm would likely reap a windfall in legal fees. The Sumner Redstone family controls roughly 80 percent of the shares of both CBS and Viacom through its holding company, National Amusements Inc., and has been in a protracted court battle with the CBS Board this year over its effort to dilute the Redstones’ control. Sumner Redstone’s daughter, Shari, sits as a Vice President on the CBS Board.
In a court filing, lawyers for CBS described Moonves’ importance to the corporation as follows:
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