What’s in Store for the Future of Leslie Moonves — and CBS?

Having Leslie Moonves at the head of CBS Corp. was once a sign of stability and great promise. But now, the chairman and chief executive is sitting atop a faltering media company that faces an uncertain future due to sexual assault and harassment allegations leveled against him less than a week ago.

It is unclear what fate Moonves will ultimately meet once CBS concludes an independent investigation into the accusations raised by several women in a shocking New Yorker article. In a surprise move on July 30, after a three-hour conference call, CBS’ board of directors chose not to vote on whether Moonves should be suspended. The executive was said to have taken part in certain parts of the discussion from his office in Los Angeles.

The directors simply discussed the parameters of the investigation, and opted for a second time to postpone the company’s annual meeting, which had been slated to take place Aug. 10. They did not set a future date.

Despite the board’s lack of action, few in the industry feel Moonves is in the clear, hobbled by the damning July 27 New Yorker report. Six women, including actress Illeana Douglas and producer Christine Peters, described disturbing encounters and physical threats made against them by Moonves over a period of 30 years. The allegations indicate Moonves engaged in a pattern of abusive behavior and made a habit of using his clout to intimidate women in connection with professional relationships.

If more women come forward with similar accusations, according to one person familiar with the proceedings, the board would likely call a special meeting and hold a vote on Moonves’ status. Meanwhile, the mood within CBS is one of despondency, this person says.

Moonves, 68, acknowledges making sexual advances and “may have made some women uncomfortable” but denies having threatened to harm the careers of those who rebuffed him. He also disputes Peters’ account of their encounter.

The exposé by investigative journalist Ronan Farrow also paints an ugly portrait of the workplace culture at CBS for women, particularly within CBS News. Few in the industry expect Moonves to remain at the helm of the company for much longer — an extraordinary reversal of fortune for a CEO who has long been one of the most powerful figures in the entertainment industry.

Moonves is the latest entertainment titan to be hit with accusations of sexual misconduct since Harvey Weinstein was outed as a serial predator last October. Other casualties of the #MeToo and Time’s Up era, in which women have boldly come forward to publicly name perpetrators, include such onetime top industry players as the late Roger Ailes, Matt Lauer, Charlie Rose, Bill O’Reilly and John Lasseter.

But Moonves is the first CEO of a publicly traded media giant to be investigated and potentially taken down by accusations of sexual misconduct. Even though most of the alleged incidents took place more than 20 years ago, the cultural reckoning of the past year has forced many of the biggest names in the entertainment business to be held accountable for past behavior in the #MeToo and Time’s Up era.

In November, at Variety’s Innovate summit, when Moonves was asked to comment on the sexual harassment scandal impacting the business, he replied: “It’s obviously affected our business. It’s affected Silicon Valley. It’s affected Washington, greatly. It’s a watershed moment.” He added: “It’s important that companies educate — have an ability to have a dialogue to know what’s going on. … It’s important that a company’s culture will not allow for this.”

The gravity of misconduct accusations against Moonves is magnified by the other corporate drama currently enveloping CBS. The storied broadcaster is embroiled in a long-shot bid to wrest control of CBS away from dominant shareholder Shari Redstone — a bitter legal fight spearheaded by Moonves. It’s an all-or-nothing strategy that will surely lead to a massive shake-up of CBS management if a Delaware judge sides with Redstone.

If Moonves were to lose his job or resign in light of the allegations, sources close to the situation say one scenario under consideration is to bring in a seasoned media pro as an interim CEO. Redstone has used her voting clout to push for former Time Warner chairman Richard Parsons to join the CBS board, and now Parsons is seen as that possible temporary CEO candidate. Parsons will be formally elected to the board at CBS’ annual meeting, whenever it is held. It was originally scheduled for May 18 but was postponed after CBS’ lawsuit against Redstone and National Amusements Inc. was filed.

Other candidates who might be tapped in an emergency situation include CBS alums Nancy Tellem and Nina Tassler. The unpredictability surrounding CBS and Viacom will make it hard for Redstone to recruit a major player — i.e., Fox Television Group chairman Dana Walden or NBC Entertainment chairman Bob Greenblatt — to permanently succeed Moonves at CBS.

The dizzying turn of events has left CBS insiders in a state of shock.

“It hasn’t really sunk in yet,” says a longtime CBS executive, a day after Farrow’s story broke. Some were still in denial about the possibility of Moonves being fired or forced out amid the heightened sensitivity to sexual harassment and abuse allegations. The explosive story was published days before CBS was to report its second-quarter earnings on Aug. 2. And on Aug. 5, the network is slated to spend the day promoting its new fall lineup at the Television Critics Assn. press tour in Beverly Hills.

Severe damage was done to CBS even before the story was published. Word of the impending exposé sent CBS’ stock price plummeting 6% on July 27, losing some $1.4 billion in market value.

On July 30, shares fell another 5% in early-morning trading, but the board announcement came after close of market.

The CBS board of directors has announced plans to hire a law firm to conduct the investigation of allegations against the CEO. As of July 27, a majority of CBS’ directors expressed their “full support” for Moonves and his management team. The statement of support surprised many observers, as it was announced prior to the New Yorker story being published — before they were aware of the extent of the allegations in Farrow’s report.

After the story broke, it became clear that Redstone may not have to wait much longer to make changes at CBS. The pressure bearing down on Moonves and the threat of CBS being further destabilized by a leadership vacuum — and potential exodus of other top executives — will be a test of Redstone’s ability to help guide the company out of crisis.

The turmoil at CBS will determine whether she has the mettle to follow in the mogul footsteps of her father, storied media investor Sumner Redstone. She is now challenged to lead her empire through a thicket of problems that run the gamut from the personal scandals that have enveloped Sumner Redstone and now Moonves to the seismic disruption under way in the traditional media business.

Shari Redstone and Moonves have gone from allies to bitter foes in the space of a year. But the weakening of Moonves’ position is not exactly good news for Redstone as an investor. CBS is in danger of losing its longtime chief just when the company needs a strong operator and strategic leader most, as the broader entertainment industry is being rapidly transformed by the impact of technology and the entry of Netflix, Amazon, Apple and other tech giants into Hollywood’s wheelhouse.

Despite Moonves’ unshakable bravado, CBS has become a smaller player in the global media arena — which is one of Redstone’s arguments for reuniting CBS and Viacom. Redstone began pushing that idea for the second time in two years late last year, as AT&T swallowed up Time Warner and Disney struck its historic deal with 21st Century Fox.

Moonves also has grand ambitions for setting CBS for the future with a mega-merger, but not with Viacom, which has struggled for years. CBS has delivered a stellar performance on Moonves’ watch, and now Redstone has to contend with the possibility that the company’s fortunes may be shaky if Moonves and key members of his team are out the door soon.

A charismatic and decisive leader, Moonves for years has been buoyed by goodwill among CBS’ rank and file and fierce loyalty from his inner circle of senior executives. Moonves has cast a long shadow over every aspect of CBS’ operations, famously micromanaging operations down to weighing in on the casting for supporting roles in comedy pilots. His larger-than-life persona and the success of the company provided a kind of insulation that made CBS seem like a family-run business.

But even Moonves’ biggest fans couldn’t ignore the view of legal experts that the CBS board of directors has a slim chance of succeeding in its effort to strip Redstone’s parent company, NAI, from controlling a majority of the voting shares in CBS. Many expected that Moonves and Redstone would find their way to detente via a settlement before the trial that is scheduled to begin in early October.

The legal fight that erupted in May is rooted in conflicting visions of CBS’ long-term future at a moment of monumental change in media and a rush of M&A activity among traditional entertainment titans. But whether CBS winds up merging with Viacom or becomes a free agent in a seller’s market, big changes are on its horizon.

The pressure bearing down on Moonves will only accelerate the start of a new chapter for CBS.

“The quality of the assets should matter more than the management,” writes Bernstein Co. analyst Todd Juenger in a note published July 30. “As good as the market believes current CBS management is, it is impossible to believe that there is no other human being on earth who could run CBS with some degree of competency. We also believe if CBS loses its CEO, it increases the probability CBS gets sold.”

Any corporate regime change spurs comings and goings, but the acrimony between Moonves and Redstone could make the environment difficult for those who were closely affiliated with him, some for many years. The 14-member board includes Redstone and two other members — Sumner Redstone attorneys David Andelman and Robert Klieger — who are considered non-independent because of their ties to NAI.

The other 11 members, who are considered to be independent, have demonstrated remarkable faith in Moonves’ leadership. The group went to the mat in endorsing CBS’ strategy of issuing a special dividend to all stockholders that would have the effect of diluting Redstone’s voting shares from 80% to 20% while keeping the equity value of NAI’s holdings at the same level, about 10% of the company.

The independent board members include Martha Minow, former dean of Harvard Law School (whose endorsement of CBS’ legal strategy as a participant in the lawsuit carried weight) and notables such as former Defense Secretary William Cohen, Bank of America chairman emeritus Charles Gifford and former NAACP president Bruce Gordon. Redstone and others, however, have criticized the board for being light on directors with hands-on media biz experience and for being too cozy with Moonves despite his undeniably strong track record.

Moonves was named CEO of CBS in January 2006 after Sumner Redstone decided to split what was then Viacom into separate firms. Redstone’s Viacom had swallowed up CBS Corp. in 2000, when Mel Karmazin was CEO. Karmazin had a rocky relationship with Sumner Redstone and was out by mid-2004. Moonves has effectively headed CBS, Showtime and related entities since he was named co-chief operating officer of Viacom, alongside Tom Freston, after Karmazin’s ouster.

As scandal envelops Moonves, Shari Redstone’s next move is complicated by the existence of CBS’ lawsuit accusing her of violating her fiduciary duty to other CBS shareholders.

CBS is arguing that Redstone is seeking to pursue her own agenda in re-merging CBS with Viacom, at the expense of CBS shareholders, who would be better off if CBS soldiers on alone or is scooped up by a larger player for a high price. CBS maintains Redstone has unlawfully shooed away potential acquirers — notably AT&T and Verizon — from negotiating because she doesn’t want to sell CBS without Viacom.

NAI has countered that Moonves is simply trying to “wish away the reality that CBS has a controlling shareholder.” CBS and Viacom held fitful acquisition talks earlier this year, but the sides were at loggerheads over price and management plans for the combined company.

There is no precedent in securities law for stripping an investor of voting rights in the absence of criminal activity. But Redstone and NAI nonetheless have to tread carefully because their actions are now under scrutiny by a Delaware Chancery Court judge. Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, says the sexual misconduct claims per se probably won’t factor into the legal case for control of CBS, but it surely will be a burden on the CBS team, which is in the trenches of the discovery and deposition phase of the suit. There had been growing speculation that the sides were grudgingly moving toward settlement talks, after both had the chance to get a sampling of what the other intends to bring to court.

“Anything that dampens [Moonves’] ability to respond is going to make [NAI’s] life a little easier,” Elson says. “If he is distracted by this, it will make their efforts a little easier, but I don’t think it’s dispositive to the situation one way or the other.”

For all of her voting power, Redstone cannot make a merger of CBS and Viacom happen overnight, nor can she simply install Viacom CEO Bob Bakish as CBS’ new leader. Bakish’s role in the prospective CBS and Viacom reunion was a source of friction between Moonves and Redstone in the merger discussions. Moonves balked at naming Bakish as his No. 2 in the combined company, arguing he needed to keep his core management team intact if he were to be successful in turning around Viacom’s struggling cable channels and Paramount Pictures.

Some see the situation as an opening for a buyer to swoop in and make Redstone an offer for CBS she can’t refuse.

There’s been market chatter about investor John Malone reaching out to Redstone with potential creative options to help her grapple with the CBS-Viacom divide.

“We think CBS could still potentially be an attractive takeover play, depending on what happens in Delaware court,” says CFRA Research media analyst Tuna Amobi.

The crisis scenario that has unfolded at CBS is the last thing Moonves wanted as he began to pay close attention to tending his legacy in the industry. Sources say Moonves has pulled back a few degrees from his characteristic omnipresence in all aspects of the business in recent months as the corporate drama has ensued. A source familiar with Moonves’ thinking says he had hoped to cap his run by pulling off a megabucks sale or acquisition that would position CBS well for the future. Now the chief exec is facing the prospect of being fired for cause and forgoing the massive severance (estimated at $150 million or more) that he would have otherwise claimed if he were to step down on his own terms.

CBS and its leader have enjoyed a level of sustained success that is rare in the entertainment business. Moonves has long been one of the highest-paid corporate executives in the country, thanks in large part to the company’s strong stock price. Last year, he took in $69.3 million in total compensation.

The glow that has surrounded the company and its top leader for so long is another reason why the turbulence of the past year has hit CBS so hard, insiders say. On July 27, as the industry was gripped with anticipation of Farrow’s story, sources said some CBS senior managers made a point of walking the halls and acknowledging the tremors in one-on-one or small group settings. There were no official internal communication about the allegations beyond the statements Moonves and CBS issued to the media. Two prominent female CBS executives — advertising chief Jo Ann Ross and daytime/syndication programming chief Angelica McDaniel — spoke out July 27 in support of Moonves.

“My experience with him on a professional and personal basis has never had any hint of the behavior this story refers to,” Ross told Variety.

Other staffers privately expressed a mix of dismay and shock at the allegations that Moonves was violent and menacing toward women while making sexual advances, and that he was quick to threaten those who rejected him. Actress Douglas told Farrow that Moonves pinned her down on a couch while trying to kiss her during a 1997 meeting, and then backed her up against a wall when she tried to leave the room. Douglas maintains she has been blackballed from working at CBS ever since.

The timing is particularly bad for morale as the CBS network gears up for the busiest time of year — the fall season launch in September. Sources say despite the troubling allegations, there was still, among many, a spirit of allegiance to the company. “Stay head down and work hard on your shows,” in the words of one veteran, to help the company weather the storm. “That’s what [Moonves] would want us to do,” says the source.

Moonves has been calling the shots at CBS for so long that insiders are hard-pressed to imagine a future without him at the helm. But the one-two-three punch from the forces of digital disruption, the clash with Redstone and the national reckoning on sexual misconduct is forcing the company to come to grips with the fact that the post-Moonves future for CBS could arrive sooner rather than later.

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