Deal Before Disaster

SOLVED!

UPDATE!

[Blind Gossip] This potential big business deal has a sordid backstory to it.

You think it’s all about strategic alliances. Nope. It’s about avoiding scandal!

 

[CEO 1] knows that [CEO 2] is going down in a scandal. The  timing is perfect for them to go in and take over his company. [CEO 2] knows the end is near. He will take the golden parachute and bail right before all the sexual misconduct accusations about him hit the press. If he tries to stay, he will be giving up a fortune AND killing his company’s value. They all know they need to do the deal before disaster strikes.

Both of these CEOs are very famous in the world of entertainment.

Similar: Keep An Eye Out For CBS Abuser

Two Companies:

CEO 1:

CEO 2:

[Optional] Will the deal happen?

SOLVED!

Two Companies: CBS and Viacom

CEO 1: Shari Redstone, Director of Viacom and CBS

CEO 2: Les Moonves, CEO of CBS

Blind Gossip told you back in January of this year that a sexual misconduct scandal was going to impact a big corporate deal… and now you know that Les Moonves is facing accusations that will impact the Viacom/CBS merger!

It’s really a fascinating story. Money! Family! Business! Sex!

First, a quick recap.

Viacom and CBS used to be part of a same company. They split into two separate companies in 2005.

Media mogul Sumner Redstone used to be Chairman of both Viacom and CBS. He stepped aside at the age of 93 after a lot of Succession-type drama with his family.

His daughter, Shari Redstone, took over National Amusements (a large movie theater operator founded by her father). National Amusements has majority control of both Viacom and CBS.

Shari’s father’s position as Chairman at Viacom and CBS was filled by Philippe Dauman and Les Moonves, respectively. Since Shari Redstone sits on the boards of both Viacom and CBS, she keeps her eye on Dauman and Moonves.

Shari Redstone is powerful. More powerful than McCaulay Culkin’s brother and Ferris Beuller’s best friend put together. Yes, that was a little Succession reference there.

Anyway, Shari Redstone wants to merge Viacom and CBS back together.

Shari Redstone and Les Moonves immediately started fighting over who would run the merged company. Of course, Moonves wants to run everything.

However, disaster loomed. Before Redstone had even signaled the possibility of a merger, reporter Ronan Farrow started investigating sexual misconduct allegations against Moonves!

So, Les Moonves – who is married to Julie Chen of Big Brother fame – knew he was going to get caught up in a scandal just as the merger talk started!

Those close to the situation thought that he would certainly take the CBS golden parachute and bail out before the scandal hit the news.

However, Moonves is arrogant. Like Harvey Weinstein and Bill Cosby and Matt Lauer, he never thought he could lose his position of extreme power.

Perhaps Moonves thought his wife could grant him the Power of Veto to prevent his eviction.

Perhaps he thought he could roll back the odometer on his dad’s Porsche and not get into trouble.

Perhaps he thought he could beat the rap… stay in his job…  get the merger done… and take over control of the merged company!

So Moonves dug his heels in and stayed.

Now that the sexual misconduct story has actually hit the news, Moonves and his arrogant little plan for global media domination are clearly in trouble. It is highly doubtful that he will be able to keep his job in the long run.

Les Moonves has a clause in his contract about his termination. If he is terminated without cause, he gets $180 million and a production deal. If he is terminated with cause, CBS doesn’t have to pay him anything. However, CBS is likely obligated to undergo some sort of due process (e.g. launch a formal investigation) before they could terminate him with cause.

That investigation could take many, many months, and in the interim, more women would likely come forward with more allegations about Moonves and other executives; allegations about them harassing women, assaulting women, and threatening women with their jobs if they didn’t keep quiet. That would be very messy and very bad for CBS. It would also put the deal in limbo. So while CBS doesn’t have to pay him anything, they will likely offer Moonves a huge amount of money in a lump sum just to go away!

The CBS board of directors is meeting today, so you will know soon in which direction this is heading. And, because both Viacom and CBS are publicly traded companies, you will find out exactly what kind of deal was made.

There are four possible outcomes: Board fires Moonves. Board suspends Moonves while they investigate. Board allows Moonves to stay in control of CBS while they investigate. Moonves voluntarily resigns.

Place your bets!

From CNBC:

Shari Redstone gets more leverage to replace CBS’ Moonves after sexual misconduct allegations: New Yorker’s Ken Auletta

CBS controlling shareholder Shari Redstone now has more power to boot Les Moonves after sexual misconduct allegations against the longtime CEO surfaced last week, media critic Ken Auletta told CNBC on Monday.

“It weakens him and it strengthens Shari Redstone in their battle,” the New Yorker staff writer said in a “Squawk Box” interview. “If she wants to replace him at some point, the odds are she has more leverage to do that now.”

The CBS board will be discussing the Moonves situation on Monday.

Those allegations came Friday in a New Yorker article written by Auletta’s colleague Ronan Farrow, whose investigative reporting in October contributed to the downfall of Hollywood powerbroker Harvey Weinstein.

Farrow reported Friday that the CBS chairman and CEO’s alleged misconduct took place more than 20 years ago. In a statement, the 68-year-old Moonves said he regretted making some women uncomfortable but that he abided by the principle that “no means no.”

The media stock plunged more than 6 percent on Friday.

It’s unclear whether Redstone will make an appearance at the Monday’s board meeting. The shareholder meeting is scheduled for Aug. 10.

Moonves and Redstone have been waging a public and hostile war over CBS attempts to stem Redstone’s control over company.

Redstone, who holds a majority of the voting shares in CBS and Viacom, wants CBS to merge with Viacom, with Moonves to lead the combined company and Viacom CEO Bob Bakish as his No. 2.

Moonves doesn’t want Bakish looking over his shoulder.

The two media companies had been under the same umbrella from 2000 to 2006 before they were split into separate publicly traded companies.

The New Yorker article published Friday cited six women who said the longtime media executive harassed them between the 1980s and 2000s.

Despite some of the alleged events taking place decades ago, Auletta, said there is a “fever” in corporate America and public support to immediately address serious allegations.

“People are concerned about male abusive power,” said Auletta, also a best-selling author on trends in the media industry. “If Moonves did what they claimed he did … that’s a serious charge. It’s very hard in this climate, even if it’s 20 years old to say, ‘Let’s have bygones be bygones.'”

Congratulations to Badfish for being first with the correct response!

UPDATE!

Les Moonves, the CEO of CBS, has been FIRED!

Blind Gossip told you backin January that this fight was coming. Les Moonves lost. Shari Redstone won.

Moonves should have done the deal in January. Now he’s going down in disgrace and will likely lose much of his compensation package.

From CNN:

Les Moonves is out at CBS after harassment allegations, corporate battle

CBS chief executive Les Moonves is exiting the company, effective immediately, amid a flurry of sexual misconduct allegations.

The announcement on Sunday evening ends his 20-year tenure atop one of the country’s most important media empires.

It also concludes a months-long battle for control of CBS between Moonves and the company’s controlling shareholder, Shari Redstone. The CBS board is being reshaped, with six new directors, and Redstone is repeating her vow to consider new bids from potential buyers.

The shakeup may position CBS for a sale. But the company is also facing some continued reputational risk. There is widespread scrutiny about the prospect of Moonves being paid tens of millions of dollars on his way out the door.

Moonves is one of the media world’s highest paid CEOs, so his severance package would normally be generous, even gargantuan.

But a huge payout to Moonves could stir shareholder ire in light of the disturbing harassment and assault allegations that have piled up against him.

With those optics in mind, CBS said Sunday night that Moonves and CBS will donate $20 million to organizations that support the #MeToo movement and other groups fighting for workplace equity for women.

The donation, which will be made immediately, will come out of any severance that Moonves might eventually be given.

Earlier in the day, a source said that Moonves stands to earn upward of $100 million.

But Sunday evening’s announcement specified that any severance “will depend upon the results” of the ongoing internal investigations into his behavior.

In other words, the details and dollar amounts may not be determined for weeks or months.

The advocacy group Times Up said in a statement on Sunday afternoon, “We will accept nothing less than full transparency of the investigation’s findings, a commitment to real change across all levels of CBS management and no reward for Les Moonves.”

Boardroom battle and huge financial stakes

Sunday’s developments are an extraordinary confluence of events — a boardroom battle royale and a #MeToo case at the C-suite level.

Moonves’ allies will surely cast his exit as a corporate coup — a successful effort by Redstone to gain a tighter grip on CBS.

Redstone’s allies will point to her position as controlling shareholder; accuse Moonves of plotting a jailbreak attempt; and cite the misconduct allegations.

The jailbreak happened earlier this year when Moonves and most members of the CBS board took steps to dilute Redstone’s control. A blizzard of lawsuits and counter-suits ensued. A trial was set to start in October.

Through Sunday evening’s settlement, all of those suits will be dismissed and CBS will return to some sense of normal corporate order.

Joseph Ianniello, who has been the CBS chief operating officer since 2013, will serve as president and acting CEO while the board looks for a new CEO.

On one level, this is a clear victory for Redstone, whose father Sumner Redstone bought CBS almost twenty years ago.

Moonves and Redstone were locked in a tug of war even before July 27, when Ronan Farrow of The New Yorker first reported on alleged harassment by Moonves. The CBS board initially resisted calls for Moonves to be suspended or forced out.

But his continued leadership of CBS became “untenable,” an executive told CNN.

Moonves kept a relatively low profile in August, but remained in charge of the broadcasting behemoth. It is unclear when he first knew that he had to go.

Some sources close to Moonves said in August that he had vowed to fight both the allegations of wrongdoing and the legal war against Redstone.

But another source said he knew his exit was inevitable several months ago, even before Farrow’s first story came out.

With settlement talks already underway, Farrow published a followup story on Sunday. He wrote that “six additional women have accused the television executive of sexual misconduct, as the board of the CBS Corporation weighs the terms of his departure.”

Farrow said some of the women spoke out because they felt CBS was failing to take appropriate action against Moonves.

The CBS board had already hired two law firms to do an investigation. Now the firms have even more to examine.

Moonves is the first CEO of a Fortune 500 company to leave his job amid harassment allegations in the year since two investigations of Harvey Weinstein (one of them by Farrow) jump-started the #MeToo Movement.

In Farrow’s first story, six women, some of whom were named, alleged harassment and other misconduct by Moonves and connected it to deeper problems at the company.

Some of the claims dated back several decades. Moonves acknowledged making mistakes in his past but said he never abused his power.

The accusations in the second story are even more serious.

‘Serious allegations,’ denials and ongoing investigations

“These are more numerous claims, these are six women all of them on the record, also describing more serious allegations,” Farrow said on CNN’s “Reliable Sources” shortly after The New Yorker published the followup. “This includes multiple allegations of either physically forced or coerced oral sex. It includes a case that resulted in a criminal investigation.”

Moonves told Farrow in a statement that the “appalling accusations in this article are untrue.”

He said he had consensual relations with three of the women named by The New Yorker “some 25 years ago before I came to CBS.” He reiterated that he never abused his power and said he can only surmise that the allegations “are surfacing now for the first time, decades later, as part of a concerted effort by others to destroy my name, my reputation and my career.”

Farrow had a different explanation.

He said on CNN that “these women are coming out now” because “they have been extraordinarily frustrated by what they perceive to be inaction on the part of CBS and its board. And that really is integral to what prompted this followup story.”

While the law firms have been investigating, Moonves has been “allowed to stay and continue to run the company,” a different outcome than many other “Me Too” cases, Farrow noted.

Farrow indicated that CBS has been aware of the new allegations for at least several days. “In the last week, as we reached out to CBS for comment,” stories emerged about exit talks, Farrow said.

The Los Angeles Times reported on Wednesday night that CBS board members were talking about Moonves’ potential exit. Discussions had focused on the size of a severance package, and on whether Moonves would move to a producer role, the Times reported.

“As of a couple of days ago, they were still talking about potentially letting him leave with a very generous exit package, up to the neighborhood of $100 million,” Farrow said on CNN. “Many of the women found that very, very frustrating. They felt this was a board that has let a powerful man who makes a lot of money for this company, in the words of one person, ‘get away with it.'”

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