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Whither CBS? With or Without Leslie Moonves, Company Faces Challenges

CBS Corp.  has entertained Americans for decades with dramas like “Gunsmoke,” “The Good Wife” and “Dallas.” Now this national institution faces a cliffhanger of its own.

Leslie Moonves, who has been CEO of the company since 2006 and an architect of its growth and success for more than two decades, stands on a precipice from which he could well fall: Six women allege in an article in The New Yorker that Moonves made unwanted sexual advances on them between the 1980s and the early 2000s. Among them is the actress Illeana Douglas and the producer Christine Peters. Independent directors from CBS Corp. on Friday said the company would investigate the claims, “promptly review the findings and take appropriate action.” The article also raises allegations about a culture of harassment at CBS News, and CBS said in a statement to the magazine that it had retained an attorney to “conduct an independent investigation of alleged misconduct at CBS News, which is “ongoing.”

“I recognize that there were times decades ago when I may have made some women uncomfortable by making advances. Those were mistakes, and I regret them immensely,” Moonves told The New Yorker in a statement. CBS’ board continues to back Moonves, according to one person familiar with the matter, but the situation is said to be tenuous.

Moonves is so tied to the company’s operations and senior executives it is difficult to envision CBS without him. His acumen for picking programs is considered to be one of the best in the business and has resulted in shows ranging from “Survivor” to “Young Sheldon.”  He weighs in on matters large and small, whether that be a new showrunner for Stephen Colbert’s late-night show or switching anchors on a CBS News program. “I think CBS stock will correct between 10% and 20% if Les Moonves leaves the firm,” says Laura Martin, a media-industry analyst with Needham & Co, “CBS is worth less without Les.”

The allegations come as CBS is grappling with its controlling shareholder, National Amusements Inc., for oversight of the company. Led by Shari Redstone, NAI has proposed merging CBS with another of her holdings, Viacom Inc. A merger would combine the owner of CBS and Showtime with the backer of MTV, Comedy Central and the Paramount movie studio, and lend both operations new heft as media and technology companies around them — AT&T and Time Warner, for example — join.

Moonves was already in a tough position. Earlier this year, CBS directors decided to issue a dividend that would result in cutting the voting power of National Amusements severely, to under 20%. National Amusements in turn tried to block the measure by making a change to CBS bylaws. A legal battle is already in bloom and the two parties will have to come to head in a Delaware court, likely some time in October. Corporate-governance experts warned that taking on a controlling shareholder can be foolhardy. Though Moonves has a reputation as a fierce competitor, there are some people who have wondered what the executive chart at CBS might look like come 2019.

The new allegations are likely to envelope the company at a time when it needs to stay focused on business matters. “Shari Redstone and Leslie Moonves are locked in a battle and these accusations weaken Les in that battle,” says Martin.

CBS had already been seen as a potential acquisition target, a bauble that could be worth plenty to a technology company with content ambitions like Amazon or Verizon, or an asset to be combined with other small to medium size media firms in order to stitch something together that could compete with a Comcast and NBCUniversal, a Disney and 21st Century Fox. The increased turmoil may bring others into the fray.

“Trepidation is the word here among CBS investors in terms of what might happen,” says Tuna Amobi, an analyst with CFRA Research.

Moonves was also backing a number of corporate initiatives aimed at broadening the company and giving it more digital scale. The company has launched several streaming outlets in the last few years, including CBSN, a streaming-video hub operated by CBS News; CBS Sports HQ, a sports-news outlet; and CBS All Access, a subscription-based streaming video site that offers a spin-off of the popular CBS drama, “The Good Wife” a glossy reboot of “Star Trek” and, soon, a revival of “The Twilight Zone.” It is also about to launch a new TV season without a lineup of “Thursday Night Football,” which is moving to 21st Century Fox’s Fox Broadcasting after a new deal with the National Football League.

His departure would likely change the face of CBS. Many of the company’s top executives have worked with Moonves for years.

The board has no choice, says Charles Elson, the director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. It has to respond to the allegations and consider not only its findings, but public reaction and advertiser support. “They are going to have to respond appropriately,” he says. “It’s as simple as that.”

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