×

Shari Redstone: CBS’ Legal Fight Is ‘Irresponsible’ and ‘Inexplicable’

National Amusements has blasted CBS Corp.’s legal effort to dilute the company’s voting power in the company as “irresponsible” and “inexplicable” in legal filings with the Delaware Chancery Court, where CBS’ request for a temporary restraining order is expected to go before a judge this afternoon.

The filing from National Amusements Inc. (NAI) also revealed the name of the CBS board member accused on Monday of bullying behavior toward Shari Redstone, the CBS Corp. controlling shareholder and National Amusements president at the center of the battle for control of the company. The filing cited independent CBS director Charles Gifford for his involvement in “certain incidents” in 2016 and 2017 that made National Amusements uncomfortable with his continued service on the board.

CBS Corp. on Monday filed a lawsuit against NAI in an effort to blunt what it feared would be an effort by NAI to force a merger with Viacom, CBS’ former corporate sibling which is also controlled by NAI. NAI’s filing reiterates the company’s assertion that it had no intention of forcing the deal or replacing CBS board members in order to secure approval for the deal.

In its response, NAI calls CBS’ legal move “egregiously over-broad and unjustified” and an attempt to pull off “an unprecedented usurpation of a controlling stockholder’s voting power.”

NAI maintains that CBS’ fears are fueled by media reports and “conjecture.” It faults CBS for failing to take steps to negotiate a quiet truce rather than going to court. CBS has proposed that its board members vote Thursday on a proposal to issue a special stock dividend to shareholders that would have the effect of diluting NAI’s 79.6% voting stake in CBS Corp. to 17%, which would not be enough for NAI to exert the same level of influence it now enjoys over the CBS board.

“NAI had, and has, no intention of forcing a merger, whether by removing and replacing the members of the Special Committee or otherwise. Plaintiffs’ contrary belief appears to be based on unsourced media reports and conjecture,” a NAI lawyer wrote in a letter to CBS counsel that was included in NAI’s response filing. “Needless to say, filing suit on the basis of such reports is both improper and irresponsible. Moreover, it is inexplicable why, given the articulated concerns, plaintiffs believe it necessary or appropriate to seek to dilute NAI’s voting power for all purposes, now and forever, rather than simply enjoin a forced merger of the sort that the above-captioned action was ostensibly filed to prevent.”

Lawyers for CBS and NAI had tried during the past 48 hours to reach a standstill agreement to avoid the spectacle of the TRO hearing but they could not come to terms. NAI said in its filing it had offered “not to take action to interfere with the status quo (including, for the avoidance of doubt, the composition of the Board or any actions with respect to a proposed combination with Viacom)” in exchange for CBS agreeing to scrap the proposed board vote on the stock dividend and a delay of its annual shareholders meeting, which is scheduled for Friday.

The flurry of legal filings underscore the level of rancor between CBS chief Leslie Moonves and Redstone over the future of CBS. CBS issued a strong denial of allegations by NAI that CBS board member Gifford engaged in inappropriate behavior toward Redstone.

NAI’s filing included a declaration from another CBS board member, Robert Klieger, who is a personal attorney for the Redstones, noting NAI’s “discomfort” with Gifford continuing on the CBS board. Klieger’s declaration states that he raised the Gifford issue with CBS board member Bruce Gordon on May 11, three days before CBS launched its legal effort to dilute NAI’s voting power. Gordon is chairman of the CBS board special committee that has been evaluating the possible merger with Viacom. This past weekend, that committee, of which Gifford is a member, voted unanimously that a reunion with Viacom would not be in the best interest of CBS shareholders.

“It is unfortunate and revealing that NAI has resorted to baseless personal attacks against a member of the CBS Board and its Special Committee as part of its response to the CBS action,” CBS said in a statement. “The allegations regarding him are not only vague and unsubstantiated, they are utterly inconsistent with our knowledge of him. It is notable that during the very years of the alleged incidents mentioned, he was twice elected to the CBS Board, in both cases with Ms. Redstone’s support and blessing and without any reservation expressed to the Board or to its Nominating and Governance Committee. In fact, it was just six weeks ago that NAI, which she controls, expressed its intention in an SEC filing to reelect him. This public support was only fitting, because during his long service at CBS he has always conducted himself with courtesy, integrity and staunch dedication to all of our shareholders. He by no means deserves this disreputable attack, which is clearly tied to the execution of his duties in this matter.”

NAI’s filing notes that the CBS and Viacom special committees evaluating the merger proposal reached an agreement on April 24 on the economic terms under which CBS would acquire Viacom in an all-stock deal. CBS directors and Moonves had also balked at Viacom’s push for its current CEO, Bob Bakish, to be named No. 2 at the combined company to Moonves.

Sources close to the situation say Moonves had previously expressed to Redstone his desire to step down as CBS chairman-CEO within a few years, which is one reason why she sought to set up Bakish as his successor. Sources close to Moonves dispute this characterization of Moonves’ intention.

NAI in its response said CBS’ legal move could have the effect of forcing its hand and spur the departure of Moonves and other managers. It also notes that Moonves stands to reap a massive payout if he is forced out of his role as chairman-CEO amid the wrangling. Moonves’ parachute is estimated at $150 million to $280 million, depending on how his stock awards are calculated were he to depart.

“Plaintiffs have forced CBS’s controlling stockholder into a position of having to make a Hobson’s choice — of either accepting massive dilution of its voting power (thereby losing control of the Company and suffering the economic detriment to its stake that entails), or acting as a stockholder to prevent such dilution and protect its voting power, knowing that doing so might trigger the departure of (and payment of massive parachute payments to) key management and directors of the Company,” the NAI filing stated. “The Board unquestionably understands that a controlling stockholder would not willingly give up control uncompensated, and it is imprudent that the Board would put the management of a $20 billion company at risk in such a fashion.”

CBS, in its response to NAI’s filing, argued that the Delaware judge should grant the TRO and allow the Thursday board meeting to proceed because CBS has vowed to not take any immediate action even if the board votes to grant the special dividend. CBS has said it will wait until the judge, Chancellor Andre Bouchard, has a chance to weigh in on the merits of CBS’ suit accusing Redstone and NAI of breach of fiduciary duty.

“This is not just about the imprudent merger pushed by Ms. Redstone; these independent directors concluded the controller presented a significant threat to the corporation,” CBS’ response filing states. “Defendants are desperate to avoid a meeting where the full Board can consider that recommendation and a full record can be developed for this Court to consider any challenge.”

More Biz

  • Discovery CEO David Zaslav Sees 2018

    Discovery CEO David Zaslav Sees 2018 Compensation Soar to $129.4 Million

    Discovery Inc. president-CEO David Zaslav is once again making headlines for an enormous compensation package. Zaslav’s 2018 compensation soared to $129.44 million in 2018, fueled by stock options and grants awarded as the longtime Discovery chief signed a new employment contract last July that takes him through 2023 at the cable programming group. Zaslav received [...]

  • Jonathan Lamy RIAA

    Jonathan Lamy Stepping Down From RIAA

    Jonathan Lamy, the Recording Industry Association of America’s longtime executive VP of communications and marketing, is stepping down from his post after 17 years, he announced today. As he put it in an email to Variety, “I started back in 2002, which means it’s been 17+ years, four different RIAA CEOs, three format changes and [...]

  • Fox Layoffs

    Disney-21st Fox Layoffs: TV Divisions Brace for Deep Cuts

    A second day of layoffs has begun on the Fox lot in the wake of Disney completing its acquisition of 21st Century Fox on Wednesday. Longtime 20th Century Fox Television Distribution president Mark Kaner is among the senior executives who were formally notified with severance details on Friday morning. 21st Century Fox’s international TV sales [...]

  • anthony pellicano

    Hollywood Fixer Anthony Pellicano Released From Federal Prison

    Anthony Pellicano, the Hollywood private eye whose wiretapping case riveted the industry a decade ago, was released from a federal prison on Friday, a prison spokeswoman confirmed. Pellicano was sentenced in 2008 to 15 years, following his conviction on 78 charges of wiretapping, racketeering, conspiracy and wire fraud. He had been in custody since 2003, [...]

  • This image taken from the Twitter

    HBO’s Reaction to Trump’s ‘Game of Thrones’ Campaign

    Everyone wants a piece of the “Game of Thrones” lemon cake. From Bud Light to Red Bull the world of Westeros is open to a lot of brand partnerships, unless you’re using that iconic typeface to push a political agenda. In November of 2018 President Donald Trump unveiled a “Thrones” inspired poster with the words [...]

  • Leaving Neverland HBO

    'Leaving Neverland' Lawsuit Proves to Be a Judicial Hot Potato

    The Michael Jackson estate sued HBO last month for airing the documentary “Leaving Neverland,” which accuses the late King of Pop of serial child sexual abuse. Since then, the case has had a difficult time finding a judge to handle it. Three federal judges have recused themselves in the last week, citing potential financial conflicts [...]

  • Members of the public mourn at

    Guy Oseary’s New Zealand Fundraiser Nears $150,000, Continues Raising Money

    In the wake of the horrific shootings at New Zealand mosques last week that killed some 49 people, Maverick chief Guy Oseary launched a GoFundMe campaign to “support those affected by this tragedy at this very difficult time,” and began it with an $18,000 donation. Boosted by donations from many celebrities — including Amy Schumer, [...]

More From Our Brands

Access exclusive content