In a very disturbing 8,000-word story in the New Yorker, titled, “Trouble at the Top,” Ronan Farrow reports on allegations of sexual misconduct and harassment by CBS Chief Executive Les Moonves over a period of almost 20 years. The article also alleges that a frat-boy culture existed at the network and most particularly in the news division, including on the set of the network’s signature show 60 Minutes. It is rare in the corporate world for a CEO who sits on the company’s board of directors to have such allegations leveled against him. Moonves for his part apologized for any unwanted advances and has said that when he was told “no” he always stopped.
The spotlight is now on CBS’s board and how the company will respond. But it seems as if the board is paralyzed, watching the stock tank, losing $2 billion in market cap since the New Yorker story broke. While the board has moved to begin an internal investigation with two blue chip law firms, Moonves is still leading earnings calls with analysts and chairing board meetings. He even chaired the board meeting that discussed the allegations against him.
A basic tenet of corporate governance is that a board must act independently of the management it oversees. In the Moonves matter, however, that doesn't seem to be the case. A perfect example of how CBS might respond would be to emulate Wynn Casninos, when the gaming firm took action against former Chairman and CEO Steve Wynn, removing him from his role after he was accused of improprieties.
While the CBS board has released a statement that Moonves will not have any role in the investigation going forward, many question whether the board is truly independent of Moonves and management’s control.
The role of the board of directors in a best practices compliance program takes on even more importance when senior management engages in recalcitrant conduct. It remains to be seen if the CBS board will step up in a time of crisis.