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Update: CBS board seeking counsel for probe of CEO Moonves' alleged misconduct


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Update: CBS board seeking counsel for probe of CEO Moonves' alleged misconduct

Updated at 4:28 p.m. ET on July 30, 2018, to include a statement from CBS Corp.'s board about the investigation into allegations of misconduct by long-time CEO Les Moonves.

CBS Corp.'s board is selecting outside counsel to lead an investigation into allegations of misconduct against Chairman, President and CEO Les Moonves, but "no other action was taken" on the matter at a meeting July 30, according to a company statement.

The board also chose to postpone a shareholder meeting that was scheduled for Aug. 10. A new date was not announced. CBS Corp. is scheduled to report its latest quarterly earnings results Aug. 2.

While the board meeting was previously scheduled, the agenda was updated to include potential actions to take related to the probe of Moonves following a July 27 article in The New Yorker that detailed allegations that he sexually assaulted and threatened six women.

The piece, written by Ronan Farrow, who was among the journalists who won a Pulitzer Prize for reporting on sexually predatory behavior by powerful men, including disgraced former Hollywood producer Harvey Weinstein, also described a culture at CBS News that tolerated abusive behavior toward women.

Before the story was published July 27, the CBS board voiced its "full support" for Moonves and his management team, noting the company's ongoing legal dispute with majority shareholder National Amusements Inc. over control of CBS. Shari Redstone, president of NAI and vice chairman of CBS and Viacom Inc., has filed suit asking the court to stop CBS' board from trying to dilute its voting control.

The legal action stems from NAI's push to recombine Viacom with CBS. The litigation is unfolding in Delaware Chancery Court. Moonves is among several members of CBS' board named in those proceedings.

CBS stock declined 6.1% on July 27 to close at $54.01 per share. The stock continued to fall on July 30, shedding another 5.05% to close at $51.28. Viacom, meanwhile, was off by 1.94% to end trading July 30 at $28.78.

On July 30, CFRA downgraded CBS’ B shares to "hold" from "buy." CFRA analyst Tuna Amobi said the action comes amid a potential cloud on the near-term outlook, ahead of the directors' meeting. Amobi said that while Moonves has largely denied the allegations, CFRA sees a number of possible outcomes that could make his tenure "increasingly tenuous" amid the heightened sensitivity of the #MeToo movement.

He called the timing inauspicious for CBS given the litigation against NAI under Shari Redstone, "who might seek to exert further leverage under the current circumstances."

With Redstone already calling for a "thorough, open and transparent" investigation, Amobi sees potential far-reaching implications for CBS' corporate governance and possible questions related to management succession.

BTIG analyst Rich Greenfield wrote in a note that "all eyes should be on" CBS' annual shareholders' meeting.

Greenfield said he was "extremely surprised" to see the independent directors of CBS immediately try to connect The New Yorker story to its ongoing battle with NAI's majority shareholder. "Regardless of Moonves' personal fate, his future and the future of nine other CBS Board of Directors is now in question," wrote the analyst.