CBS shareholders who claim they were lied to about how the company handles sexual misconduct and lost money when harassment claims surfaced against ousted CEO Leslie Moonves have accepted a $14.75 million payout to resolve a securities class action.
Moonves left CBS in 2018 after more than a dozen women accused him of sexual harassment. He’s denied the allegations.
Investors led by the Construction Laborers Pension Trust for Southern California sued CBS in August 2018 for alleged violations of securities laws. They claimed that CBS and its executives made false statements regarding its policies and approach to sexual assault allegations from September 2016 to December 2018.
The complaint, filed in New York federal court, came a month after The New Yorker ran a story detailing how Moonves, known in the industry for his ability to make or break careers, allegedly made unwanted sexual advances on several women. Several people accused him of harassment and intimidation, with dozens more describing his alleged abuse at the company.
Moonves, widely considered a titan of the entertainment industry and known for his hands-on approach as a corporate executive, led CBS for 15 years as its CEO. He’s credited for having resurrected what was at the time a fading company to make it the most watched network of the 2010s, taking its share price from $5 a decade ago to nearly $70 in 2017. During his reign, CBS produced hits like The Big Bang Theory and How I Met Your Mother.
The deal represents between 7 and 9 percent of the expected damages of up to $210 million if shareholders had won at trial, according to a court filing. People who bought CBS stock from November 2017 to July 2018 will be able to participate in the deal.
In moving for approval of the settlement, shareholders acknowledged CBS’ “substantial arguments concerning liability.” They say that they faced an uphill battle to prove that CBS had a duty to disclose rumors regarding Moonves’ conduct.
“The proposed Settlement balances the risks, costs, and delays inherent in complex securities class action cases such as this one,” shareholders wrote in a filing. “When viewed in the context of these risks and the uncertainty of any later recovery from Defendants, the Settlement is extremely beneficial to the Settlement Class.”
CBS argued in support of dismissing the lawsuit that it wasn’t obligated to share allegations of sexual misconduct or assess the impact it could have on business operations. Federal securities law, it said, isn’t meant to govern corporate mismanagement, “no matter how unseemly the scandal was and no matter how significant the scandal would have been to the market.”
CBS stated, “Were it otherwise, a corporation would have a higher duty to disclose allegations that its CEO was guilty of sexual misconduct than allegations that its CEO was involved in an unlawful bribery scheme, which plainly is not the law.”
U.S. District Judge Valerie Caproni, overseeing the case, issued a ruling in January 2020 largely agreeing with the network. She concluded only one of the shareholders’ alleged misstatements was sufficient to support a claim, significantly narrowing the class period. Lawyers representing shareholders didn’t try to fix their allegations in an amended complaint.
Plaintiffs’ attorneys say they will seek no more than $3.7 million, or 25 percent of the settlement.
The complaint pointed to statements Moonves made at Variety’s Innovative Summit, where he “described the #MeToo movement as a ‘watershed moment’ and stressed the importance of having a company culture that does not tolerate harassment and encourages victims to come forward with complaints.”
The complaint reads: “In truth and in fact, however, CBS and its executives, led by its long-time CEO Moonves, engaged in and fostered a company-wide pattern and practice of sexual harassment, creating a ‘culture of fear’ and hostile work environment that was diametrically opposed to Defendants’ public statements. By the beginning of the Class Period, CBS was steeped in a culture of sexual harassment, intimidation and retaliation. The culture emanated from Moonves, who was later revealed to have engaged in systemic sexual misconduct both before and during his tenure at CBS, including numerous allegations of sexual assault.”
Other statements cited in the complaint include representations from CBS that it maintains “the highest standards of ethical and appropriate business actions,” including a “zero tolerance” policy for sexual harassment and discrimination. The company stated that it would “protect anyone who makes a good faith report of a violation” and that retaliation “against an employee who makes a good faith report will not be tolerated.”
CBS has emphasized that its business depended upon the expertise of Moonves and that his departure could have had a “material adverse effect on the company.” Investors took issue with CBS’ failure to disclose the true risks that he’d be forced to leave due to his misconduct.
Moonves in 2021 dropped a lawsuit to claim his $120 million severance. A report from lawyers hired by the network found that he violated the terms of his employment agreement by engaging in “multiple acts of serious nonconsensual sexual misconduct in and outside of the workplace, both before and after he came to CBS in 1995.” It also concluded that he lied to investigators and destroyed evidence to save his severance.
Moonves in 2019 launched Moon Rise Unlimited, a production, distribution and streaming banner.
CBS didn’t reply to requests for comment.