CBS’s Board Pretends to Know What It’s Doing

(Bloomberg Opinion) -- CBS Corp. takes the prize this year for most dysfunctional corporate governance. It's lucky the disarray isn't showing up in its business operations — well, not yet.

The $20 billion media company is mired in a bitter legal battle against its controlling shareholder, Shari Redstone, a situation that has turned nasty, with both sides trading jabs and accusations in recent months. Separately, chairman and CEO Les Moonves is facing allegations of sexual misconduct without any clear succession contingency plan. All this comes as CBS, long a dominant force in TV ratings, begins to look increasingly small-scale in an industry where rivals are beefing up.

CBS held its earnings call for analysts Thursday evening after reporting well-received results for the second quarter. It was probably the company's most listened-to conference call in a long time because everyone was waiting to hear from Moonves, who to the shock of many observers remains in his post. The board's independent directors, still backing Moonves in the Redstone fight, have outsourced the investigation into the misconduct allegations to two law firms, most likely hoping it will disappear quietly.

It's almost as if it has. In what's shaping up to be one of the shortest #MeToo moments, not one analyst asked Moonves or the rest of the management team to address the elephant on the call. Shareholders should care deeply about this because the last few months have made it evident that there is incredible disruption at the top of CBS.

Two of the biggest hallmarks of good corporate governance are transparency and accountability. CBS's board has failed at both. It reportedly knew about the accusations against Moonves long before The New Yorker detailed them last week; the bombshell story had been rumored for months. That's why CBS's halfhearted response is so stunning.

But let's set that aside for the moment (as if that were possible). The media and entertainment industry is undergoing a transformation in which Walt Disney Co. agreed to buy most of 21st Century Fox Inc., AT&T Inc. bought Time Warner and Discovery Inc. bought Scripps Networks. Redstone wanted to recombine CBS with her family's other property, Viacom Inc., which Moonves resisted. He's also 68 years old and was expected to retire in a couple of years. And he sits atop a board that is among the oldest in the country, trying to figure out how to grab the attention of a younger audience that may never possess a cable box.

CBS may be able to point to its impressive growth in digital subscribers and continued reduced reliance on traditional TV advertising revenue. But what it needs more than ever is leadership — not a guessing game as to whether its CEO is staying or about to get the boot. The board is quickly running out of time to redeem itself.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.