Unscripted, page 26
Moonves and Gordon didn’t make any commitments at the meeting but said they’d get back to Shari and Parsons. But a few days later Gordon informed Parsons that the CBS board had decided to go “pencils down” on the merger for the time being—i.e., to table further discussions—due to the following week’s busy schedule, which included the CBS annual meeting on May 17.
Moonves had no intention of allowing Bakish to join the board or Gifford to be removed. As he texted Ianniello on May 11, “Remember her father always said you can never give up your control. She will literally [do anything] to keep that. That was his first rule.”
* * *
—
The first Martha Minow heard about the tactic that came to be known as the “nuclear option” was when Martin Lipton and a retinue of lawyers from his firm, Wachtell, Lipton, Rosen & Katz, briefed the CBS special committee considering the Viacom merger.
Initially floated years earlier, Lipton’s proposal for a special dividend had since been refined to accommodate the extraordinary circumstance that CBS now found itself in: the majority independent directors had turned against Shari, the de facto controlling shareholder who had put them in their positions as directors (and could still remove them at any time). Lipton’s bold, potentially precedent-setting plan could well be the capstone of what was, for Lipton, already a legendary career as a corporate lawyer and strategist.
The plan was brilliant in its simplicity. Under the dual classes of stock at CBS (and Viacom), National Amusements—firmly controlled by the Redstones—owned class B shares, which represented just 10 percent of the value of the company but had 80 percent of the voting power. Other shareholders owned class A shares giving them roughly 20 percent of the votes. Most stock dividends consist of money. But Lipton’s proposed dividend, which was explicitly authorized by the CBS charter, would be additional votes—enough to give class A shareholders roughly 83 percent of the total, reducing National Amusements to a 17 percent voting share. The move, if successful, would strip the Redstone family of its voting control.
Minow, for one, initially thought the idea was preposterous. Investors paid enormous premiums for control of a corporation. How could a board simply vote that away without compensation? And how would the dividend pass muster with the Delaware courts? CBS would need immediate help from the court system; otherwise the Redstones would just fire the directors and replace them—as they’d already done at Viacom.
But Moonves, without being explicit, had made it clear that he’d quit if Bakish gained a foothold in management or on the board. If that happened, the stock would likely plunge and chaos would ensue. That was indisputably not in the interest of CBS shareholders, and the directors had a duty to act in their interests, not Shari Redstone’s. If that meant the nuclear option, so be it.
The independent board members were sworn to secrecy—there could obviously be no hint of this line of thinking to Shari and her allies. Klieger reached out to Gordon on May 11 to see if he’d made any progress getting Gifford to step down.
Gordon responded that he thought it would be a mistake to make any board changes while a merger was being discussed.
Had Gordon even brought up the resignation issue with Gifford? Klieger asked.
“I don’t want to even think about that conversation,” Gordon said. He bristled at the idea that Shari had the right to purge a board member. That should be a decision for the entire board.
Klieger concluded Gordon had no intention of replacing his longtime boardroom ally. Klieger said he’d talk to Shari but that she wouldn’t be “comfortable” with the idea of keeping Gifford.
He and Gordon scheduled a follow-up call for Monday.
* * *
—
To the CBS special committee Moonves had initially portrayed unwavering confidence in the plan to dilute the Redstones’ voting control. But now he vacillated. On May 11, the same day he texted Ianniello about the importance of control, he revealed a far different and more troubled state of mind to his longtime confidant and spokesman Gil Schwartz.
“I am not up for this,” Moonves texted. “I know I had no choice. No options. But this will be more hell.”
“You have the support and admiration of everyone,” Schwartz assured him. “Uneasy lies the head that wears the crown,” he added, quoting from Shakespeare’s Henry IV, Part 2. “But you wear it very well.”
Of course, Moonves knew what Schwartz did not—the persistent Dauer was a constant reminder.
“Admiration doesn’t make me sleep better when there will be mortal enemies trying to destroy me,” Moonves replied. Sinking further into despair, he added, “This will be torture. Every way was torture. I feel bad. I would have felt bad every other way too.”
Schwartz worried about Moonves’s mental state. “You’re all alone there? Drinking and getting yourself into a blue funk.”
Moonves admitted he was indeed drinking. “Scared of the attacks coming my way. I really want peace,” he texted.
Moonves turned to the subject of Shari Redstone. “She can’t get along with anybody,” he maintained. “Always in court.” He worried she “will come after me.”
An hour later he added, “This is going to be hell.”
EPISODE 7
“All Out War”
Schwartz wasn’t the only member of Moonves’s inner circle worried about his state of mind. “How you holding up?” Ianniello texted Moonves the next day, May 12. “We really don’t have a choice and if we lose, we are leaving anyway. She caused this, not us.”
Moonves wasn’t feeling any better. “I feel like shit,” he said. “I know she caused this. But it will be all out war.”
Moonves described Shari as a “crazy person” and warned, “You are taking away her whole life.”
“Viacom is her life,” Ianniello countered. “She has nothing to do with our company. BTW—for her troubles we will make her an extra billion. She still has a toy in Viacom. [She] has her board and her guy to run it.”
Though he was not a member of the special committee, Moonves’s allies kept him informed every step of the way, and vice versa. The next day, on Sunday, May 13, Moonves wrote to Gordon: “This is NUCLEAR. The last meeting we had with them was not.” He realized there would be no turning back. “After filing there can’t be a deal.” Referring to Shari: “She won’t be manageable.”
“She’s not manageable now,” Gordon responded.
Moonves hinted again at the unspoken threat from his past.
“She’s going to bring up reasons why she mentioned firing me.”
Ten minutes later, Moonves reversed course yet again, texting Schwartz, “I can’t do this. I do not want to file. It will be a public war for 6 months. I am not emotionally prepared for this. I would rather leave. Sorry.”
Schwartz said only, “I get it.”
Moonves conveyed his decision to Gordon. “Sorry Bruce. I’m not in for filing. We should try one more time to negotiate. I am out. Can’t do this. Will be a horrible fight.”
It fell to Gordon to coax Moonves back on board. He wasn’t entirely surprised that Moonves was wavering. He knew Moonves didn’t like conflict and was worried about what Shari and her PR advisers would dredge up about him (though it never crossed his mind those worries might involve #MeToo allegations). But Gordon felt his duty was to shareholders, not to make life easier for Moonves. And he was convinced a merger was not in the interest of CBS shareholders.
The board convened by phone that day to consider the special dividend and the attack on the Redstone family. With the meeting in progress, Gordon texted Moonves: “I really don’t think you want to do this. You are destroying your credibility.”
“I am not ready for the fight,” Moonves replied. “I can’t do it. 6 months of attacks. No.”
“You will lose the board, your exec team, your employees and the market,” Gordon countered. “You are worried about your reputation. This will ruin it.” He added, “Chad [Gifford] will leave. Others will follow. Then what?”
Gordon continued. “You are making a huge mistake that you will regret. Are you going to call in and tell the group on the call of your decision? How do you expect this call to end?”
Moonves didn’t immediately answer. Seven minutes later, Gordon took another tack.
“I feel I am not helping you deal with this. What can I do?”
“Nothing,” Moonves responded. He agonized that if he supported the vote to dilute the Redstones and the ensuing lawsuit, Shari would attack him with all the ammunition she could muster. If he didn’t, he’d lose the support of Gordon, Gifford, and other directors loyal to him.
“I am sick either way,” Moonves added. “I have never felt worse.” He continued, “A public spectacle.” Shari “wants to run it. Let’s let her.”
Other members of the committee were well aware of Moonves’s vacillations. In various conversations he’d reversed himself or given inconsistent answers when asked if he supported the decision to reject the merger and unleash the lawsuits to strip Shari of control. The committee had now resolved to go through with the nuclear option, but with a formal vote at hand, its members wanted to hear directly from Moonves. They wanted to go forward only with Moonves’s full support.
Minutes later Gordon texted Moonves that it was time for him to join the board call.
“I think we will add you on momentarily. You ready?”
Somehow Gordon had talked him back from the brink. Moonves had done another about-face and was ready to go ahead.
“Less is more,” Gordon advised him. “Leave us the flexibility to work details this week.”
“Headline news,” Moonves responded.
Moonves joined the board call in progress just after 3:00 p.m. He said the committee had his full support in its decision to block the merger and sue National Amusements. He was terse, and some board members could tell he was anguished. He showed no energy or enthusiasm. But he said he could see no other path forward. There was no way he could work with Shari.
The committee essentially had to choose between Shari and Moonves and believed Moonves to be essential to the health of the enterprise. It voted unanimously that a merger with Viacom was not in the interest of CBS shareholders except for National Amusements and the Redstones.
The committee could have stopped there, made its vote public, and let Shari and her lawyers take the next step. But, convinced that Shari would move swiftly to change the bylaws and replace them with directors who’d support a merger, the committee voted unanimously to file suit in Delaware the next day for a restraining order to prevent the Redstones from exercising their controlling power, and to convene a full board meeting later that week to vote on the special dividend to permanently dilute their voting power.
After the vote, Gordon checked in with Moonves.
“You ok?”
“Yes,” Moonves answered. It was only about 5:40 p.m., but he was already drinking again. “On my third vodka and second egg roll. Go time.”
“Hope you felt the commitment and support. 10 for 10,” Gordon wrote, referring to the unanimous vote.
“I did. The ladies seemed nervous,” Moonves observed, referring to Minow and Griego.
Moonves sounded far less confident when he wrote to Schwartz. “I’m back to doing it,” he reported. “If we don’t Chad gets fired. 3 people quit and we lose the company. it will be over. I am at great personal risk here.”
“I know that,” Schwartz replied. “I’m with you. We all are.”
Ianniello was just as loyal and supportive: “I have your back to the end!” he texted.
“Well, I’m counting on you to stop me from dying here,” Moonves replied.
“We are stronger together,” Ianniello assured him. “Everyone feels the same way. We have no choice. There are only worse alternatives.”
Moonves was still worrying about Shari. “She will come after me big time. I know you have my back!!! She threw us under the bus when not under pressure. Now??? Wow . . . She will be enraged.”
An hour and a half later, Moonves threw down the gauntlet.
“Mattresses tomorrow am,” he texted Ianniello. “And take the gun. We need it.”
“We won’t forget the cannoli too!” Ianniello answered.
In another Godfather reference, Moonves wrote to Schwartz: “Buckle up. Mattresses tomorrow.”
By now Moonves must have been far beyond his third vodka of the evening. In his last text of the day, to Schwartz at 10:36 p.m., he was all but incoherent: “We need to lay their clowns think early on we are no hardship Barr no and will ill them handcuffs off. If they want to bring it n watch out. We will decimate. Old Sara we haven’t done anything but party with you. Now we will kill Scarw her big. All of them scare them. I am going to prevent this public bulls hit rightbaway. And let’s go after them head on NOW.”
* * *
—
The next morning, May 14, Shari Redstone was at her apartment high in the tower of the Pierre Hotel in New York. Central Park sprawled outside her windows, its landscape now a vivid green with spring foliage.
At 9:30 a.m. she received an email saying that there would be a special CBS board meeting that Thursday. That was the first Shari had heard about any special board meeting.
She called one of her lawyers, Christopher Austin at Cleary Gottlieb Steen & Hamilton in New York.
“What’s this about a board meeting?”
“I’m afraid it’s worse than that,” Austin replied. “You’ve been sued. In Delaware.”
“What?”
Austin outlined the claims: Shari was plotting to replace the CBS directors. She’d violated her duty to shareholders. Her fellow board members wanted to strip her, her father, and her family of their control. As she saw it, they wanted to steal the company her father had built.
Shari wandered through the apartment in a daze. Her feelings were a potent mix of shock, hurt, and betrayal. She’d just decided to drop the merger idea if Moonves didn’t support it. For all their difficulties, she and Moonves were friends. At least that’s what she’d thought.
The phone rang. It was Shari’s daughter, Kimberlee. “Are you okay?”
She was not.
In Los Angeles it was just after 6:30 a.m., so Shari texted Rob Klieger:
“I’ve been sued in Delaware. Call me. They’ve declared war. They made up facts. . . . I’m shaking, shaking, shaking. . . . I’m in shock literally.”
Season 4
EPISODE 1
A “Blatant Abuse of Power”
As Moonves had predicted, the CBS lawsuit to strip the Redstones of voting control was headline news, with many references to CBS having triggered a “nuclear option.”
The CBS complaint couched the suit in noble terms of shareholder democracy rather than a clash of wills between Moonves and his board allies and Shari and hers. CBS argued that it held itself out to investors as a company managed by independent directors despite being controlled by the Redstones. CBS cited several ways Shari had undermined that premise: she’d put her own personal lawyer (Klieger) on the board; she’d talked about potential replacements for Moonves without board authority and had “disparaged” Ianniello; she’d rebuffed an overture from another company (Verizon) without even telling the board; and she was plotting to replace board members who didn’t support the proposed merger with Viacom.
In a statement, National Amusements called the allegations “outrageous” and stressed that National Amusements “had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies. NAI’s conduct throughout supports this, and reflects its commitment to a well-governed process.”
Shari asked Klieger to break the news of the lawsuit to her father in person. She didn’t want to tell him over the phone—it was too complicated and potentially too upsetting. When Klieger told him, Sumner was predictably livid. First Dauman, now Moonves had turned against him. But he took the news in stride. Litigation was in his DNA. This was a fight he expected to win.
Needless to say, Klieger’s scheduled call with Gordon to resolve Gifford’s fate never happened. Klieger was shocked that Gordon had made the argument that Gifford shouldn’t be replaced during merger negotiations, when he knew the committee had already decided to reject it and file the suit. As for the further step to dilute the controlling shareholder, Klieger still couldn’t believe his fellow board members had embraced such a drastic action, especially since Shari had no intention of trying to force through a merger.
It was probably a long shot, but maybe they could get the board to see reason and withdraw the suit. So he called Griego and Minow—the two independent directors he didn’t consider to be part of the Moonves inner circle.
Griego was in London, so he ended up speaking only to Minow. “This is ridiculous,” Klieger said. Shari “isn’t doing anything, and even if she was, this isn’t the answer.” Minow said little but suggested further talks.
A larger group including Gordon convened by phone the next day. Gordon’s mantra was that the directors were simply acting in accord with their fiduciary duties to shareholders other than Shari. There didn’t seem to be anything else to discuss.
“Are you having fun?” Shari texted Klieger later that evening. “Anything productive?”
“That was a long ass call and a waste of time,” he answered.
Klieger wondered if the real issue wasn’t the proposed merger at all but Shari’s effort to remove Gifford.
Texts and emails suggest Gifford was, indeed, a critical element.
