CBS Report on Moonves Shows Epic Failure of Corporate Governance

As a draft report prepared by CBS’ outside lawyers now makes clear, many of the company’s employees, including high-ranking executives and even members of its board, were aware of the former chief executive Leslie Moonves’ alleged sexual misconduct and subsequent efforts to conceal it.

Yet no one acted to stop him — and the repercussions for that failure are likely to reverberate at CBS for years.

“A culture where this behavior could have gone unchecked for so long with so much knowledge is really troubling,” said Charles M. Elson, an expert on corporate governance at the University of Delaware. “This is a disaster for CBS shareholders. There’s been no other #MeToo incident with this kind of negative impact” on a major American company.

One longtime CBS executive — the former communications director Gil Schwartz — drafted a letter of resignation for Moonves after becoming privy to one of the most serious allegations against him, according to the draft report, which was reviewed by The New York Times. Yet the letter was never sent, and Schwartz said nothing about it to board members.

Members of corporate boards, senior executives and even rank-and-file employees have a duty of loyalty — to the company, not its chief executive. They’re required by corporate law, company policy and in many cases their employment contracts to report misconduct to the board.

When it comes to sexual harassment, “if you see it and don’t report it, you’re in the same boat as the person engaging in the behavior,” said David F. Larcker, director of the Corporate Governance Research Initiative at Stanford’s business school. “That’s a violation of your duty as an officer of the corporation.”

In CBS’ case, one of the most egregious violations appears to have been committed by Arnold Kopelson, a long-standing board member and a patient and friend of Dr. Anne Peters, who has accused Moonves of misconduct. Peters told the CBS lawyers that in 1999 Moonves grabbed her, grinded against her with an erect penis and had a look on his face that she described as that of a “monster.” After she pushed him away, Moonves went to the corner of the room and masturbated, then left without saying anything, Peters told the lawyers, according to their report. (Moonves told investigators that he’d only made a pass at Peters, which was rejected, and denied being aggressive or masturbating.)

Peters told the lawyers that she gave Kopelson a detailed account of the episode in 2007, when Kopelson was thinking about joining the CBS board. Kopelson responded that it was a trivial incident, adding that “we all did that.”

Kopelson joined CBS’ board and remained a staunch supporter of Moonves. Furthermore, he never disclosed the episode, even after rumors swirled about Moonves early this year, or after the board was made aware of multiple other instances of alleged sexual harassment by Moonves.

CBS’ lawyers were unable to interview Kopelson, who died in October, the month after Moonves was forced out of the company.

Kopelson “clearly had a duty to disclose the incident to the full board,” Elson said. “It’s horrible that he didn’t. This is exactly the kind of behavior that makes employees afraid to come forward because they know people in authority won’t care and they’ll get fired.”

Elson noted that Kopelson was a longtime friend of Sumner M. Redstone, the entertainment mogul who controlled CBS before ceding control to his daughter, Shari Redstone. Sumner Redstone, who had a series of mistresses and affairs, was hardly a pillar of sexual propriety. “Redstone fostered this environment,” Elson asserted.

Andrew J. Levander, Moonves’ lawyer, said that his client “vehemently denies having any non-consensual sexual relations.”

The lawyers’ report said that two board members, Charles Gifford and Bruce Gordon, spoke with Moonves about rumors of #MeToo problems and the fact that an outside law firm, Weil, Gotshal & Manges, would be looking into the matter. But they said “they did not need to hear the details directly,” according to the report. (Gifford and Gordon didn’t respond to requests for comment Tuesday.)

Larcker said that’s not unusual. “There’s a saying in corporate governance: Be careful what you ask for. If you ask and get the information and don’t act on it, you’re worse off than not asking in the first place. That’s unfortunate.”

That’s even more true of lower-ranking employees. “These situations put people in a very tough position,” Larcker said. “They may have a duty to disclose, but they’re understandably afraid of losing their jobs. The history of whistleblowers is not very encouraging.”

The CBS lawyers reported that “a number of employees” knew that Moonves was routinely receiving oral sex from a CBS employee and “believed that the woman was protected from discipline or termination as a result.” (Moonves acknowledged to the lawyers that he received oral sex from the employee, who was his subordinate, but said it was consensual.)

Levander, the lawyer for Moonves, said on Tuesday that his client “never put or kept someone on the payroll for the purpose of sex.”

The report said that multiple CBS executives, including Schwartz, the communications director, were aware by late 2017 that a woman had filed a complaint about Moonves with the Los Angeles Police Department, and also knew of allegations regarding Bobbie Phillips, an actress whose claims that Moonves assaulted her in 1995 were reported by The Times last week. None of these executives brought these matters to the attention of any board members, the report said.

“The people who kept quiet got rewarded,” Elson said. “That sends a powerful message. No amount of ethics or sexual harassment training is going to change that.”