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CBS Corp. Files Suit Against Shari Redstone & National Amusements


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CBS Corporation has filed a lawsuit alleging “breaches of fiduciary duty” by Shari Redstone and National Amusements.

The suit alleges that Shari Redstone has pushed for a merger of CBS and Viacom, which also is controlled by National Amusements—refusing to allow all CBS stockholders to vote on a transaction—but promptly shut down discussions when CBS demanded certain governance protections at the combined company. It also accuses Ms. Redstone of interfering with the nominating and governance committee process. In 2017, Ms. Redstone filled Sumner Redstone’s newly vacant board seat with the Redstones’ personal lawyer, who has since been instructing management and other directors on Ms. Redstone’s and National Amusements’ wishes, including the desire to replace certain directors.

CBS Corp. is claiming that Ms. Redstone has acted to undermine CBS’s management team, including, without board authority, talking to potential CEO replacements, ridiculing the COO and threatening to change the board. “These escalating attacks make it difficult for management to perform its duties and threatens continuity of management,” the filing states.

Ms. Redstone recently once again proposed a CBS-Viacom merger, which the special committee concluded is not in the best interests of CBS and its stockholders. During the course of the special committee’s negotiations regarding a possible merger, the suit alleges that Ms. Redstone refused to agree to typical public company governance or submit any potential transaction to a vote of all of the unaffiliated public stockholders of CBS.

The lawsuit also claims that Ms. Redstone told the CEO of a potential acquirer of CBS that he should not make the offer, “thereby depriving CBS stockholders of a potentially value-enhancing opportunity,” which the board or the special committee should have been free to evaluate.

“This behavior and the uncertainty and negative public attention it has engendered have harmed CBS and its stockholders and will continue to do so,” the suit states. “CBS’s stock price has dropped from nearly $70 per share to nearly $50 per share since merger talks were reinstated—a loss of approximately $7 billion in market cap suffered by the Class B stockholders. This loss of market value has occurred despite management consistently delivering excellent results.”

“The five members of CBS’s special committee, all independent directors of the company, unanimously believe that the CBS Board has a fiduciary duty to act now to protect all stockholders and prevent Ms. Redstone from continuing to misuse her power as a controller, in breach of her fiduciary duties,” the suit continues.

CBS Corp. has scheduled a meeting of the full CBS Board for this Thursday to consider potential responses to Ms. Redstone’s conduct, including the issuance of a dividend that would effectively reduce the Redstones’ and National Amusements’ voting power, from 80 percent to approximately 17 percent.

“CBS’s special committee believes that it is only a matter of time before Ms. Redstone will attempt to replace the independent directors at CBS who do not agree with her positions, just as she and National Amusements did at Viacom two years ago, in order to block the CBS Board from considering appropriate corporate strategies for CBS that would be in the best interests of all CBS shareholders—not just National Amusements.”

The company is seeking a temporary restraining order “to prevent Ms. Redstone and National Amusements from attempting to replace the board or modify the company’s governance documents before any board action taken at the special board meeting becomes effective.”



About Kristin Brzoznowski

Kristin Brzoznowski is the executive editor of World Screen. She can be reached at kbrzoznowski@worldscreen.com.

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