The average investors in badly managed companies that pay executives large salaries and in which large shareholders get special perks often ask, “Where are the shareholders’ yachts”? At CBS Corp. (NYSE: CBS), the answer is that there aren’t any as controlling shareholder Shari Redstone battles CEO Les Moonves for control of the company.
The value of Redstone’s position, owned via National Amusements, is in the tens of billions of dollars. Moonves made $69.3 million last year and $69.6 million in 2016. CBS has posted good earnings for several years. However, the battle is tearing the company apart, taking up extremely valuable management and board time and putting the future of CBS in question.
Shareholders need management to dig its shares out of a hole. The stock is down 15% in the past year to $52. The S&P 500 is up 15% over the same period.
Redstone would like to merge CBS with Viacom, a company her family also controls. Viacom’s shares have not done as badly as CBS’s in the past year, but the return to investors has been subpar, down 7% to $39.
Redstone believes a merger would enrich her. The combined companies could cut redundant costs. They also may be able to share programming and distribution platforms. Moonves wants to run the new company. At first, Redstone wanted him to remain as CEO. After he demanded that his management operate the new public corporation without Viacom top management, Redstone turned on him.
Redstone’s time is not as critical as Moonves’s time. He has run CBS since 2003. His steady hand has been credited with guiding the company successfully as most traditional media companies have been battered by the new online world where revenue is dominated by Google and Facebook and content competition from Netflix and Amazon have crowed the market. Moonves is not distracted and may be so for months.
CBS’s shares dropped almost 3% when a court said that its board could not take away the Redstone family’s controlling stake in the company. The shareholders won’t be getting any yacht soon, and probably not ever. Moonves and Redstone, on the other hand, will continue to do very well, no matter the outcome of their fight.