You get fired from a job after accusations of sexual harassment, then your boss decides not to pay your $120 million severance package, but a little loophole in your contract forces your former company to pay all your legal bills.
In the arcane world of chief executive contracts and compensation policies, that is exactly what’s happening in this legal battle between ousted chief executive Leslie Moonves and CBS.
The issue is “far from over,” Moonves said today in an interview with Agenda, a corporate governance newsletter.
Moonves has the right to challenge the board’s decision in a confidential arbitration proceeding, and he could also sue for breach of contract.
In the interview, Moonves, who greenlit reality TV programs like Survivor and Big Brother, said he hadn’t yet decided whether to pursue arbitration.
But if you feel you were wronged and your former employer is paying all the bills, why wouldn’t he?
Under his termination agreement, reached when he left the company in September, CBS itself will be picking up the tab.
The agreement stated explicitly that Moonves retains all rights of indemnification, “including advancement or payments of Executive’s expenses (including his attorneys fees).”
You read that right: CBS has been footing the bill for Moonves’s months long legal fight against CBS.
The Moonves legal team “could easily run up $20 million in fees for an arbitration at this level,” said Peter Henning, a law professor at Wayne State University and an expert on executive compensation.
“I’d say that’s the low end. I could see it getting to the $40-$50 million range.”
CBS is also presumably racking up its own legal fees in the tens of millions of dollars.
It has two high-priced law firms, Debevoise & Plimpton and Covington & Burling, investigating Moonves’s conduct and advising CBS’s board of directors.
“You get this bizarre result where the company essentially pays someone they fired to sue them,” Henning said.
Few companies want to run up the additional costs and risks of litigating the issue of fees.
“It’s just fees on top of fees,” Henning said. “It creates this bizarre incentive for the company to pay.”
Even so, Moonves’s situation may be a special case in which it makes sense for CBS to keep fighting its former C.E.O. while simultaneously bankrolling his case.
Even if it would be cheaper to settle, any payment is sure to enrage many people, given the highly publicized allegations of sexual assaults and other misconduct against him. (Moonves has said that any sexual activity was consensual and that he cooperated fully in CBS’s investigation.)
“If CBS pays him anything, that sends a terrible message to the organization,” said Charles Elson, a professor and corporate governance expert at the University of Delaware.
“Sometimes you have to stand on principle, go the distance and litigate to make your point. You have to send the message that this behavior is unacceptable. The value of that is incalculable.”
Still, it gives Moonves a lot of leverage.
And that leverage could help run out the clock on what remains of Julie Chen Moonves’s contract with CBS.
Chen Moonves, 48, is under contract to return as host of Celebrity Big Brother next month.
But the controversy has taken a toll on her career.
She resigned as co-host of The Talk back in September.
And while she remains employed at CBS, there is also growing speculation that Celebrity Big Brother may be her last show at the network.
She had been planning to host the next regular season of Big Brother next summer, but CBS insiders believe there is no way she’ll will stay at the network when they finally terminate her husband’s advisory role.
ABC may be interested in pursuing Chen, now that her husband’s affiliation with CBS is at an end.
Many believe she would be the perfect replacement for Barbara Walters, who spent years at ABC as the face of entertainment and interviews.
“I would trade myself for Barbara Walters, I bow to her” Chen once told Andy Cohen. “I bow to her because she’s the best.”