In House - The FindLaw Corporate Counsel Blog

CBS Sued for Securities Violations Over CEO Conduct

The #MeToo charge CBS CEO Leslie Moonves is facing appears to have spawned a shareholder lawsuit against him and CBS for withholding information from an SEC filing relating to the recent allegations.

One shareholder has filed the class action, specifically citing a 2014 proxy statement that CBS filed with the SEC. That statement explained that the company directors were required to certify compliance with a harassment and bias free workplace, among other commitments. And given the allegations against Moonves, the case seeks to represent the class of shareholders who purchased stock after the 2014 statement.

CBS Stock Slump

On the news of the allegations breaking, CBS stock fell by 6 points, and is yet to really recover. The lawsuit points to a letter written by Moonves in 2016 telling employees that the company is committed to a harassment free workplace.

Specifically, the case alleges that the company failed to disclose, or mislead investors, about the (alleged) fact that CBS execs (such as Moonves) had engaged in widespread sexual harassment and that CBS's policies were inadequate, despite being boasted about in SEC filings.

Face the Music and Your Shareholders

While it may seem almost counterintuitive for a business to announce that it has a potential sexual misconduct fiasco coming down the pipeline, it could very well be the best option. If investors find out material information was withheld, and when the info is released, and the company stock price tanks, there could be some real big liability there. And while notifying shareholders of a potential fiasco or litigation is likely to lead to a slump, it's better than the two slumps that'll happen when the info goes public and then the company gets sued by its shareholders.

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