On Friday, ViacomCBS reported on a Form 8-K that the $120 million disputed severance payment to former CEO Leslie Moonves would revert in its entirety to the company. The determination came out of an arbitration proceeding, so it’s informative but doesn’t set a legal precedent that would apply to other companies facing this type of dispute.
Two and a half years ago, the company had announced that there were grounds to terminate Mr. Moonves’ employment for “cause” after #MeToo allegations came to light. Specifically, the company said that he’d engaged in:
[W]illful and material misfeasance, violation of Company policies and breach of his employment contract, as well as his willful failure to cooperate fully with the Company’s investigation.
Here are the employment agreement’s prongs of “cause” that the company appeared to be citing:
– your willful misfeasance having a material adverse effect on the Company
– your willful and material violation of any policy of the Company that is generally applicable to all employees or all officers of the Company (including, but not limited to, policies concerning insider trading or sexual harassment, Supplemental Code of Ethics for Senior Financial Officers, and Employer’s Business Conduct Statement), provided that such violation has a material adverse effect on the Company
– your willful failure to cooperate fully with a bona fide Company internal investigation or an investigation of the Company by regulatory or law enforcement authorities whether or not related to your employment with the Company (an “Investigation”), after being instructed by the Board to cooperate or your willful destruction of or knowing and intentional failure to preserve documents or other material known by you to be relevant to any Investigation;
– your willful and material breach of any of your material obligations hereunder
Although the company ultimately prevailed under this “cause” definition, the severance payment has been tied up in a trust since December 2018 due to a provision in Mr. Moonves’ 2018 separation agreement that said that any dispute related to the board’s determination was subject to binding arbitration. This $120 million was specifically set up as a “holdback” in the separation agreement rather than being paid out immediately.
-Liz Dunshee, CompensationStandards.com May 17, 2021