CBS board meets this week at a crossroads, weighing the company’s future

Nearly five months after longtime Chief Executive Leslie Moonves was forced out over a widening sexual harassment scandal, CBS Corp. and its board of directors are facing a pivotal moment in the company’s future.

When the board meets at the company’s West Coast headquarters in Studio City on Thursday, it will wrestle with who should lead the legendary broadcaster and whether it should reunite with its corporate sibling, Viacom Inc.

Board members are expected to discuss whether acting Chief Executive Joseph Ianniello should become a more permanent leader or whether someone from the outside should come in to further shake things up.

Wall Street is watching closely for signs that CBS is preparing to embrace a merger with Viacom, which owns the Paramount Pictures movie studio and cable channels MTV, VH1, Comedy Central, BET and Nickelodeon. Moonves, along with several of CBS’ independent board members, fiercely resisted Vice Chair Shari Redstone’s efforts last year to merge the two New York-based media companies that her family controls. His ouster has revived the prospect of a CBS-Viacom reunion.

Figuring out “a strategic path forward for CBS� will be a priority for the board, said one person close to CBS who was not authorized to speak publicly. Whether CBS decides to pursue a merger with Viacom, or perhaps a smaller media company such as Lionsgate or Discovery, also could influence the board’s decision on who should replace Moonves.

Late last year, CBS hired executive search firm Korn Ferry to conduct the CEO search. A shortlist of candidates has already been submitted to the board, and interviews are expected to take place in February, sources said.

Ianniello has indicated he wants the job, and other prominent executives, including Tom Staggs, the former No. 2 executive at Walt Disney Co., have been approached. However, some candidates wanted to know whether CBS was planning to merge with Viacom before making a decision, said one knowledgeable person. Others, including Sony Pictures Entertainment Chairman Tony Vinciquerra, have taken themselves out of the running.

CBS’ stock slid 20% last year as it grappled with its leadership issues and dramatic changes to the television industry. On Wednesday, CBS closed down 1.7% to $49.50.

Media companies have been in a frenzy to consolidate to withstand the shifts in TV consumption led by streaming giants. Walt Disney Co. is buying much of Rupert Murdoch’s 21st Century Fox, and telecom giant AT&T swallowed HBO, the Turner cable channels and the Warner Bros. movie and TV studio.

CBS risks becoming a small fry.

“We think it is a foregone conclusion that CBS and Viacom will merge in 2019,� prominent media analyst Michael Nathanson of the MoffettNathanson research firm wrote in a recent report.

“Putting CBS and Viacom back together would not solve all the existential issues facing both of these companies, but it would deliver scale and cost savings to build a bigger, more secure entity,� Nathanson said.

Worries about a Viacom purchase at an inflated price prompted CBS’ independent board members last May to sue the Redstone family in an effort to strip them of their nearly 80% voting control. But after scandal enveloped Moonves (he steadfastly denies the sexual misconduct claims), the CBS board abandoned that lawsuit in a September settlement that saw six new directors joining the board.

Shari Redstone agreed not to push for a Viacom-CBS merger until at least mid-2020 — but that agreement doesn’t preclude an independent board member from leading the charge.

“As a shareholder I’d rather see both [companies] sold to a different kind of business,� said Laura Martin, analyst with Needham & Co. “From a shareholder perspective, I’d much rather CBS be sold to Apple, Google or another tech company, someone with deeper pockets and global distribution … rather than double down on U.S. linear TV.�

Bernstein & Co. media analyst Todd Juenger agreed.

“If the CBS independent directors conclude they must take action to acquire a company … we strongly believe they could get better quality scale with equal or better synergies by pursuing targets other than Viacom,� he wrote this month. “In fact, we don’t believe CBS should be pursuing cable network groups at all. But if they are bound and determined to do so, we believe either Discovery or AMC Networks would be better targets than Viacom.�

Thursday’s board meeting is the first of this year, and the first gathering since board members voted to withhold Moonves’ $120-million severance package. CBS has said that Moonves is challenging that decision, and the issue is expected to be decided by an arbitrator.

CBS’ six new board members include veteran media executive Strauss Zelnick, who is serving as interim chairman of the board. Richard Parsons served as chairman for about a month, stepping down because of health issues in October.

Some analysts say Viacom’s health has improved since the last time CBS contemplated a union under the leadership of Bob Bakish, who became CEO of Viacom in late 2016. Ratings have improved at some of Viacom’s key channels, and last week, the company announced that it was buying the ad-supported streaming service Pluto TV for $340 million.

Some analysts think that Bakish, who has been a favorite of Redstone, could run a combined Viacom-CBS.

On Wednesday, Viacom’s Paramount Pictures laid off 20 staffers, mostly in back-office positions, as part of a restructuring effort. The cuts also affected Paramount Television, coming after a regime change in which Nicole Clemens was hired last year to replace fired executive Amy Powell. Earlier this month, nearly two dozen were cut from Viacom’s entertainment division, mostly affecting the company’s Paramount Network.

Though the layoffs represent a small sliver of Viacom and Paramount’s overall workforce, they fueled speculation that the company is preparing itself for a possible acquisition by CBS, which was part of Viacom until Sumner Redstone divided his empire in 2006.