Les (Not Paul) and Indemnification of Directors and Officers
Posted On December 20, 2018 Reading Time: 2 minutes.
Indemnification of directors and officers often rears its head in white-collar matters and internal investigations. Here is an interesting take by James Stewart on the Les Mooves situation (click on image for article):
Mr. Moonves, of course, was until recently the long-time, influential chief executive of CBS. He was fired after an internal investigation into complaints of sexual harassment (click on image for article):
In part, Mr. Stewart notes that:
Mr. 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, Mr. Moonves said he hadn’t yet decided whether to pursue arbitration.
But 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 Mr. Moonves retains all rights of indemnification, “including advancement or payments of Executive’s expenses (including his attorneys fees).”
Here is the provision in full:
Executive will retain all of his existing rights to indemnification (including advancement of expenses) and D&O insurance coverage following the Termination Date under Paragraph 16 of the Employment Agreement and under the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of Employer, including advancement or payments of Executive’s expenses (including his attorney’s fees) in connection therewith.
Such provisions are fairly standard for officers and directors, especially those of public companies, and can remain in place even where, as here, the outside law firms retained to conduct the internal investigation apparently concluded that Mr. Moonves, when interviewed, was “evasive and untruthful at times and . . . deliberately lied about and minimized the extent of his sexual misconduct.” He likely was required to sign an “undertaking,” an agreement to pay back legal costs if he is ultimately found liable (or, in this instance, ultimately loses his potential arbitration claim or contract lawsuit against CBS). Most people in Mr. Moonves’s position readily sign an undertaking: if they lose, their career and finances may be in such a shambles that they are judgment proof — although Mr. Moonves is likely more solvent than the average director or officer.
Mr. Moonves seems less pleased than the other Les: Les Paul, here in 1951 with Mary Ford: