Viacom Board Needs to Protect CBS From Rather
by Peter Flaherty

How should a business owner respond to a highly compensated employee in a position of great responsibility engaging in seemingly irrational behavior that is causing great harm to the firm and its brand names? And what if the company is in a business like news reporting where reputation is everything?

Of course, it depends on the circumstances, but one thing is for certain. Doing nothing is not an option. Viacom, the parent of CBS Television, cannot now do nothing about the deepening controversy over the use by CBS of apparent forged documents on "60 Minutes" and its evening news anchored by Dan Rather.

If Rather and CBS News President Andrew Heyward had simply acknowledged a possible problem and announced they would look into it, the Viacom board would be off the hook. It would be an embarrassing episode for CBS, but it would have been a 3-4 day story.

Instead, Rather and company dug in, moving from one implausibility to another, each day facing intensified hoots of derision, playing a losing hand. As Mark Twain once said, "Against the assault of laughter nothing can stand."

Over the years, Rather accrued power at CBS. He is not only anchor of the evening news, but also its managing editor. He doesn't just read the news on-camera. He also decides what is news. And now instead of reporting the news, he has become the news, and it looks like he is in way too deep.

CBS's management has allowed Rather great influence in formulating the news, but with such power comes responsibility. When that responsibility is abused in such a dramatic fashion, the responsibility of accountability flows ultimately to the board.

Viacom is chaired by movie-theater magnate Sumner Redstone. The board includes not only his daughter and moneyed cronies of varying degree, but also "independent" directors like Bill Cohen, the former Senator and Defense Secretary, and Patty Stonesifer, president of the Bill and Melinda Gates Foundation.

Serving on a board like Viacom is no doubt a cushy deal and a positively thrilling opportunity. But every so often publicly held companies get in big trouble and directors have to function like directors. This is one of those times.

Dan Rather joined CBS News in 1962. He is a bit of an institution. The prominence of CBS News preceded by decades Viacom's acquisition of CBS in 1999. Under normal circumstances, reluctance by Viacom to tamper with CBS News would be understandable. Add to that the fear that it would be accused of breaching the news division's "independence" if it exercised more oversight.

But it may be that very independence that the Viacom board must now rescue. Rather and Heyward appear to have acted irrationally, but they are not stupid men. It is rational to exercise the better of two bad options. Perhaps having their credibility pummeled is preferable to disclosing where the documents really came from. Evidence now points to a discredited Bush-hater in Texas named Bill Burkett, who has been pushing the story for years, but that explanation may be a little too convenient for CBS.

Burkett seems to have been in touch with some people in high places, including former Senator Max Cleland. If CBS knowingly received the forgeries through the Kerry campaign or the Democratic National Committee, it would be a huge journalistic scandal, not to mention a serious blow to John Kerry's candidacy. Don't hold your breath until CBS breaks that story.

The corporate scandals of recent years have created an expectation of financial accountability and transparency. Viacom faces this expectation, but also another one just as powerful. With or without the memo controversy, there is an increased expectation in the news business of editorial accountability and transparency. The Internet has democratized information. Pajama-clad bloggers can check facts as easily as Dan Rather's staff.

CBS News and "60 Minutes" are valuable brands. Over the years, "60 Minutes" in particular has been a cash cow for the network. Those brands now face irreparable harm. The Viacom board has a fiduciary duty to protect the interests of shareholders. It must now order an investigation conducted by persons having no prior connection to CBS.

Peter Flaherty is President of the National Legal and Policy Center, a foundation promoting ethics in public life. The group sponsors the Corporate Integrity Project. (www.nlpc.org)