DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to Section 240.14a-12

CBS Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

November 16, 2018

Dear Stockholder:

You are cordially invited to attend the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of CBS Corporation (the “Company”), which will be held at The Museum of Modern Art, The Ronald S. and Jo Carole Lauder entrance, 11 West 53rd Street (between Fifth and Sixth Avenues), New York, New York 10019, at 9:00 a.m., Eastern Standard Time, on Tuesday, December 11, 2018. Holders of CBS Corporation Class A Common Stock are being asked to vote on the matters listed in the attached Notice of 2018 Annual Meeting of Stockholders.

If you hold shares of the Company’s Class A Common Stock, please cast your vote promptly to ensure that your shares will be voted at the Annual Meeting. You may vote by completing, signing and returning the enclosed proxy card or voting instruction card. Alternatively, you may also submit your vote by telephone or through the Internet by following the instructions in the 2018 Proxy Statement. If you attend the Annual Meeting, you may vote your shares in person.

National Amusements, Inc., which as of November 6, 2018, beneficially owned shares of the Company’s Class A Common Stock representing approximately 79.7% of the voting power of CBS Corporation’s common stock, has advised CBS Corporation that it intends to vote all of its shares of the Company’s Class A Common Stock in accordance with the recommendations of the Board of Directors on Items 1 through 3 in the attached Notice. Therefore, the approval of those matters in accordance with the Board’s recommendations is assured.

If you wish to attend the Annual Meeting in person, you must be a holder of Company common stock as of the record date (November 6, 2018) and request an admission ticket in advance. Each such holder eligible to attend the Annual Meeting may bring one guest. If you are a record holder of the Company’s Class A Common Stock, you can request a ticket when you vote by telephone or through the Internet, or by marking the appropriate box on the proxy card. If you are a record holder of the Company’s Class B Common Stock or you hold shares of the Company’s Class A or Class B Common Stock in a brokerage account, you can request a ticket by sending a written request along with proof of ownership, such as your brokerage firm account statement as of the record date (November 6, 2018), to Director, Shareholder Relations, CBS Corporation, 51 West 52nd Street, New York, New York 10019.

Upon arrival at the Annual Meeting, you will be asked to present an admission ticket, and all meeting attendees will be asked to present a current government-issued picture identification (such as a driver’s license or passport) to enter the meeting. The Company may implement security procedures as it deems appropriate to ensure the safety of meeting attendees.

If you have elected to receive paper copies of the Company’s proxy statements, annual reports and other materials relating to the Annual Meeting and want to elect to receive these documents electronically next year instead of by mail, please go to http://enroll.icsdelivery.com/cbs and follow the instructions to enroll. We highly recommend that you consider electronic delivery of these documents as it helps to lower the Company’s costs and reduce the amount of paper mailed to your home.

We appreciate your interest in and support of CBS Corporation and look forward to seeing you at the Annual Meeting.

 

 

LOGO
JOSEPH R. IANNIELLO
President and Acting Chief Executive Officer


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CBS CORPORATION

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS

AND PROXY STATEMENT

To CBS Corporation Stockholders:

The 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of CBS Corporation (the “Company”) will be held at The Museum of Modern Art, The Ronald S. and Jo Carole Lauder entrance, 11 West 53rd Street (between Fifth and Sixth Avenues), New York, New York 10019, at 9:00 a.m., Eastern Standard Time, on Tuesday, December 11, 2018. The principal business of the meeting will be the consideration of the following matters:

 

  1.

The election of 11 directors;

 

  2.

The ratification of the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for fiscal year 2018;

 

  3.

The approval of an amendment and restatement of the CBS Corporation 2009 Long-Term Incentive Plan; and

 

  4.

Such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

The close of business on November 6, 2018 has been fixed as the record date for determining the holders of shares of CBS Corporation Class A Common Stock entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. For a period of at least 10 days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be open to the examination of any stockholder during ordinary business hours at the Company’s corporate headquarters located at 51 West 52nd Street, New York, New York 10019.

By order of the Board of Directors,

 

 

LOGO

JONATHAN H. ANSCHELL

Secretary

November 16, 2018


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TABLE OF CONTENTS

 

     Page  

VOTING AND SOLICITATION OF PROXIES

     1  

CORPORATE GOVERNANCE

     4  

CBS CORPORATION’S BOARD OF DIRECTORS

     7  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     16  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     19  

RELATED PERSON TRANSACTIONS

     20  

ITEM 1—ELECTION OF DIRECTORS

     22  

DIRECTOR COMPENSATION

     27  

Outside Director Compensation During 2017

     27  

Description of Director Compensation

     28  

ITEM  2—RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     30  

REPORT OF THE AUDIT COMMITTEE

     31  

FEES FOR SERVICES PROVIDED BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     33  

COMPENSATION DISCUSSION AND ANALYSIS

     34  

COMPENSATION COMMITTEE REPORT

     57  

EXECUTIVE COMPENSATION

     58  

Summary Compensation Table for Fiscal Year 2017

     58  

Grants of Plan-Based Awards During 2017

     64  

Outstanding Equity Awards at Fiscal Year-End 2017

     66  

Option Exercises and Stock Vested During 2017

     70  

Pension Benefits in 2017

     70  

Nonqualified Deferred Compensation in 2017

     74  

Potential Payments Upon Termination and Certain Other Events

     76  

ITEM 3—APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE CBS CORPORATION 2009 LONG-TERM INCENTIVE PLAN

     93  

EQUITY COMPENSATION PLAN INFORMATION

     103  

OTHER MATTERS

     104  

2019 ANNUAL MEETING OF STOCKHOLDERS

     104  

ANNEX A—RECONCILIATION OF NON-GAAP MEASURES

     A-1  

ANNEX B—CBS CORPORATION 2009 AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN

     B-1  


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CBS CORPORATION

2018 PROXY STATEMENT

 

 

VOTING AND SOLICITATION OF PROXIES

Solicitation of Proxies

A proxy is being solicited by the Board of Directors of CBS Corporation, a Delaware corporation (“CBS Corporation” or the “Company”), for use at the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, December 11, 2018 at 9:00 a.m., Eastern Standard Time. The close of business on November 6, 2018 is the record date for determining the record holders of the Company’s Class A Common Stock, par value $0.001 per share, entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. Holders of the Company’s non-voting Class B Common Stock, par value $0.001 per share, are not entitled to vote at the Annual Meeting or any adjournment or postponement thereof.

As of November 6, 2018, the Company had outstanding 37,507,526 shares of its Class A Common Stock, each of such shares being entitled to one vote, and 336,701,580 non-voting shares of its Class B Common Stock (together with the Company’s Class A Common Stock, the “Common Stock”). The Company intends to commence its distribution of this proxy statement on or about November 20, 2018.

Submission of Proxies

Each of the persons named in the proxy card and on the Company’s voting website at www.proxyvote.com (the “proxy holders”), individually and with the power to appoint his substitute, has been designated by the Company’s Board of Directors to vote the shares represented by proxy at the Annual Meeting. The proxy holders are officers of the Company. They will vote the shares represented by each valid and timely received proxy in accordance with the stockholder’s instructions, or if no instructions are specified, the shares represented by the proxy will be voted in accordance with the recommendations of the Board of Directors as described in this proxy statement. If any other matter properly comes before the Annual Meeting, the proxy holders will vote on that matter in their discretion.

Holders of record of the Company’s Class A Common Stock may submit a proxy in the following ways:

 

   

By Mail: Holders of record may complete, sign and date the proxy card and return it in the envelope provided, so that it is received prior to the Annual Meeting.

 

   

By Internet: Holders of record may access www.proxyvote.com, with the proxy card in hand, and follow the instructions. The Internet proxy must be received no later than 11:59 p.m., Eastern Standard Time, on December 10, 2018.

 

   

By Telephone: Holders of record living in the United States or Canada may use any touch-tone telephone to call 1-800-690-6903, with the proxy card in hand, and follow the recorded instructions. The telephone proxy must be received no later than 11:59 p.m., Eastern Standard Time, on December 10, 2018.

“Beneficial holders” (defined below) will receive voting materials, including instructions on how to vote, directly from the holder of record.

Shares Held in the Company’s 401(k) Plan. Voting instructions relating to shares of the Company’s Class A Common Stock held in the Company’s 401(k) plan must be received no later than 11:59 p.m., Eastern Standard Time, on December 9, 2018, so that the trustee of the plan (who votes the shares on behalf of plan participants) has adequate time to tabulate the voting instructions. Shares held in the 401(k) plan that are not voted or for which the trustee does not receive timely voting instructions will be voted by the trustee in the same proportion as the shares held in the plan that are timely voted.

 

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Voting Other than by Proxy. While the Company encourages holders of its Class A Common Stock to vote by proxy, holders of the Company’s Class A Common Stock (other than shares held in the 401(k) plan) also have the option of voting their shares in person at the Annual Meeting. Some holders of the Company’s Class A Common Stock hold their shares in “street name” through a broker or other nominee and are therefore known as “beneficial holders.” If shares of Class A Common Stock are held for a beneficial holder in a brokerage, bank or other institutional account, then the beneficial holder must obtain a proxy from that entity and bring it to the Annual Meeting in order to vote the shares at the Annual Meeting.

Revocation of Proxies

A proxy may be revoked before the voting deadline by sending written notice to Jonathan H. Anschell, Secretary, CBS Corporation, 51 West 52nd Street, New York, NY 10019, or by timely submission (including telephonic or Internet submission) of a proxy bearing a later date than the proxy being revoked to Proxy Services, P.O. Box 9111, Farmingdale, NY 11735-9543. Revocations made by telephone or through the Internet must be received by 11:59 p.m., Eastern Standard Time, on December 10, 2018. A holder may also revoke a proxy by voting in person at the Annual Meeting.

Shares Held in the Company’s 401(k) Plan. Voting instructions relating to shares of the Company’s Class A Common Stock held in the Company’s 401(k) plan may be revoked prior to 11:59 p.m., Eastern Standard Time, on December 9, 2018, by sending written notice to Jonathan H. Anschell, Secretary, CBS Corporation, 51 West 52nd Street, New York, NY 10019, or by timely submission (including telephonic or Internet submission) of voting instructions bearing a later date than the voting instructions being revoked to Proxy Services, P.O. Box 9111, Farmingdale, NY 11735-9543.

Quorum

Under the Company’s Amended and Restated Bylaws, the holders of a majority of the aggregate voting power of the Company’s Class A Common Stock outstanding on the record date, present in person or represented by proxy at the Annual Meeting, shall constitute a quorum. Abstentions and broker non-votes will be treated as present for purposes of determining the presence of a quorum.

Matters to be Considered at the Annual Meeting

The Board of Directors recommends a vote FOR each of the following matters:

 

  1.

The election of each of the 11 nominated directors;

 

  2.

The ratification of the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm (“independent auditor”) for fiscal year 2018; and

 

  3.

The approval of an amendment and restatement of the CBS Corporation 2009 Long-Term Incentive Plan.

The affirmative vote of the holders of a majority of the aggregate voting power of the Company’s Class A Common Stock present in person or represented by proxy at the Annual Meeting (“majority vote”) is required to elect each of the 11 nominated directors and to approve Items 2 and 3 set forth above. An abstention with respect to any matter will have the effect of a vote against such matter.

Under the rules of the New York Stock Exchange (“NYSE”), a broker or other nominee holding shares of the Company’s Class A Common Stock on behalf of a beneficial holder may not be permitted to exercise voting discretion with respect to some matters to be acted upon at stockholders’ meetings. Therefore, if a beneficial holder does not give the broker or nominee specific voting instructions, the holder’s shares may not be voted on those matters and a broker non-vote will occur. Under the rules of the NYSE, brokers or nominees may vote on the matter listed as Item 2 above, but not on the matters listed as Items 1 and 3 above, if they do not receive instructions from the beneficial holder of the shares held in street name. A broker non-vote will have no effect on the voting results for Items 1 and 3 above.

 

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As of November 6, 2018, National Amusements, Inc. (“National Amusements”) beneficially owned, directly and indirectly through a wholly owned subsidiary, approximately 79.7% of the Company’s outstanding Class A Common Stock and approximately 10.5% of the Company’s outstanding Class A Common Stock and Class B Common Stock on a combined basis. Sumner M. Redstone, the controlling stockholder of National Amusements, is Chairman Emeritus of the Company. National Amusements has advised the Company that it intends to vote all of its shares of the Company’s Class A Common Stock in favor of each of Items 1 through 3 above. Such action by National Amusements will be sufficient to constitute a quorum and to approve each of Items 1 through 3 above.

Cost of Proxy Solicitation and Inspector of Election

The Company will pay the cost of the solicitation of proxies, including the preparation, printing and mailing of this proxy statement and the related materials. The Company will furnish copies of this proxy statement and related materials to banks, brokers, fiduciaries and custodians that hold shares on behalf of beneficial holders so that they may forward the materials to the beneficial holders. American Election Services, LLC will serve as the independent inspector of election for the Annual Meeting.

Mailing Address

The Company’s mailing address is 51 West 52nd Street, New York, NY 10019.

 

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CORPORATE GOVERNANCE

CBS Corporation’s corporate governance practices are established and monitored by its Board of Directors (the “Board”). The Board, with assistance from its Nominating and Governance Committee, regularly assesses CBS Corporation’s governance practices in light of legal requirements and governance best practices. In several areas, CBS Corporation’s practices go beyond the requirements of the NYSE corporate governance listing standards (the “NYSE listing standards”). For example, despite being a “controlled company” (i.e., a company of which more than 50% of the voting power is held by an individual or another company), CBS Corporation has a majority of independent directors on its Board and has an independent Compensation Committee and an independent Nominating and Governance Committee, none of which is required for controlled companies under the NYSE listing standards.

CBS Corporation’s principal governance documents are as follows:

 

   

Corporate Governance Guidelines

 

   

Board Committee Charters:

 

     

Audit Committee Charter

 

     

Compensation Committee Charter

 

     

Nominating and Governance Committee Charter

 

   

Business Conduct Statement

 

   

Supplemental Code of Ethics for Senior Financial Officers

These documents are available on the Company’s public website at www.cbscorporation.com, and copies of these documents may also be requested by writing to Investor Relations, CBS Corporation, 51 West 52nd Street, New York, NY 10019. The Company encourages its stockholders to read these documents, as the Company believes they illustrate CBS Corporation’s commitment to good governance practices. Certain key provisions of these documents are summarized below.

Corporate Governance Guidelines

CBS Corporation’s Corporate Governance Guidelines (the “Guidelines”) set forth the Company’s corporate governance principles and practices on a variety of topics, including the responsibilities, composition and functioning of the Board, director qualifications, and the roles of the Board Committees. The Guidelines are periodically reviewed and updated as needed. The Guidelines provide, among other things, that:

 

   

A majority of the members of the Board must be independent as determined under the NYSE listing standards and the standards set forth in the Guidelines;

 

   

All of the members of the Audit, Compensation, and Nominating and Governance Committees must be independent;

 

   

Separate executive sessions of the non-management directors and independent directors must be held a minimum number of times each year;

 

   

The Board, acting on the recommendation of the Nominating and Governance Committee, shall determine whether a director candidate’s service on more than three other public company boards of directors is consistent with service on the Board;

 

   

Director compensation will be established in light of the policies set forth in the Guidelines;

 

   

Within three years of joining the Board, directors are expected to own shares of Common Stock having a market value of at least five times the cash annual retainer fee paid to them, in accordance with the Guidelines;

 

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The Board will hold an annual self-evaluation to assess its effectiveness; and

 

   

The Compensation Committee and the Nominating and Governance Committee will together review periodically succession planning and report to the non-management directors on these reviews.

Board Committee Charters

Each standing Board Committee operates under a written charter that has been adopted by the Board. The Company has three standing Committees: the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. The Committee charters set forth the purpose, objectives and responsibilities of the respective Committee and discuss matters such as Committee membership requirements, number of meetings and the setting of meeting agendas. The charters are assessed at least every other year, or more frequently as the applicable Committee may determine, and are updated as needed. More information on the Committees, their respective roles and responsibilities, and their charters can be found under “CBS Corporation’s Board of Directors—Board Committees.”

Business Conduct Statement

The Company’s Business Conduct Statement (“BCS”) sets forth the Company’s standards for ethical conduct required of all directors and employees of the Company. The BCS is available on the Company’s website at www.cbscorporation.com and on the Company’s intranet sites and also has been distributed to the Company’s employees and directors. As part of the Company’s compliance and ethics program, directors and full-time employees are required to certify as to their compliance with the BCS and, on an ongoing basis, must disclose any potential conflicts of interest. The Company has also implemented an online BCS training program. The BCS addresses, among other things, topics such as:

 

   

Compliance with laws, rules and regulations, including the Foreign Corrupt Practices Act;

 

   

Conflicts of interest, including the disclosure of potential conflicts to the Company;

 

   

Confidentiality, insider information and trading, and fair disclosure;

 

   

Financial accounting and improper payments;

 

   

The Company’s commitment to providing equal employment opportunities and a bias-free and harassment-free workplace environment;

 

   

Fair dealing and relations with competitors, customers and suppliers;

 

   

Health, safety and the environment; and

 

   

Political contributions and payments.

The BCS provides numerous avenues for employees to report violations of the BCS or matters of concern, whether anonymously or with attribution, to the appropriate officers of the Company and/or the Audit Committee, or to government human rights agencies. These avenues include a telephone hotline, email contacts or direct communication with the Company’s compliance officers. The BCS also provides that the Company will protect anyone who makes a good faith report of a violation of the BCS and that retaliation against an employee who makes a good faith report will not be tolerated.

Waivers of the BCS for the Company’s executive officers or directors will be disclosed on the Company’s website at www.cbscorporation.com or by Form 8-K filed with the Securities and Exchange Commission (SEC).

 

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Supplemental Code of Ethics for Senior Financial Officers

The Supplemental Code of Ethics is applicable to the Company’s Acting Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Supplemental Code of Ethics, which is available on the Company’s website at www.cbscorporation.com, addresses matters specific to those senior financial positions in the Company, including responsibility for the disclosures made in CBS Corporation’s filings with the SEC, reporting obligations with respect to certain matters and a general obligation to promote honest and ethical conduct within the Company. The senior financial officers are also required to comply with the BCS. Amendments to or waivers of the Supplemental Code of Ethics for these officers will be disclosed on the Company’s website at www.cbscorporation.com or by Form 8-K filed with the SEC.

 

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CBS CORPORATION’S BOARD OF DIRECTORS

Recent Developments Regarding the Company’s Board and Governance Matters

On September 9, 2018, the Company entered into a settlement and release agreement (the “Settlement Agreement”) with National Amusements, NAI Entertainment Holdings LLC (“NAI-EH” and together with National Amusements, the “NAI Entities”), the Sumner M. Redstone National Amusements Trust (the “SMR Trust”), Sumner Redstone, Shari Redstone, other members of the Redstone family and related parties, the other then-members of the Company’s Board of Directors, each of the trustees of the SMR Trust, and certain other parties. Pursuant to the Settlement Agreement, among other matters, the parties dismissed with prejudice all claims in the litigation that had been pending in the Delaware Chancery Court among the Company, NAI, the then-members of the Company’s Board of Directors and certain other parties.

Pursuant to the Settlement Agreement, Leslie Moonves, David R. Andelman, Joseph A. Califano, Jr., Charles K. Gifford, Leonard Goldberg, Arnold Kopelson and Doug Morris each resigned as a director of the Company, effective immediately after the execution of the Settlement Agreement. Additionally, at a meeting held on September 9, 2018, the Board, following a review process by the directors, appointed Candace K. Beinecke, Barbara Byrne, Brian Goldner, Richard D. Parsons, Susan Schuman and Strauss Zelnick (“New Director Appointees”) to fill six of the Board vacancies resulting from the resignations, in accordance with the terms of the Settlement Agreement. On the same date, Mr. Moonves also resigned as Chairman of the Board, President and Chief Executive Officer, and the Board appointed Joseph R. Ianniello as President and Acting Chief Executive Officer. As a result of these changes, the Board on September 9, 2018 had 13 directors, consisting of the New Director Appointees, William S. Cohen, Gary L. Countryman, Bruce S. Gordon, Linda M. Griego, Robert N. Klieger, Martha L. Minow and Shari Redstone (the “September 9 Board”). Subsequently, three of those directors (Messrs. Cohen, Gordon and Parsons) resigned from the Board.

As of the date of this proxy statement, the Board of Directors is comprised of 10 members: Candace K. Beinecke, Barbara M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. Griego, Robert N. Klieger, Martha L. Minow, Shari Redstone, Susan Schuman and Strauss Zelnick. Mr. Klieger was appointed as a director on July 27, 2017. The remaining directors not appointed to the Board on September 9, 2018 as indicated above were elected at the Company’s 2017 Annual Meeting of Stockholders.

The Board also acted on September 9, 2018 to reconstitute each of the standing committees of the Board. Following the resignations of Messrs. Cohen, Gordon and Parsons, these Committees were further reconstituted, and as of the date of this proxy statement, the members of such Committees are as set forth below under the “Board Committees” section.

The Settlement Agreement prescribes arrangements relating to nominations of directors and the future composition of the Board of Directors and Committees of the Board. In the Settlement Agreement, the Company and National Amusements agreed that the members of the September 9 Board would continue to constitute the members of the Board at least until the Company’s 2020 annual meeting of stockholders and further agreed to take all actions necessary to recommend such persons for election to the Board and to cause such persons to be elected and/or appointed to the Board, except that the individual who is selected by the Board to serve as the Company’s Chief Executive Officer may be elected as a director, and if any Board member’s service as a director ceases as a result of such director’s removal, death, retirement or resignation, such vacancy will be filled (i) if the director is either Ms. Redstone or Mr. Klieger, by an individual designated by the NAI Entities, (ii) if the director is the chief executive officer, with the new chief executive officer upon appointment by the Board, and (iii) for any other vacancy, with an “unaffiliated independent director” (as defined under the Settlement Agreement) approved by the Board upon the recommendation of the Nominating and Governance Committee. Each of the NAI Entities agreed in the Settlement Agreement that it would not take action that would result in (i) the Board being comprised of less than a majority of unaffiliated independent directors, (ii) the Compensation Committee or the Nominating and Governance Committee not being comprised of all unaffiliated independent directors, or

 

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(iii) CBS availing itself of the “controlled company” exception under the NYSE listing standards. The Settlement Agreement defines “unaffiliated independent director” as any member of the Board (i) who is not affiliated or associated with Mr. Redstone, Ms. Redstone, the NAI Entities, the SMR Trust and the other trustees of the SMR Trust, and (ii) who is independent under applicable stock exchange and SEC rules.

The Settlement Agreement also provides that any vacancy in the office of the Chairman of the Board would be left vacant pending further determination by the newly reconstituted Board regarding filling the office. Following the resignation of Mr. Gordon, the lead independent director, effective September 23, 2018, the Board appointed Mr. Parsons to serve as Interim Chairman of the Board on September 25, 2018. Following Mr. Parson’s resignation on October 21, 2018, the Board appointed Mr. Zelnick to serve as Interim Chairman of the Board as of the same date.

Meetings of the Board

During 2017, the Board held 8 meetings and also acted by unanimous written consent. Each incumbent director who was a director in 2017 attended at least 75% of the meetings of the Board and Board Committees on which such director served during 2017 that were held during the period for which he or she served as a director. In addition to Board and Committee meetings, directors are expected to attend the Annual Meeting, and all of the directors who stood for election in 2017 attended the Company’s 2017 Annual Meeting of Stockholders.

In accordance with the Guidelines and the NYSE listing standards, the non-management directors meet separately, without directors who are Company employees, at least two times each year, and at such other times as they deem appropriate. The independent directors also meet separately, without those directors who are not independent as determined by the Board, at least two times each year, and at such other times as they deem appropriate. Currently, the non-executive Interim Chairman of the Board presides at meetings of the non-management directors and independent directors; during 2017, the members of the Nominating and Governance Committee presided at meetings of the non-management directors and independent directors on a rotating basis. During 2017, the non-management directors met 6 times, and the independent directors met 6 times.

Director Independence

The Company’s Guidelines provide that a majority of the Company’s directors must be independent of the Company, as “independence” is defined in the NYSE listing standards and in the Guidelines. The NYSE listing standards set forth five “bright-line” tests that require a finding that a director is not independent if the director fails any of the tests. In addition, the NYSE listing standards provide that a director is not independent unless the Board affirmatively determines that the director has no “material relationship” with the Company. The Guidelines set forth categorical standards to assist the Board in determining what constitutes a “material relationship” with the Company. Generally under these categorical standards, the following relationships are deemed not to be material:

 

   

The types of relationships identified by the NYSE listing standards’ “bright-line” tests, if they occurred more than five years ago (the Board will review any such relationship if it occurred more than three but less than five years ago);

 

   

A relationship whereby the director has received, or an immediate family member of the director has received for service as an executive officer, less than $120,000 in direct compensation from the Company during any 12-month period within the last three years; and

 

   

A relationship where the director is an executive officer or employee, or an immediate family member of the director is an executive officer, of the following:

 

     

a company that made payments to, or received payments from, the Company for property or services in an amount that, in each of the last three fiscal years, is less than 1% of such company’s annual consolidated gross revenues;

 

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a company which is either indebted to or a creditor of the Company in an amount that is less than 1% of such company’s total consolidated assets; and

 

     

a tax-exempt organization that received contributions from the Company in the prior fiscal year in an amount less than the greater of $500,000 or 1% of that organization’s consolidated gross revenues.

For relationships that exceed the thresholds described above, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, is made by the directors who are independent. In addition, the Guidelines state that, generally, the types of relationships not addressed by the NYSE listing standards or described in the Guidelines will not cause an otherwise independent director to be considered not independent. However, the Board may determine that a director is not independent for any reason it deems appropriate.

The full text of the Guidelines is available on the Company’s website at www.cbscorporation.com.

In October and November of 2018, the Nominating and Governance Committee reviewed the independence of the Company’s current 10 directors, all of whom are standing for election at the Annual Meeting, and the new nominee for director (Mr. Frederick O. Terrell), to determine its recommendation regarding which of them meet the independence standards outlined above. The Board, based on its review and the recommendation of the Nominating and Governance Committee, determined that 8 of the current 10 directors are, and the new nominee for director also is, independent. The current directors who are independent are Mses. Beinecke, Byrne, Griego, Minow, and Schuman and Messrs. Countryman, Goldner, and Zelnick.

During its review, in determining that the director nominees named above are independent, the Board considered that the Company and its subsidiaries in the ordinary course of business have, during the past three years, sold products and services to, and/or purchased products and services from, persons and companies and other entities, of which certain directors are executive officers or principals, and determined that all of these transactions met the threshold for relationships deemed to be immaterial under the Guidelines.

Board Leadership Structure

The Company’s Board of Directors is currently comprised of the following:

 

   

An independent non-executive Interim Chairman of the Board;

 

   

A non-executive Vice Chair of the Board; and

 

   

Eight other directors, seven of whom are independent.

Our Interim Chairman of the Board, Strauss Zelnick, presides at all meetings of the Board and at the meetings of the non-management directors and independent directors. Under the Guidelines, his responsibilities also include, together with the Chief Executive Officer, developing and approving agendas for Board meetings. Ms. Redstone serves as the non-executive Vice Chair of the Board, whose responsibilities include the duties set forth in the Company’s Bylaws. The Board believes that her role appropriately reflects both her breadth of experience in the entertainment industry and her ownership position in and role at National Amusements. The Board believes that this leadership structure, in which an independent director serves as Interim Chairman of the Board, is appropriate and in the best interests of the stockholders under current circumstances. In support of the independent oversight of management, the non-management directors and, separately, the independent directors routinely meet and hold discussions without management present. A majority of the directors on the Board are independent, and the Audit, Compensation and Nominating and Governance Committees are composed entirely of independent directors.

The Company’s Acting Chief Executive Officer is not a member of the Board. Pursuant to the terms of the Settlement Agreement, as described in the “Recent Developments Regarding the Company’s Board and Governance Matters” section above, the individual who is selected by the Board to serve as the Company’s permanent Chief Executive Officer may also be elected as a director.

 

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Board Risk Oversight

The Company’s Board of Directors has overall responsibility for the oversight of the Company’s risk management process. The Board carries out its oversight responsibility directly and through the delegation to its Committees of responsibilities related to the oversight of certain risks, as follows:

 

   

The Audit Committee, as part of its internal audit and independent auditor oversight, is responsible for reviewing the Company’s risk assessment and risk management practices and discusses risks as they relate to its review of the Company’s financial statements, the evaluation of the effectiveness of internal control over financial reporting, compliance with legal and regulatory requirements, and the performance of the internal audit function, among other responsibilities set forth in the Committee’s charter.

 

   

The Compensation Committee monitors risks associated with the design and administration of the Company’s compensation programs, including its performance-based compensation programs, to promote an environment which does not encourage unnecessary and excessive risk-taking by the Company’s employees. The Committee also reviews risks related to management resources, including the depth of the Company’s senior management. In view of this oversight and based on management’s assessment, the Company does not believe that its employee compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company.

 

   

The Nominating and Governance Committee oversees risk as it relates to monitoring developments in law and practice with respect to the Company’s corporate governance processes and in reviewing related person transactions. The Committee also is responsible for the periodic review of the following risk management processes at the Company: disaster recovery, crisis management and theft of intellectual property.

Each of these Committees reports regularly to the Board on these risk-related matters, among other items within its purview. On an annual basis, the Board conducts strategy sessions, which include presentations from economic, political and industry experts, among others, on matters affecting the Company, to assist the Board and management in preparing and implementing strategic initiatives, including risk management. In addition, the Board and Committees receive regular reports from management that include matters affecting the Company’s risk profile, including, among others, operations reports from the Chief Executive Officer and from division heads, all of which include strategic and operational risks; reports from the Chief Financial Officer and Chief Accounting Officer on credit and liquidity risks and on the integrity of internal controls over financial reporting; reports from the Chief Legal Officer on legal risks and material litigation; and reports on internal audit activities from the Senior Vice President, Internal Audit. The Audit Committee also receives periodic reports from the Company’s Chief Compliance Officer on the Company’s compliance program; Chief Information Security Officer on the Company’s information security program and the management of cybersecurity risk; and Senior Vice President, Internal Audit on the Company’s internal audit plan for the upcoming fiscal year, the scope of which is to determine the adequacy and function of the Company’s risk management, control and governance processes. Outside of formal meetings, Board members have regular access to executives, including the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer, and the Chief Legal Officer. The Committee and management reports, strategy sessions and real-time management access collectively provide the Board with integrated insight on the Company’s management of its risks.

Board Committees

The standing Board Committees were substantially reconstituted in the latter half of 2018 in connection with changes to Board membership. See the “Recent Developments Regarding the Company’s Board of Directors and Governance Matters” section above for a discussion of the arrangements related to the composition of Board Committees.

 

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The following chart sets forth the membership of each standing Board Committee as of the date of this proxy statement. The Board reviews and determines the membership of the Committees at least annually.

 

Committee    Members        

Audit Committee

  

Gary L. Countryman, Chair

Barbara M. Byrne

Susan Schuman

Compensation Committee

  

Brian Goldner, Chair

Linda M. Griego

Strauss Zelnick

Nominating and Governance Committee

  

Candace K. Beinecke, Chair

Martha L. Minow

Strauss Zelnick

During 2017, the Audit Committee held 5 meetings, the Compensation Committee held 16 meetings and the Nominating and Governance Committee held 15 meetings. Information about these Committees, including their respective roles and responsibilities and charters, is set forth below.

Audit Committee

The Audit Committee Charter provides that the Audit Committee will be comprised of at least three members and that all of the members on the Committee must be independent directors. Also, the Committee must have at least one “audit committee financial expert” (as described below), and all Committee members must be financially literate. The Committee holds at least five regular meetings each year, and it regularly meets separately at these meetings with the independent auditor, the Company’s Chief Legal Officer, its Senior Vice President, Internal Audit and other members of the Company’s senior management. The Committee is responsible for the following, among other things:

 

   

The appointment, retention, termination, compensation and oversight of the Company’s independent auditor, including reviewing with the independent auditor the scope of the audit plan and audit fees;

 

   

Reviewing the Company’s financial statements and related disclosures, including with respect to internal control over financial reporting;

 

   

Oversight of the Company’s internal audit function; and

 

   

Oversight of the Company’s compliance with legal and regulatory requirements.

For additional information on the Committee’s role and its oversight of the independent auditor during 2017, see “Report of the Audit Committee.”

Audit Committee Financial Experts. The Board has determined that all of the members of the Audit Committee are “financially literate,” as that term is interpreted by the Board in its business judgment. In addition, the Board has determined that each member of the Audit Committee, including Mr. Countryman, the Chair of the Audit Committee, qualifies as an “audit committee financial expert,” as that term is defined in the regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

Compensation Committee

The Compensation Committee Charter provides that the Compensation Committee will be comprised of at least three members, except that the Committee is deemed to be properly constituted with at least two members in the event of a vacancy until the Board fills the vacancy. The Charter also provides that all of the members on the Committee must be independent directors and that the Committee shall also satisfy the relevant requirements established pursuant to regulations promulgated under Section 162(m) of the Internal Revenue Code of 1986, as

 

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amended (the “Code”). The Committee holds at least four regular meetings each year and is responsible for the following, among other things:

 

   

Adopting and periodically reviewing the Company’s compensation philosophy, strategy and principles regarding the design and administration of the Company’s compensation programs;

 

   

Reviewing and approving the total compensation packages for the Company’s executive officers and other senior executives identified by the Committee after consultation with members of management (excluding “Talent,” as such term is currently used in the media or entertainment industries) (collectively, the “senior executives”); and

 

   

Overseeing the administration of the Company’s incentive compensation plans and its equity-based compensation plans.

Consideration and Determination of Executive Compensation. The Compensation Committee reviews all components of the senior executives’ compensation, including base salary, annual and long-term incentives and severance arrangements. In approving compensation for the senior executives, the Committee considers the input and recommendations of the Chief Executive Officer and certain other executive officers with respect to those senior executives who report directly to him or her. With respect to the Chief Executive Officer, the Committee reviews and approves goals and objectives relevant to his compensation and, together with the Nominating and Governance Committee, annually evaluates his performance in light of those goals and objectives. The results of this evaluation are then reported to the non-management directors. The Compensation Committee sets his compensation, taking this evaluation into account, and reports to the Board on this process.

The Company’s processes and procedures for the consideration of executive compensation and the role of the Company’s executive officers in determining or recommending the amount or form of executive compensation are more fully described in the “Compensation Discussion and Analysis” section below. Director compensation is approved by the Board, based on recommendations from the Nominating and Governance Committee, as more fully described in the “Nominating and Governance Committee” section below.

The Compensation Committee has the power to delegate its authority and duties to subcommittees or individuals as it deems appropriate and in accordance with applicable laws and regulations. The Committee has delegated to the President and Chief Executive Officer limited authority (with respect to executives who are not senior executives) to grant long-term incentive awards under the Company’s long-term incentive plan to such executives in connection with their hiring, promotion or contract renewal and to modify the terms of outstanding equity grants in certain post-termination scenarios, as discussed in the “Compensation Discussion and Analysis” section below.

The Committee is empowered to retain compensation consultants having special competence to assist the Committee in evaluating executive officer and employee compensation. The Committee has the sole authority to retain and terminate such consultants and to review and approve such consultants’ fees and other retention terms. During fiscal year 2017, the Committee retained an independent compensation consulting firm, Exequity LLP, to advise the Committee in its review of senior executive compensation. The Compensation Committee adopted a policy in 2008 providing that the independent compensation consulting firm will not be considered as a provider of services to the Company, other than for services provided to the Compensation Committee. Accordingly, other than these services provided to the Committee, Exequity did not perform any administrative or consulting services for the Company. In furtherance of the Committee’s review of senior executive compensation, the independent consultant examines the compensation practices at companies with which the Company competes for senior executive talent, including those companies engaged in similar business activities and other publicly traded U.S. companies, and provides other analysis, as more fully described in the “Compensation Discussion and Analysis” section below. The Compensation Committee assessed the independence of Exequity and determined that Exequity’s work for the Committee did not raise any conflict of interest.

 

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Nominating and Governance Committee

The Nominating and Governance Committee’s Charter provides that the Nominating and Governance Committee will be comprised of at least three members, except that the Committee is deemed to be properly constituted with at least two members in the event of a vacancy until the Board fills the vacancy. The Charter also provides that all of the members on the Committee must be independent directors. The Committee holds at least three regular meetings each year and is responsible for the following, among other things:

 

   

Identifying and recommending to the Board nominees for election to the Board and reviewing the composition of the Board as part of this process;

 

   

Overseeing all aspects of the Company’s corporate governance initiatives, including regular assessments of its principal governance documents;

 

   

Establishing criteria for the annual self-evaluations of the Board and its Committees;

 

   

Making recommendations to the Board on director compensation matters;

 

   

Monitoring developments in the law and practice of corporate governance;

 

   

Developing and recommending items for Board meeting agendas;

 

   

Reviewing transactions between the Company and related persons; and

 

   

Reviewing the following risk management processes at the Company: disaster recovery, crisis management and theft of intellectual property.

Consideration and Determination of Director Compensation. The Committee annually reviews and recommends for the Board’s consideration the form and amount of compensation for Outside Directors. “Outside Directors” are directors of the Company who are not employees of the Company or any of its subsidiaries. Only Outside Directors are eligible to receive compensation for serving on the Board, as more fully described in the “Director Compensation” section below. In connection with its 2018 review and recommendation, the Committee received advice from the then-current independent compensation consulting firm (Exequity LLP) retained by the Compensation Committee regarding market practice for director compensation.

In accordance with the Guidelines and its Charter, the Committee is guided by three principles in its review of Outside Director compensation and benefits: Outside Directors should be fairly compensated for the services they provide to the Company, taking into account, among other things, the size and complexity of the Company’s business and compensation and benefits paid to directors of comparable companies; Outside Directors’ interests should be aligned with the interests of stockholders; and Outside Directors’ compensation should be easy for stockholders to understand.

The recommendations of the Committee with respect to director compensation are subject to approval by the Board.

October/November 2018 Director Nomination Process. In connection with the October/November 2018 director nomination process, the Nominating and Governance Committee reviewed the current composition of the Board in light of the considerations set forth in its Charter and the Company’s Guidelines and the terms of the Settlement Agreement related to Board nominations and composition. See the “Recent Developments Regarding the Company’s Board and Governance Matters” section above. In addition, the Committee considered input received from other directors on Board member qualifications, Board composition and any special circumstances that the Committee deemed to be important in its determination. After taking these considerations into account, the Committee determined to recommend to the Board that each of the nominees set forth below in “Item 1-Election of Directors” be nominated to stand for election at the 2018 Annual Meeting.

Board Diversity. As part of its review, the Committee considers diversity, among other factors. The Committee considers diversity to be a broadly defined concept which takes into account professional experience,

 

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gender and ethnicity, among other characteristics. Multiple industries are represented on the Board, including the entertainment and media, banking, legal, insurance, education, and management consulting industries, among others. Additionally, distinguished contributors to governmental and not-for-profit organizations also serve on the Board. Multiple professions are represented among the directors, including current and past experience as principal executive officers, attorneys, higher education officials, entrepreneurs and television, film and record producers, among others. The Committee assesses the effectiveness of its consideration of diversity as part of its annual nomination process, when it reviews the composition of the Board as a whole.

Stockholder Recommendations for Director. The Committee will consider candidates for director recommended by the stockholders of the Company. All recommendations by stockholders for potential director candidates, which shall include written materials with respect to the potential candidate, should be sent to Jonathan H. Anschell, Secretary, CBS Corporation, 51 West 52nd Street, New York, NY 10019. The Company’s Guidelines and Nominating and Governance Committee Charter set forth certain criteria for director qualifications and Board composition that stockholders should consider when making a recommendation. These criteria include an expectation that directors have substantial accomplishments in their professional backgrounds, are able to make independent, analytical inquiries, and exhibit practical wisdom and mature judgment. Directors of CBS Corporation should also possess the highest personal and professional ethics, integrity and values and be committed to promoting the long-term interests of CBS Corporation’s stockholders. Director candidates recommended by stockholders who meet the director qualifications, which are described more fully in the Company’s Guidelines and Nominating and Governance Committee Charter, will be considered by the Chair of the Committee, who will present the information on the candidate to the entire Committee. Subject to the terms of the Settlement Agreement, director candidates recommended by stockholders will be considered by the Committee in the same manner as any other candidate.

Stockholder Outreach

The Company’s management, including through its investor relations program, conducts stockholder outreach throughout the year to inform the Company’s management and Board about the issues that matter most to stockholders. The stockholder outreach efforts include management meetings with individual and group investors in person or by telephone and management presentations at investor and industry conferences, including question-and-answer sessions, on a regular basis. The investor relations group also responds to retail investor email and telephone inquiries, providing access to Company representatives and a forum for providing feedback. During 2017, the Company’s investor relations team, certain named executive officers and/or other members of management and operating executives met with 26 of the Company’s 30 largest investors, representing 67% of the Company’s outstanding shares of Class A and Class B Common Stock, and with stockholders representing 60% of the Company’s outstanding shares of Class A and Class B Common Stock.

Communications with Directors

Stockholders and other parties interested in contacting CBS Corporation’s non-management directors may send an email to nonmanagementdirectors@cbs.com or write to Non-Management Directors, CBS Corporation, 51 West 52nd Street, 35th Floor, New York, NY 10019. The non-management directors’ contact information is also available on CBS Corporation’s website at www.cbscorporation.com. The non-management directors have approved the process for handling communications received in this manner.

Stockholders should also use the email and mailing address for the non-management directors to send communications to the Board. The process for handling stockholder communications to the Board received in this manner has been approved by the independent directors of the Board. Correspondence relating to accounting or auditing matters will be handled in accordance with procedures established by the Audit Committee for such matters.

 

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Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during fiscal year 2017 was, or has ever been, an officer or employee of the Company, and, during fiscal year 2017, no executive officer of the Company served on the board and/or compensation committee of any company that employed as an executive officer any member of the Company’s Board and/or Compensation Committee.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth as of September 30, 2018, unless otherwise indicated, information concerning the beneficial ownership of the Company’s Class A and Class B Common Stock by (i) each current director and director nominee, (ii) each named executive officer and (iii) the current directors and executive officers of the Company as a group. Each person has sole voting and investment power over the shares reported, except as noted. Also set forth below is information concerning the beneficial ownership by each person, or group of affiliated persons, who is known by the Company to beneficially own more than 5% of the Company’s Class A Common Stock. As of September 30, 2018, there were 37,507,609 shares of the Company’s Class A Common Stock outstanding and 337,358,037 shares of the Company’s Class B Common Stock outstanding.

 

     Beneficial Ownership of Equity Securities  

Name

         Title of Security          Number of Shares    Percent
of Class
 

Anthony G. Ambrosio

   Class A Common      0           0  
   Class B Common      439,430      (1)(2)(3)      *  

Candace K. Beinecke

   Class A Common      0           0  
   Class B Common      0           0  

Barbara M. Byrne

   Class A Common      0           0  
   Class B Common      1,639      (3)      *  

Gary L. Countryman

   Class A Common      6,697      (4)      *  
   Class B Common      81,028      (1)(4)      *  

Brian Goldner

   Class A Common      0           0  
   Class B Common      0           0  

Linda M. Griego

   Class A Common      0           0  
   Class B Common      47,435      (3)(4)      *  

Joseph R. Ianniello

   Class A Common      0           0  
   Class B Common      1,212,330      (1)(2)(3)      *  

Robert N. Klieger

   Class A Common      889      (4)      *  
   Class B Common      2,448      (4)      *  

Martha L. Minow

   Class A Common      2,298      (4)      *  
   Class B Common      4,512      (4)      *  

Leslie Moonves

   Class A Common      0           0  
   Class B Common      2,888,764      (1)(2)(3)      *  

Shari Redstone

   Class A Common      15,018      (4)(5)      *  
   Class B Common      114,796      (3)(4)(5)      *  

Susan Schuman

   Class A Common      0           0  
   Class B Common      0           0  

Gil Schwartz

   Class A Common      0           0  
   Class B Common      86,026      (1)(2)      *  

Frederick O. Terrell

   Class A Common      0      (6)      0  
   Class B Common      0      (6)      0  

Lawrence P. Tu

   Class A Common      0           0  
   Class B Common      192,210      (1)(2)      *  

Strauss Zelnick

   Class A Common      0           0  
   Class B Common      0           0  

Current directors and executive officers as a group (16 persons)

   Class A Common
Class B Common
    
24,902
1,884,720
 
 
   (4)(5)
(1)(2)(3)(4)(5)(7)(8)
    

*

*

 

 

 

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     Beneficial Ownership of Equity Securities  

Name

         Title of Security            Number of Shares    Percent
of Class
 

National Amusements
846 University Avenue
Norwood, MA 02062

    

Class A Common

Class B Common

 

 

    

29,882,599

9,243,800

 

 

   (9)

(9)

    

79.7

2.7


Mario J. Gabelli et al.(10)

     Class A Common        3,398,568           9.1

GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580-1435

           

Gruss Capital Management, LP et al.(11)

     Class A Common        2,480,000           6.6

Gruss Capital Management, LP
510 Madison Avenue, 16th Floor
New York, NY 10022

           

 

*

Represents less than 1% of the outstanding shares of the class.

 

(1)

Includes the following shares of the Company’s Class B Common Stock which the indicated named executive officer or director had the right to acquire on or within 60 days from September 30, 2018, through the exercise of stock options: Ambrosio, 233,353; Countryman, 15,279; Ianniello, 859,686; Moonves, 1,681,273; Schwartz, 64,444; and Tu, 192,020.

 

(2)

Includes shares held through the CBS 401(k) Plan.

 

(3)

Includes the following number of shares of the Company’s Class B Common Stock (a) owned by family members but as to which, except in the case of Ms. Griego, the indicated person disclaims beneficial ownership: Griego, 6,000; Ianniello, 2,416; and Moonves, 4,746; (b) held by trusts, as to which the indicated person has shared voting and investment power: Moonves, 146,292; and Shari Redstone, 1,500; (c) held in family trusts, as to which the indicated person has sole voting and investment power: Ambrosio, 94,366; Byrne, 864; and Moonves, 278,090; and (d) held in family trusts, as to which the indicated person’s family member has voting and investment power: Ambrosio, 36,858.

 

(4)

Includes (a) the following Company Class A Common Stock phantom units and Class B Common Stock phantom units credited pursuant to the Company’s deferred compensation plans for Outside Directors: Countryman, 6,697 Class A and 6,708 Class B; Klieger, 889 Class A and 895 Class B; Minow, 2,298 Class A and 2,311 Class B and Shari Redstone, 15,018 Class A and 15,197 Class B; and (b) the following shares of the Company’s Class B Common Stock underlying vested restricted stock units (“RSUs”) for which settlement has been deferred: Countryman, 57,104; Griego, 31,584; Klieger, 1,553; and Shari Redstone, 44,025. Pursuant to the governing plans, the phantom common stock units are payable in cash and the RSUs are payable in shares of the Company’s Class B Common Stock following termination of service as a director.

 

(5)

Ms. Redstone is a stockholder of National Amusements and has a minority indirect beneficial interest in the Company shares owned by National Amusements (and a wholly owned subsidiary).

 

(6)

Information for Mr. Terrell is as of November 16, 2018.

 

(7)

Includes 1,160,647 shares of the Company’s Class B Common Stock which the current directors and executive officers as a group had the right to acquire on or within 60 days from September 30, 2018, through the exercise of stock options or through the vesting of RSUs.

 

(8)

Includes information for Christina Spade as of October 18, 2018, the date of her appointment as the Company’s Executive Vice President, Chief Financial Officer.

 

(9)

These shares are owned by National Amusements and a wholly owned subsidiary. Beneficial ownership may also be attributed to Sumner M. Redstone, Chairman Emeritus of the Company, as Mr. Redstone is the chairman of the board and the beneficial owner of a controlling interest in National Amusements. National Amusements is controlled by Mr. Redstone through the Sumner M. Redstone National Amusements Trust

 

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  (the “SMR Trust”), which owns 80% of the voting interest of National Amusements, and such voting interest of National Amusements held by the SMR Trust is voted solely by Mr. Redstone until his incapacity or death. The SMR Trust provides that in the event of Mr. Redstone’s death or incapacity, voting control of the National Amusements’ voting interest held by the SMR Trust will pass to seven trustees, who will include director Shari Redstone. No member of the Company’s management is a trustee of the SMR Trust. Based on information received from National Amusements, National Amusements has pledged to its lenders shares of the Company’s Class A Common Stock and Class B Common Stock owned directly or indirectly by National Amusements. The aggregate number of shares pledged by National Amusements represents approximately 4.5% of the total outstanding shares of the Company’s Class A Common Stock and the Company’s Class B Common Stock, on a combined basis. The amount of the Company’s Class A Common Stock which National Amusements directly or indirectly owns and which has not been pledged by National Amusements to its lenders represents approximately 59.7% of the Company’s total Class A Common Stock outstanding. Mr. Redstone also directly owns 40 shares of the Company’s Class A Common Stock and 202,493 shares of the Company’s Class B Common Stock that are not shown in the table. Including such shares, Mr. Redstone beneficially owns a total of 29,882,639 shares of the Company’s Class A Common Stock, or 79.7% of the class, and 9,446,293 shares of the Company’s Class B Common Stock, or 2.8% of the class.

 

(10)

The information concerning Mario J. Gabelli et al. is based upon a Schedule 13D/A filed with the SEC on November 20, 2017. In addition to Mr. Gabelli, each of the following entities that Mr. Gabelli directly or indirectly controls or for which he acts as chief investment officer is a reporting person on the Schedule 13D/A: Gabelli Funds, LLC (“Gabelli Funds”); GAMCO Asset Management, Inc. (“GAMCO”); Gabelli & Company Investment Advisers, Inc. (“GCIA”); Gabelli Foundation, Inc. (the “Foundation”); MJG-IV Limited Partnership (“MJG-IV”); GGCP, Inc. (“GGCP”); GAMCO Investors, Inc. (“GBL”); and Associated Capital Group, Inc. (“AC”). As reported in the Schedule 13D/A, as of November 17, 2017: Gabelli Funds beneficially owned 1,524,300 of the reported shares; GAMCO beneficially owned 1,842,226 of the reported shares; GCIA beneficially owned 11,200 of the reported shares; GGCP beneficially owned 5,000 of the reported shares; the Foundation beneficially owned 4,000 of the reported shares; MJG-IV beneficially owned 10,000 of the reported shares; and AC beneficially owned 842 of the reported shares. Mr. Gabelli is deemed to beneficially own 1,000 shares as well as the shares owned beneficially by each of the foregoing reporting persons. AC, GBL and GGCP are deemed to beneficially own the shares owned beneficially by each of the foregoing reporting persons other than Mr. Gabelli and the Foundation. Each of the reporting persons discloses that it has sole voting and investment power with respect to the shares it beneficially owns, except that: (a) GAMCO does not have voting power over 135,934 of the reported shares; (b) Gabelli Funds has sole vesting and investment power with respect to the shares of each fund for which Gabelli Funds provides advisory services (the “Funds”) so long as the aggregate voting interest of all joint filers does not exceed 25% of their total voting interest in the Company and, in that event, the proxy voting committee of each Fund will vote that Fund’s shares; (c) in other special circumstances, the proxy voting committee of each Fund may take and exercise in its sole discretion the entire voting power with respect to the shares held by such Fund; and (d) the power of Mr. Gabelli, AC, GBL and GGCP to vote and invest the shares is indirect with respect to shares beneficially owned directly by the other reporting persons.

 

(11)

The information concerning Gruss Capital Management LP et al. is based upon a Schedule 13G/A filed with the SEC on January 30, 2018. As reported in the Schedule 13G/A, as of December 31, 2017, each of the following reporting persons shared voting and investment power with respect to all of the reported shares: Gruss DV Master Fund, Ltd. (“GDVMF”); Gruss Capital Management LP (“Gruss LP”); Gruss Management, LLC (“Gruss”); and Sean Dany. The reporting persons disclose that Gruss LP serves as the investment manager to GDVMF, Gruss serves as the general partner to Gruss LP, and Sean Dany is the managing member and principal owner of Gruss.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s executive officers and directors, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE and to furnish the Company with copies of all Section 16(a) forms they file. Based upon the Company’s compliance program, a review of the forms furnished to the Company and written representations, the Company believes that during 2017 its executive officers, directors and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements.

 

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RELATED PERSON TRANSACTIONS

Review, Approval or Ratification of Transactions with Related Persons

The Board of Directors adopted a written policy whereby the Nominating and Governance Committee reviews and approves, ratifies or takes other actions it deems appropriate with respect to a related person transaction that, under the rules of the SEC, is required to be disclosed in the Company’s proxy statement. In its review, the Committee considers the related person’s interest in the transaction; the material terms of the transaction, including the dollar amount involved; the importance of the transaction to the related person and the Company; whether the transaction would impair the judgment of the related person; and any other information the Committee deems appropriate.

Any member of the Committee who is a related person with respect to a transaction under review may not participate in the review or vote respecting the transaction; however, that person may be counted in determining the presence of a quorum at a meeting of the Committee that considers the transaction.

Under the policy, the Company’s legal staff is primarily responsible for determining whether a related person has a direct or indirect material interest in a transaction with the Company that is required to be disclosed. The determination will be made after a review of information obtained from the related person and information available from the Company’s records. The staff is responsible for establishing and maintaining policies and procedures to obtain relevant information to allow it to make the determination.

Agreements Related to Viacom Inc.

National Amusements, the Company’s controlling stockholder, is also the controlling stockholder of Viacom Inc. (“Viacom”). Mr. Sumner M. Redstone, the controlling stockholder, chairman of the board of directors and chief executive officer of National Amusements, serves as Chairman Emeritus for both the Company and Viacom.

During 2017, the Company, as part of its normal course of business, entered into transactions with Viacom and its subsidiaries. The Company licenses its television content, leases production facilities and sells advertising spots to various subsidiaries of Viacom. Viacom also distributes certain of the Company’s television programs in the home entertainment market. The Company’s total revenues from these transactions were $145 million for the year ended December 31, 2017. In addition, the Company leases production facilities, licenses feature films and purchases advertisement spots from various subsidiaries of Viacom. The total amounts from these transactions were $21 million for the year ended December 31, 2017. As of December 31, 2017, Viacom owed the Company approximately $104 million, and the Company owed Viacom approximately $2.8 million in connection with the Company’s various normal course of business transactions with Viacom.

The Company believes that the terms of all such transactions were no more or less favorable to the Company and its businesses than they would have obtained from unrelated parties. The Company expects for the foreseeable future to continue to have transactions with Viacom.

Other Transactions

The National Center on Addiction and Substance Abuse (“CASA”) sponsors an annual “Family Day” event, the purpose of which is to encourage families to eat dinner together. During 2017, Mr. Joseph A. Califano, Jr. (who served as a director of the Company until September 9, 2018) served as Founder and Chairman Emeritus of CASA. In 2017, certain divisions of the Company and its subsidiaries supported the “Family Day” event by airing public service announcements (PSAs). It is anticipated that divisions of the Company and its subsidiaries will from time to time continue to promote Family Day. In addition, in 2017, the Company made contributions totaling $50,000 to CASA.

 

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Pursuant to an agreement between a subsidiary of the Company and Panda Productions, a television and film production company owned 50% by Mr. Leonard Goldberg (who served as a director of the Company until September 9, 2018), he serves as an Executive Producer of CBS Network’s television series, Blue Bloods. In connection with this agreement, during 2017, the Company paid to Panda Productions fees per episode for Mr. Goldberg’s executive producer services, which are consistent with fees paid to other executive producers at Mr. Goldberg’s level. The Company has previously paid, and may also in the future pay, additional contingent compensation to Panda Productions based upon its negotiated participation in net revenues received by the Company in connection with the Blue Bloods series, consistent with industry practice. The Company believes that the terms of the agreement with Panda Productions are no more or less favorable to the Company than it could have obtained from unrelated parties.

Julie Chen, the wife of Mr. Leslie Moonves (who served as the Company’s Executive Chairman of the Board, President and Chief Executive Officer until September 9, 2018), is the host of the CBS Network show Big Brother and was a host of the CBS Network show The Talk until September 2018. Ms. Chen’s compensation is comparable to on-air talent in similar positions at the CBS Network, and the Company believes it is comparable to on-air talent in such positions generally.

Pursuant to the terms of an agreement between Simon & Schuster, a subsidiary of the Company, and Gil Schwartz (who served as the Company’s Senior Executive Vice President and Chief Communications Officer until November 1, 2018), Mr. Schwartz is entitled to receive an advance, a portion of which was paid in 2017 and in 2018, on royalties otherwise payable to him in connection with his grant to Simon & Schuster of the exclusive rights to publish a new book authored by him, payable over time subject to certain milestones. The formula for determining royalties payable under Mr. Schwartz’ agreement is consistent with such formulas for determining royalties payable to other authors at his level. The Company believes that the terms of the agreement with Mr. Schwartz are no more or less favorable to the Company than it could have obtained from unrelated parties.

Leonardo Mei (son-in-law of Anthony G. Ambrosio, who served as the Company’s Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer until November 1, 2018) is an employee in the Facilities Engineering and Design department of the Company. Mr. Mei received compensation in 2017 in an amount consistent with the compensation paid to other employees at his level.

In November 1995, the Company entered into an agreement with Gabelli Asset Management Company (“GAMCO”) pursuant to which GAMCO manages certain assets for qualified U.S. pension plans sponsored by the Company. For 2017, the Company paid GAMCO approximately $199,407 for such investment management services. The Company believes that the terms of the agreement with GAMCO are no more or less favorable to the Company than it could have obtained from unrelated parties. Entities that are affiliated with GAMCO collectively own 3,398,568 shares of the Company’s Class A Common Stock, according to a Schedule 13D/A filed with the SEC on November 20, 2017 by such entities (the latest filing available), which shares, as of September 30, 2018, represented approximately 9.1% of the outstanding shares of the class.

During 2017, Mr. Redstone was employed by the Company and received approximately $463,000, both for his continuing role with the Company as Chairman Emeritus and in recognition of his significant historical contributions to the Company. The total amount paid reflects implementation of a significant reduction in his compensation arrangement, which was approved by the Compensation Committee, to an annual rate of pay of $50,000, effective June 2017.

 

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ITEM 1—ELECTION OF DIRECTORS

The Board of Directors proposes the election of 11 directors, 10 of whom are serving as a director as of the date of this proxy statement. Each director elected at the Annual Meeting will hold office, in accordance with the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, until the next annual meeting or until his or her successor is duly elected and qualified. The Board’s nominees for election are: Candace K. Beinecke, Barbara M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. Griego, Robert N. Klieger, Martha L. Minow, Shari Redstone, Susan Schuman, Frederick O. Terrell, and Strauss Zelnick.

In accordance with the Board’s recommendation, the proxy holders will vote the shares of the Company’s Class A Common Stock covered by the respective proxies for the election of each of the 11 director nominees set forth below, unless the stockholder gives instructions to the contrary. If, for any reason, any of the director nominees become unavailable for election, the proxy holders may exercise discretion to vote for substitute nominees proposed by the Board. Each of the director nominees has indicated that he or she will be able to serve if elected and has agreed to do so.

For a description of certain arrangements relating to nominations of directors and the future composition of the Board of Directors, see “Recent Developments Regarding the Company’s Board and Governance Matters.”

Information about each director nominee is set forth below:

 

Candace K. Beinecke

 

  

Director since 2018

 

Ms. Beinecke (age 71) is the Senior Partner of Hughes Hubbard & Reed LLP, a New York law firm, and is a practicing partner in Hughes Hubbard’s corporate department. In 1999, Ms. Beinecke became the first woman to Chair a major New York law firm. Ms. Beinecke also serves as the Lead Trustee of Vornado Realty Trust, the Chairperson of the Board of First Eagle Funds (a mutual fund family), and as a board member of ALSTOM (a public French transport company). She has held no other public company directorships during the past five years.
As the long-time lead of a top-ranked international law firm, Ms. Beinecke is well-recognized in the legal profession for her corporate governance and mergers and acquisitions expertise and brings to the Board extensive legal, governance, business and risk management experience. Ms. Beinecke’s breadth of director experience, which includes service as a lead trustee and chairperson, as well as service on other nominating and governance committees, a remuneration committee and an executive committee, gives her a deep understanding of public company governance.

 

Barbara M. Byrne

 

  

Director since 2018

 

Ms. Byrne (age 64) is the former Vice Chairman, Investment Banking at Barclays PLC. She has held no other public company directorships during the past five years.
During her more than 35 years of financial services experience, Ms. Byrne served as team leader for some of Barclay’s most important multinational corporate clients and was the primary architect of several of Barclays’ marquee transactions. Widely recognized as a leading investment banker and strategic advisor, she is a member of various industry councils and participates as a forum leader on strategic issues and trends facing the financial services sector and global markets. With this experience, Ms. Byrne brings to the Board important business and financial expertise in its deliberations on complex transactions, risk management, strategy and other financial matters.

 

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Gary L. Countryman

 

  

Director since 2007

 

Mr. Countryman (age 79) has been Chairman Emeritus of the Liberty Mutual Group since 2000. He served as Chairman of Liberty Mutual Group from 1986 to 2000 and as Chief Executive Officer from 1986 to 1998. He has held no other public company directorships during the past five years.
Mr. Countryman’s 40-year career in the insurance industry provides the Board with financial expertise and an understanding of the management of risk from an insurance perspective. His leadership in transforming Liberty Mutual from a domestic to an international financial services group and overseeing a complex, highly regulated group of insurance companies is relevant to the Board’s oversight of the Company’s global businesses and complex regulations. Mr. Countryman is an experienced director, whose breadth of experience includes experience on executive personnel, executive, investment and nominating committees.

 

Brian Goldner

 

  

Director since 2018

 

Mr. Goldner (age 55) has served as the Chief Executive Officer of Hasbro, Inc. since 2008, and additionally has served as its Chairman of the Board since May 2015. In addition to being Chief Executive Officer, from 2008 to 2016, Mr. Goldner was also the President of Hasbro. Besides being a member of Hasbro’s board, he also serves on the board of directors of The Gap, Inc. and served on the Board of Molson Coors Brewing Company from 2010 to 2016. He has held no other public company directorships during the past five years.
Mr. Goldner brings to the Board significant leadership, operational and brand management experience from his executive positions at one of the leading public companies in his industry, where he was instrumental in transforming a traditional toy and game company into a global play and entertainment leader. With his direct experience in executing on strategies to differentiate Hasbro in a competitive global marketplace in response to industry evolution, he is well-positioned to advise on the strategic direction of the Company’s businesses. Further, Mr. Goldner’s service on other boards and board committees gives him a deep understanding of public company governance.

 

Linda M. Griego

 

  

Director since 2007

 

Ms. Griego (age 71) has served, since 1986, as President and Chief Executive Officer of Griego Enterprises, Inc., a business management company. For more than 20 years, she oversaw the operations of Engine Co. No. 28, a prominent restaurant in downtown Los Angeles that she founded in 1988. From 1990 to 2000, Ms. Griego held a number of government-related appointments, including Deputy Mayor of the city of Los Angeles, President and Chief Executive Officer of the Los Angeles Community Development Bank, and President and Chief Executive Officer of Rebuild LA, the agency created to jump-start inner-city economic development following the 1992 Los Angeles riots. Over the past two decades, she has also served on a number of government commissions and boards of directors of nonprofit organizations, including current service on the boards of The Ralph M. Parsons Foundation, the MLK Health and Wellness, CDC, and the Charles R. Drew University of Medicine and Science. Ms. Griego has served as a director of publicly traded and private corporations, including presently serving as director of AECOM and the American Funds (7 funds). She has held no other public company directorships during the past five years.
With the breadth of her leadership experience as a businesswoman, in the public sector through her multiple government appointments and extensive community-based participation in Los Angeles, an area where the Company has a significant presence, and on multiple not-for-profit boards, Ms. Griego provides the Board with financial and business acumen, as well as public policy expertise as it relates to business practices. Ms. Griego is also an experienced director, including through service on other audit, compensation and organization, and nominating and governance committees, with demonstrated expertise in the application of sound corporate governance principles.

 

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Robert N. Klieger

 

  

Director since 2017

 

Robert N. Klieger (age 46) is a partner in the Los Angeles law firm Hueston Hennigan LLP. Mr. Klieger’s practice focuses on complex civil litigation and counseling in the areas of entertainment and intellectual property. Mr. Klieger represents motion picture studios, broadcast and cable television networks, production companies, video game publishers and high net worth individuals in the media and entertainment space, as well as clients in other industries including apparel, aviation and venture capital. Prior to joining Hueston Hennigan, Mr. Klieger was a partner at Irell & Manella LLP and a founding partner at Kendall Brill & Klieger LLP. Before beginning his career in private practice, Mr. Klieger served as a law clerk to the Honorable Cynthia Holcomb Hall of the United States Court of Appeals for the Ninth Circuit, and the Honorable William Matthew Byrne, Jr. of the United States District Court for the Central District of California. He has held no other public company directorships during the past five years.
Mr. Klieger is recognized as one of the most prominent attorneys in the entertainment industry, with a practice focused on complex civil litigation and counseling in the areas of media, entertainment and intellectual property and clients that include leading enterprises in television, film and digital media. With his exceptional legal acumen and distinguished reputation for his trial practice and counsel, Mr. Klieger brings to the Board legal and strategic expertise in matters germane to the Company’s businesses and complex business transactions.

 

Martha L. Minow

 

  

Director since 2017

 

Ms. Minow (age 63) is the 300th Anniversary University Professor at Harvard University. Ms. Minow has taught at Harvard Law School since 1981 and served as Dean of the Harvard Law School from 2009 through June 2017. A fellow of the American Academy of Arts & Sciences since 1992, Ms. Minow has also been a senior fellow of Harvard’s Society of Fellows, a Fellow of the American Bar Foundation, and a Fellow of the American Philosophical Society. She has served extensively on government commissions and boards of directors of nonprofit organizations, including current service as Vice-Chair of the Legal Services Corporation, a trustee of the MacArthur Foundation and an advisory council member of the MIT Media Lab, among others. She is also the author of numerous books and scholarly articles in journals of law, history and philosophy. She has held no other public company directorships during the past five years.
Ms. Minow’s 37-year career at Harvard Law School, including her tenure as Dean of Harvard Law School, reflects exceptional achievements in academia. As the former chief executive of the Harvard Law School, Ms. Minow brings extensive leadership and administrative and management experience to the Board. Her distinguished legal expertise on public policy issues will provide the Board with meaningful insight on matters relating to social and governance policies and corporate reputation. She is also an experienced director, through her many years of service on government commissions and numerous boards of directors of nonprofit organizations.

 

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Shari Redstone

 

  

Director since 1994

 

Ms. Redstone (age 64) is a media executive with a wide-ranging background in numerous aspects of the entertainment industry and related ventures. She is Non-Executive Vice Chair of the Company’s Board of Directors. She is also Non-Executive Vice Chair of the Board of Directors of Viacom, a position to which she was elected January 1, 2006.
Ms. Redstone is Co-founder and Managing Partner of Advancit Capital, an investment firm launched in 2011 that focuses on early stage companies at the intersection of media, entertainment and technology. Advancit is an investor in more than 75 companies. Since 2000, she has been President of National Amusements and is also a director.
Ms. Redstone earned a BS from Tufts University and a JD and a Masters in Tax Law from Boston University. She practiced corporate law, estate planning and criminal law in the Boston area before joining National Amusements.
Ms. Redstone serves on the Board of Trustees for the Paley Center for Media and is actively involved in a variety of charitable, civic and educational organizations. She is a member of the Board of Directors at Combined Jewish Philanthropies and the John F. Kennedy Library Foundation. Ms. Redstone sits on the Board of Trustees at Dana- Farber Cancer Institute.
Ms. Redstone brings to the Board, and to her position as its Vice Chair, extensive industry and executive expertise, as well as legal acumen from her prior experience as a practicing attorney. That broad experience and entertainment industry knowledge directly assist the Board in overseeing the management of the Company. Ms. Redstone also brings to the Board’s deliberations a direct knowledge of global growth strategies for the Company’s businesses. She is an experienced director through her service on the boards of multiple industry associations, other public companies and charitable organizations. Ms. Redstone also provides institutional knowledge of the Company and continuity of the Company’s Board, having served as a Board member for 25 years.

 

Susan Schuman

 

  

Director since 2018

 

Ms. Schuman (age 59) is the Chief Executive Officer and Co-Founder of SYPartners LLC, a consultancy firm that partners with chief executive officers and their leadership teams undergoing business and cultural transformation. She has held no other public company directorships during the past five years.
Over the past 20 years, Ms. Schuman has built and led SYPartners, working with executives at many high-profile companies and organizations. This experience in advising on business, organization and cultural transformation, including new value creation strategies, positions Ms. Schuman as a skilled advisor to the Board on the strategic and transformational direction of the Company.

 

Frederick O. Terrell

 

  

Director Nominee

 

Mr. Terrell (age 63) served as Executive Vice Chairman of Investment Banking and Capital Markets at Credit Suisse and later Senior Advisor from January 2018 to November 2018. From June 2010 to December 2017 he was Vice Chairman of Investment Banking and Capital Markets at Credit Suisse. His investment banking career began in 1983 as an Associate with The First Boston Corporation. During his accomplished career in the financial services sector spanning more than 25 years, Mr. Terrell was responsible for Credit Suisse’s global banking relationships with some of its most high profile clients. From 2000 to 2008 he was the Managing Partner of Provender Capital Group, LLC a private equity firm focusing on investments in emerging companies. He has held no public company directorships during the past five years.
He has served as a member of the Board of Directors of the New York Life Insurance Company, Wellchoice Inc. (formerly Empire Blue Cross Blue Shield) and Carver Bancorp, Inc. His experience also includes past and present service on multiple not-for-profit boards, including the Yale School of Management, The Partnership for New York City, The Partnership Fund for New York City, Coro New York Leadership Center, Big Brothers Big

 

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Sisters of New York City and the Center for a New American Security. He is a member of the Council on Foreign Relations and The Economic Club of New York. Based on his extensive banking and corporate advisory experience, Mr. Terrell is poised to bring significant business and financial expertise to the Board in its deliberations on corporate strategy, complex transactions and other financial matters.

 

Strauss Zelnick

 

  

Director since 2018

 

Mr. Zelnick (age 61) is the Company’s non-executive Interim Chairman of the Board. He has served as the Chairman of the Board and the Chief Executive Officer of Take-Two Interactive Software, Inc. since 2007 and 2011, respectively. He is also the founder of, and a partner in, Zelnick Media Capital (ZMC), a leading media-focused private equity firm. In addition to being a member of Take-Two Interactive’s board, he also serves on the board of directors of Starwood Property Trust, Inc. He has held no other public company directorships during the past five years.
Through an accomplished career serving in various executive and operational roles at numerous global entertainment companies, as well as originating, structuring and monitoring private equity investments in the media and communications industries, Mr. Zelnick brings to the Board significant leadership experience in these industries. With this experience, he is well-positioned to advise on the strategic direction of the Company’s businesses. He is also an experienced director, including through his service on audit, compensation, investment and nominating and governance committees, giving him a deep understanding of public company governance.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends a vote “FOR” the election of each of the director nominees named above.

 

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DIRECTOR COMPENSATION

Outside Director Compensation During 2017

The following table sets forth information concerning the compensation of the Company’s Outside Directors for 2017.

 

Name  

Fees Earned or
Paid in Cash
($)

(1)

   

Stock
Awards
($)

(2)

   

Change in

Pension

Value and
Nonqualified
Deferred

Compensation

Earnings

($)

(3)

   

All Other
Compensation
($)

(4)

   

Total

($)

 

Andelman, David R. (5)

    100,000           200,026       98           7,500           307,624  

Califano, Jr., Joseph A. (5)

    147,000           200,026       16,380           7,500           370,906  

Cohen, William S. (5)

    132,000           200,026       149           100           332,275  

Countryman, Gary L.

    162,000           200,026       1,780           7,500           371,306  

Gifford, Charles K. (5)

    184,000           200,026       8,123           7,500           399,649  

Goldberg, Leonard (5)

    100,000           200,026       —             7,500           307,526  

Gordon, Bruce S. (5)

    144,587           200,026       —             7,500           352,113  

Griego, Linda M.

    122,000           200,026       —             7,500           329,526  

Klieger, Robert N.

    42,935           100,033       0           7,500           150,468  

Kopelson, Arnold (5)

    100,000           200,026       12           0           300,038  

Minow, Martha L.

    69,814           133,361       13           7,500           210,688  

Morris, Doug (5)

    132,000           200,026       117           0           332,143  

Redstone, Shari

    100,000           200,026       45           7,500           307,571  

 

(1)

Reflects cash amounts earned by Outside Directors in 2017 for the annual board retainer and committee chair retainers and meeting fees for standing and ad hoc board committee meetings. These amounts include cash deferred by Messrs. Andelman, Califano, Cohen, Klieger and Morris and Mses. Minow and Redstone under the CBS Corporation Deferred Compensation Plan for Outside Directors.

 

(2)

These amounts reflect the grant date fair value determined in accordance with FASB ASC Topic 718 of the annual grant of restricted share units (RSUs) to each Outside Director under the CBS Corporation 2015 Equity Plan for Outside Directors. For a discussion of the assumptions made in calculating the grant date fair value amounts for 2017, see Note 13 “Stock-Based Compensation” to the audited 2017 consolidated financial statements on pages II-75-II-78 in the Company’s Form 10-K for the fiscal year ended December 31, 2017. The aggregate number of unvested RSUs outstanding as of the fiscal year ended December 31, 2017 for each Outside Director was 3,066 (except for Klieger (1,543) and Minow (2,166),who each received prorated RSUs due to joining the Board following the date of the annual RSU grant on July 27, 2017 and May 19, 2017, respectively). The aggregate number of option awards outstanding (from prior year grants, all of which are fully vested) as of the fiscal year ended December 31, 2017 for each Outside Director was as follows: Andelman, 20,372; Cohen, 1,698; Califano, Countryman, Gifford and Kopelson, 15,279; Goldberg, Gordon, Griego, Klieger, Minow, Morris and Redstone, 0.

 

(3)

Interest accrues on cash in deferred accounts under the CBS Corporation Deferred Compensation Plan for Outside Directors at the prime rate in effect at Citibank, N.A. at the beginning of each calendar quarter. For 2017, the prime rate represented an interest rate that was more than 120% of the long-term applicable federal rate published by the Internal Revenue Service and therefore is deemed to be preferential for purposes of this table. Accordingly, amounts in the table reflect the amount of interest accrued for each

 

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  Outside Director in 2017 that exceeded the amount of interest that would have been accrued at 120% of the long-term applicable federal rate published by the Internal Revenue Service. Messrs. Goldberg and Gordon and Ms. Griego do not have any deferred cash amounts.

 

(4)

Amounts reflect the aggregate value of all matching contributions made by the Company on behalf of the director for 2017 under the CBS Corporation Matching Gifts Program for Directors. Under the program, the Company matches donations made by a director to eligible tax-exempt organizations at the rate of one dollar for each dollar donated up to $7,500 for each fiscal year.

 

(5)

These directors resigned as of September 9, 2018, except for Messrs. Gordon and Cohen, who resigned as of September 23, 2018.

Description of Director Compensation

Directors of the Company who are not employees of the Company or any of its subsidiaries are “Outside Directors” as defined in the director plans described below. Outside Directors receive compensation for their service on the Board and are eligible to participate in these director plans. Messrs. Andelman, Califano, Cohen, Countryman, Gifford, Goldberg, Gordon, Klieger, Kopelson and Morris and Mses. Griego, Minow and Redstone were deemed Outside Directors during 2017. Mr. Moonves was not compensated for serving on the Board and was not eligible to participate in any director plans, other than the Matching Gifts Program for Directors.

Cash Compensation

The Company pays the following cash compensation to Outside Directors:

 

   

An annual Board retainer of $100,000, payable in equal installments quarterly in advance; and

 

   

The Chairs of the Audit, Compensation and Nominating and Governance Committees each receive an annual retainer of $20,000, payable in equal installments quarterly in advance, and the members of those Committees each receive a per meeting attendance fee of $2,000; the Chairs and members of any ad hoc committees of the Board that may exist from time to time shall be paid as determined by the Board.

Deferred Compensation Plan

The Company maintains deferred compensation plans for Outside Directors (the “Director Deferred Compensation Plans”). Under the Director Deferred Compensation Plans, Outside Directors may elect to defer their Board and committee chair retainers and committee meeting fees. Deferred amounts are credited during a calendar quarter to an interest-bearing income account or a stock unit account in accordance with the director’s prior election. Amounts credited to an income account bear interest at the prime rate in effect at the beginning of each calendar quarter. Amounts credited to a stock unit account are deemed invested in phantom units for shares of the Company’s Class A Common Stock and Class B Common Stock on the first day of the calendar quarter following the quarter in which the amounts are credited, with the number of shares calculated based on the closing market prices on that first day. Until the amounts credited to the stock unit account are converted into phantom units, these credited amounts bear interest at the prime rate in effect at the beginning of the relevant calendar quarter.

Upon a director’s leaving the Board, the amounts deferred under the Director Deferred Compensation Plans are paid in cash in a lump sum or in three or five annual installments, based on the director’s prior elections, with the lump sum or initial annual installment becoming payable on the later of six months after the director leaves the Board (90 days after the director leaves the Board in the case of amounts deferred before January 1, 2005) or January 15th of the following year. The value of a stock unit account is determined by reference to the average of the respective closing market prices of the Company’s Class A Common Stock and Class B Common Stock on the NYSE on each trading date during the four-week period ending five business days prior to the initial payment date. Amounts paid in installments accrue interest until the final installment is paid.

 

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Equity Compensation

The Company maintains the 2015 Equity Plan for Outside Directors (the “Director Equity Plan”).

Outside Directors receive the following awards under the Director Equity Plan:

 

   

an annual grant of RSUs on each February 15th, equal to $200,000 in value based on the closing price of the Company’s Class B Common Stock on the New York Stock Exchange (“NYSE”) on the date of grant (or, if the date of grant is not a day on which the NYSE is open for trading, on the last trading day preceding the date of grant), which RSUs vest one year from the date of grant; and

 

   

prorated RSU grants for Outside Directors who join the Board following the date of the annual RSU grant, but during the calendar year of the grant. Such grants will be made five business days following the date such Outside Director joins the Board, and will be determined by multiplying the number of months remaining in such calendar year from the date the Outside Director joins the Board (counting the month of joining as a full month), by the value of the annual RSU grant for that calendar year divided by 12, divided by the closing price of the Company’s Class B Common Stock on the NYSE on the date of grant (or, if the date of grant is not a day on which the NYSE is open for trading, on the last

trading day preceding the date of grant). Prorated RSU grants vest on the first anniversary of the date of grant of the annual RSU grant that was awarded during the calendar year in which the Outside Director received such prorated RSU grant.

RSUs are payable to Outside Directors in shares of the Company’s Class B Common Stock upon vesting unless the Outside Director elects to defer the settlement to a future date. Outside Directors are entitled to receive dividend equivalents on the RSUs in the event the Company pays a regular cash dividend on its Class B Common Stock. Dividend equivalents will accrue on the RSUs (including RSUs for which settlement has been deferred) until the RSUs are settled.

Matching Gifts Program for Directors

All directors are eligible to participate in the Company’s Matching Gifts Program for Directors. Under the program, the Company matches donations made by a director to eligible tax-exempt organizations at the rate of one dollar for each dollar donated up to $7,500 for each fiscal year. The purpose of the program is to recognize the interest of the Company and its directors in supporting eligible organizations.

Other

Expenses: Directors are reimbursed for expenses incurred in attending Board, committee and stockholder meetings (including travel and lodging) in accordance with the Company’s normal travel policies.

Director Attendance at Certain Other Events: CBS Corporation believes it is in its best interest for directors to participate in certain Company events and other events to meet with management, customers, talent and others important to the Company’s business. The Board has established a policy on director attendance at these events. Under the policy, tickets to events that are designated as having a business purpose are allocated to directors. In addition, the Company reimburses directors for travel and related expenses in accordance with the Company’s normal travel policies.

 

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ITEM 2—RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the year ending December 31, 2018, subject to stockholder ratification. The Audit Committee has reviewed PwC’s independence from the Company as described in the “Report of the Audit Committee.” In appointing PwC as the Company’s independent registered public accounting firm for the year ending December 31, 2018, and in recommending that the Company’s stockholders ratify the appointment, the Audit Committee has considered whether the non-audit services provided by PwC were compatible with maintaining PwC’s independence from the Company and has determined that such services do not impair PwC’s independence.

Representatives of PwC are expected to be present at the Annual Meeting and will be given an opportunity to make a statement if they desire to do so. They will also be available to respond to questions at the Annual Meeting.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm for fiscal year 2018.

 

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REPORT OF THE AUDIT COMMITTEE

The following Report of the Audit Committee does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such information by reference.

The Audit Committee Charter states that the purpose of the Audit Committee is to oversee the accounting and financial reporting processes of the Company and the audit of the consolidated financial statements of the Company. The Audit Committee also assists the Board of Directors’ oversight of:

 

   

The quality and integrity of the Company’s consolidated financial statements and related disclosures;

 

   

Evaluation of the effectiveness of the Company’s internal control over financial reporting and risk management;

 

   

The Company’s compliance with legal and regulatory requirements;

 

   

The independent auditor’s qualifications and independence; and

 

   

The performance of the Company’s internal audit function and independent auditor.

Under the Audit Committee Charter, the Audit Committee’s authorities and duties include, among other things:

 

   

Direct responsibility for the appointment, retention, termination, compensation and oversight of the work of the independent auditor, which reports directly to the Audit Committee, and the sole authority to pre-approve all services provided by the independent auditor;

 

   

Reviewing and discussing the Company’s annual audited financial statements, quarterly financial statements and earnings releases with the Company’s management and its independent auditor;

 

   

Reviewing the organization, responsibilities, audit plan and results of the internal audit function;

 

   

Reviewing with management, the internal auditor and the independent auditor the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures;

 

   

Reviewing with management material legal matters and the effectiveness of the Company’s procedures to ensure compliance with legal and regulatory requirements; and

 

   

Overseeing the Company’s compliance program and obtaining periodic reports from the Chief Compliance Officer.

The Audit Committee also discusses certain matters with the independent auditor on a regular basis, including the Company’s critical accounting policies, certain communications between the independent auditor and management, and the qualifications of the independent auditor.

The full text of the Audit Committee Charter is available on CBS Corporation’s website at www.cbscorporation.com. The Audit Committee assesses the adequacy of its Charter at least every other year, or more frequently as the Committee may determine.

The Company’s management is responsible for the preparation of the Company’s consolidated financial statements, the financial reporting processes and maintaining effective internal control over financial reporting. The independent auditor is responsible for performing an audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and expressing an opinion on the conformity of the audited consolidated financial statements to U.S. generally accepted accounting principles. The independent auditor also expresses an opinion on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee monitors and oversees these processes.

 

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As part of its oversight role, the Audit Committee has reviewed and discussed with management and the Company’s independent auditor, PricewaterhouseCoopers LLP (“PwC”), the Company’s audited consolidated financial statements for the year ended December 31, 2017, the Company’s disclosures under “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s 2017 Annual Report on Form 10-K and matters relating to the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.

The Audit Committee has also discussed with PwC all required communications, including the matters required to be discussed pursuant to PCAOB Auditing Standard No. 1301 (Communications with Audit Committees). In addition, the Audit Committee has received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with PwC the firm’s independence from the Company.

Based on this review and these discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Audit Committee

Gary L. Countryman, Chair

Linda M. Griego

Gary L. Countryman (Chair), Charles K. Gifford and Linda M. Griego were the members of the Audit Committee who engaged in the review and discussions and made the recommendation referred to above in the Report of the Audit Committee. Subsequently, the Audit Committee was reconstituted, such that, as of the date of this proxy statement, the members of the Audit Committee are Gary L. Countryman (Chair), Barbara M. Byrne and Susan Schuman.

 

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FEES FOR SERVICES PROVIDED BY THE INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The following table sets forth fees for professional services rendered by PwC to the Company and its subsidiaries for each of the years ended December 31, 2017 and 2016.

 

     2017      2016  

Audit Fees(1)

   $ 10,837,000      $ 11,291,000  

Audit-Related Fees(2)

     348,000        892,000  

Tax Fees(3)

     5,621,000        5,650,000  

All Other Fees(4)

     16,000        15,000  
  

 

 

    

 

 

 

Total

   $ 16,822,000      $ 17,848,000  
  

 

 

    

 

 

 

 

(1)

Audit fees for 2017 and 2016 include $1,400,000 and $2,950,000, respectively, attributable to audit services provided in connection with the divestiture of CBS Radio Inc. (“Radio”), including with respect to Radio’s debt transactions, comfort letters and SEC filings.

 

(2)

Audit-related fees principally related to domestic and foreign employee benefit plan audits, attestation services required by contract, the adoption of new accounting standards, and, also for 2016, the preparation of carve-out financial statements and a sales and scheduling system pre-implementation assessment.

 

(3)

Tax fees principally related to transfer pricing studies, tax compliance and tax consulting.

 

(4)

All other fees principally related to license fees for the use of PwC reference materials and publications and access to various online tools.

Audit Committee Pre-Approval of Services Provided by PwC

All audit and non-audit services provided to the Company by PwC for 2017 were pre-approved by either the full Audit Committee or the Chair of the Audit Committee. Under the Audit Committee’s pre-approval policies and procedures in effect during 2017, the Chair of the Audit Committee was authorized to pre-approve the engagement of PwC to provide certain specified audit and non-audit services, and the engagement of any accounting firm to provide certain specified audit services, up to a maximum amount of $200,000 per engagement, with the total amount of such authorizations outstanding that have not been reported to the Audit Committee not to exceed an aggregate of $1,000,000. The Audit Committee receives regular reports on the engagements approved by the Chair pursuant to this delegation. For 2018, the Audit Committee adopted the same pre-approval policies and procedures that were in effect for 2017, which permit the Chair to pre-approve the specified audit and non-audit services up to a maximum amount of $200,000 per engagement, with the total amount of such authorizations outstanding that have not been reported to the Audit Committee not to exceed an aggregate of $1,000,000.

 

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Explanatory Note Regarding Compensation Discussion and Analysis

The following Compensation Discussion and Analysis (“CD&A”) is intended to provide stockholders with an understanding of the Company’s compensation philosophy, its core objectives and the Company’s compensation policies in effect for executive compensation paid with respect to 2017. During 2018, the Company experienced a number of transitions relating to its senior executives and the members of the Compensation Committee, as more fully described in the “Recent Developments Regarding the Company’s Board and Governance Matters” section above and in the “Compensation Committee Report” below. As described in this proxy statement, following the resignation of Mr. Moonves (the Company’s former Chairman of the Board, President and Chief Executive Officer), Mr. Ianniello, the Company’s Chief Operating Officer during 2017, was appointed President and Acting Chief Executive Officer effective September 9, 2018. Subsequently, Mr. Schwartz (the Company’s former Senior Executive Vice President and Chief Communications Officer) separated from the Company on November 1, 2018, and Mr. Ambrosio (the Company’s former Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer) resigned from that position effective November 1, 2018, following which he remained a consultant to the Company.

Bruce S. Gordon (Chair), William S. Cohen, Linda M. Griego and Doug Morris were the members of the then-current Compensation Committee who reviewed and discussed with the Company’s management the CD&A included in this proxy statement, which reflected the views of the Compensation Committee as of April 2018. As previously reported, the Company is conducting an internal investigation, and the Board will make a determination whether the Company has grounds to terminate the employment of Mr. Moonves for cause under his employment agreement within 30 days following completion of the final report of the independent investigators on the current internal investigation, but in no event later than January 31, 2019.

Following the Compensation Committee’s review and discussion with the Company’s management of the CD&A included in this proxy statement, the Compensation Committee was reconstituted, such that, as of the date as of this proxy statement, the members of the Compensation Committee are Brian Goldner (Chair), Linda M. Griego and Strauss Zelnick.

COMPENSATION DISCUSSION AND ANALYSIS

Fiscal Year 2017 Executive Summary

During 2017, CBS management achieved a record level of revenue under the leadership of Mr. Moonves, the Company’s former Chairman of the Board, President and Chief Executive Officer and Mr. Ianniello, the Company’s former Chief Operating Officer and currently the Company’s President and Acting Chief Executive Officer, and the senior management team. The Company drove this record level by growing international content licensing revenues and expanding its international presence, capitalizing on subscriber growth in its over-the-top offerings and reducing its reliance on advertising revenues through strategic acquisitions and dispositions, including the divestiture of CBS Radio®. As a result, the Company entered the 2018 fiscal year better positioned for long-term success as a producer of premium content.

Company Performance—Continued Execution on Long-Term Strategic Objectives

CBS Corporation continued to execute on its long-term strategic objectives during 2017, which included returning value to shareholders, growing its revenues from non-advertising sources through arrangements with new and existing distribution partners, expanding the Company’s presence globally and capitalizing on the demand for the Company’s top-tier content. As described below, the Company better positioned itself for long-term success through its 2017 achievements.

 

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The Company returned value to stockholders and strengthened its financial position:

 

   

The Company achieved record revenues, which increased 4% over the prior year.

 

   

The Company continued to focus on its commitment to return value to shareholders, including by:

 

     

Growing adjusted net earnings per diluted share (“EPS”), up 7% from 2016 to $4.40 in 2017, representing the eighth consecutive fiscal year of increase in this metric (See Annex A, “Reconciliation of Non-GAAP Measures”),

 

     

Maintaining its quarterly dividend at $0.18 per share in 2017, and

 

     

Retiring more than 34 million shares of its Class B Common Stock pursuant to the Company’s share repurchase program and completion of the CBS Radio exchange offer.

 

   

The Company capitalized on opportunities to improve its financial strength, including by:

 

     

Issuing $1.8 billion of senior notes, resulting in a reduction of the Company’s weighted average interest expense and extending its overall maturity profile, and

 

     

Purchasing a group annuity contract that reduced the Company’s outstanding pension benefit obligation by approximately $800 million, or approximately 20% of the total obligations of the Company’s qualified pension plans.

Senior management successfully executed on key strategic initiatives to grow revenues from non-advertising sources and to expand the Company’s presence globally, including by:

 

   

Increasing retransmission and station affiliation revenues more than 27% over the prior year, and building for future success by finalizing two key multi-year retransmission compensation arrangements and 11 key multi-year station affiliation arrangements;

 

   

Continuing to grow the number of subscribers and revenues from the Company’s direct-to-consumer digital subscription live-streaming service, CBS All Access®, and its stand-alone streaming service of premium content, Showtime OTT®;

 

   

Further enhancing its global footprint and brand awareness by completing new licensing agreements around the world, including the following:

 

     

The Company concluded licensing deals with Fox Networks Group Asia, Hotstar and Canal+ Group, in which the Company licensed the Showtime® brand in seven southeast Asian markets (Malaysia, Indonesia, Singapore, Philippines, Thailand, Taiwan, and Hong Kong), India and France, respectively;

 

     

The Company and Netflix reached agreement on a licensing pact for The CW’s “Dynasty” series, which gives Netflix the international “first-window” broadcasting rights to the new series; and

 

     

The Company entered into an exclusive, multi-year licensing agreement with Japan’s leading pay-television provider, WOWOW, for the rights to five CBS® Television Network (the “Network”) and Showtime series, including “Bull” and “Twin Peaks,” in Japan; and

 

   

Significantly increasing revenues derived from the inclusion of the Company’s content in “skinny bundles,” and positioning itself for future success by executing agreements with Hulu, YouTubeTV, DirecTV Now and fuboTV.

 

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As shown below, since the Separation, the Company has successfully executed on its strategy of increasing revenues derived from non-advertising sources.

 

 

LOGO

The Company continued its success in developing premium content across its divisions, led by the Network, which maintained its lead in key Nielsen Media Research ratings categories:

 

   

The Network closed out the 2016/2017 television season as the #1 network in viewers for the 14th time in 15 seasons, winning the season convincingly by an average of 1.5 million viewers (based on “Live+7” ratings, which measure viewing from live airing through the seven-day period thereafter via Digital-Video-Recording (DVR) or Video-on-Demand (VOD) (“Live+7”)). Because of its success, the Company renewed 22 primetime entertainment series from the 2016/2017 television season to be aired during the 2017/2018 television season.

 

   

From the commencement of the 2017/2018 television season through the end of 2017 (i.e., through Week 14 of the 2017/2018 season), the Network ranked #1 in viewers and households (based on Live+7 ratings). The Network also had during this period, in terms of viewers in primetime (based on Live+7 ratings, unless otherwise noted):

 

     

The #1 Series,

 

     

The #1 Scripted Series,

 

     

The #1 Comedy,

 

     

The #1 News Program,

 

     

The #1 Program on four nights (more than all other broadcast networks combined),

 

     

The #1 Scripted Program on six nights (more than all other broadcast networks combined),

 

     

Two of the top five, six of the top 10, nine of the top 20 and 15 of the top 30 regularly-scheduled primetime broadcasts, demonstrating the depth and overall strength of the Network’s primetime schedule relative to other broadcasters, and

 

     

More time-period winning broadcasts than all other broadcast networks combined (based on “Live+SD” ratings, which measure viewing from live airing through the remainder of the broadcast day, including via DVR and VOD).

 

   

The Company holds an ownership position in more than 80% of the shows that aired on the Network’s fall 2017/2018 primetime schedule.

 

   

The Company continued to deliver high ratings on significant live events, including CBS Sports®broadcast of NCAA Men’s Basketball Championship, which was up 30% versus the 2016

 

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championship game, and Showtime’s pay-per-view event featuring the boxing match between Floyd Mayweather and Conor McGregor, which was the second highest grossing pay-per-view event in television history.

 

   

The premiere of “Star Trek: Discovery®,” the fall kick-off of the NFL on the Network and the season finale of “Big Brother” and the “Big Brother” live feeds led to the biggest number of new subscriptions for CBS All Access in a week and in a month.

 

   

“The Late Show®” with Stephen Colbert finished the 2016/2017 television season as the most-watched late night program, which marked the first time that “The Late Show” finished as the most-watched late night program in more than 20 years, and continued to be the most-watched late night program in the fourth quarter of 2017.

 

   

Showtime continued to provide high quality original programming to its subscribers, including the new series “SMILF,” which was nominated for two Golden Globe Awards.

 

   

Simon & Schuster® continued to produce bestsellers in hardcover, paperback and multi-formats, 195 of which appeared on the New York Times bestseller lists and 30 of which held the #1 position.

 

   

Overall, the Company’s programming (with respect to CBS Entertainment™, CBS News®, CBS Sports, CBS Television Stations and Showtime) received, in 2017, 295 Emmy nominations and 62 wins.

Pay for Performance

CBS’s performance-based compensation programs generally provide for the opportunity to reward the executive officers whose compensation is individually disclosed in the tables that appear on subsequent pages (the “named executive officers”) and certain other senior executives (together with the named executive officers, the “senior executives”) for contributing to annual financial and operational performance (through annual bonus programs) and stock price appreciation (through long-term equity incentives). A high percentage of the named executive officers’ total target compensation is performance-based (targeted at 74% to 91% of total target compensation for 2017).

 

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The following chart shows the percentage of the average of the named executive officers’ target total compensation that is allocable to fixed versus variable compensation:

 

 

LOGO

In selecting the financial performance metrics, goals and criteria for the performance-based compensation programs each year, the Compensation Committee considers the Company’s annual operating budget for the upcoming year, as approved by the Board. The Company’s budgeting process reflects aggressive goal-setting and takes into account the expected performance of the Company’s industry peers for that year as determined by media industry analysts. The Company’s achievement of the resulting challenging, yet realistic, financial and operational goals has led to its successful return of value for shareholders.

For 2017, the Committee determined that budgeted Operating Income (“OI”) and Free Cash Flow (“FcF”) were the appropriate metrics to be used in setting performance goals and criteria in order to reflect the Company’s core objective of pay for performance. (See “Performance-Based Compensation Programs—Long-Term Incentive Programs—Performance Goals for LTMIP Awards” and “Compensation Deductibility Policy” for a discussion of the calculation of the performance goals and criteria, respectively.)

As a result of the Company’s performance in the 2017 fiscal year, the Compensation Committee approved the bonuses disclosed in the “Summary Compensation Table for Fiscal Year 2017” and related footnotes, and shares underlying performance-based equity awards were earned as discussed in the “Long-Term Incentive Programs” section, at levels reflecting the Company’s performance. The bonus awards and further achievements during the 2017 fiscal year are discussed in more detail below in the “Bonus Awards” section.

 

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Overview of Compensation Objectives

CBS Corporation’s compensation programs are designed to motivate and reward business success and to increase stockholder value. The Company’s compensation programs are based on the following core objectives:

 

   

Stockholder Value Focused: Align executives’ interests with stockholders’ interests, with particular emphasis on creating incentives that reward executives for consistently increasing the value of the Company.

 

   

Market-based: Take into account the profile of compensation and benefits programs found in peer companies in order to attract and retain the talent needed to drive sustainable competitive advantage and deliver value to stockholders.

 

   

Performance-based: Ensure plans provide reward levels that reflect variances between actual and desired performance results.

 

   

Flexible: Enable management and the Board to make decisions based on the needs of the business and to recognize different levels of individual contribution and value creation.

In determining the Company’s compensation policies and decisions, the Company has considered the results of the previous vote held on the compensation of the named executive officers as disclosed in the 2017 proxy statement relating to the 2017 Annual Meeting of Stockholders and, as a result, continued to base the Company’s compensation programs on the core objectives listed above.

Evaluating Senior Executive Compensation

The Compensation Committee reviews and approves the Company’s compensation arrangements with the senior executives. The Committee reviews all components of the senior executives’ compensation, including base salary, annual and long-term incentives, severance arrangements and benefit programs to ensure that they adhere to the core objectives of the Company’s compensation programs. The Committee utilizes a rolling 12-month calendar based on regularly-scheduled meeting dates that identifies the meeting date at which each senior executive requires Committee consideration regarding compensation and the type of action to be considered (i.e., salary increase, annual bonus payout, long-term incentive award determination, and other compensation actions). All final determinations relating to the compensation of Mr. Moonves were made by the Committee in executive session, with advice from the then-current independent compensation consultant (Exequity LLP). In assessing the compensation of the senior executives, the Committee considers many factors, including the performance of the Company’s operations (with respect to corporate executives, the overall performance of the Company; with respect to operational executives, performance of the operations for which the executive is responsible), individual performance, experience, tenure and historical compensation, comparisons to other appropriate senior executives at identified peer companies and the advice of the Committee’s independent compensation consultant. In considering any individual element of a senior executive’s compensation, the Committee considers that element in relation to the individual executive’s total compensation (i.e., base salary, bonus and long-term incentives).

The Compensation Committee retains an independent compensation consultant to advise the Committee in its review of senior executive compensation. The Committee has the sole authority to retain and terminate the independent compensation consultant and to review and approve the firm’s fees and other retention terms. The Committee adopted a policy in 2008 providing that the independent compensation consultant will not be considered as a provider of services to the Company other than for services provided to the Compensation Committee. Accordingly, during 2017, other than these services provided to the Committee, Exequity LLP did not perform any administrative or consulting services for the Company. The Committee assessed the independence of Exequity and determined that Exequity’s work for the Committee did not raise any conflict of interest.

In reviewing senior executive compensation, the Compensation Committee considers data regarding the competitive market for senior executive talent. For 2017, at the Committee’s request, Exequity reviewed and

 

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approved a competitive assessment of the compensation practices at companies with which the Company competes for senior executive talent. The assessment includes those companies engaged in similar business activities (i.e., industry peers) and, as a more general reference point, an index of total compensation packages at other applicable primarily publicly-traded U.S. companies (general industry), all as described below. Not all of the companies included in these groups may be used as a point of comparison when reviewing a senior executive’s total compensation. In determining which companies are appropriate comparisons for each senior executive, the scope of the executive’s responsibility and the nature of the business for which he or she is responsible are considered. As a result, the appropriate companies selected for comparison may differ from one senior executive to the next. With respect to senior executives other than Mr. Moonves, the competitive assessment focuses on applicable compensation packages at the 65th percentile of reliable market data, which includes an evaluation of base salary, target annual incentive opportunities (as such data is available), actual annual incentive earned, annualized value of long-term incentives, and the resulting total actual and target compensation. The competitive assessment also includes market data at the 65th percentile to reflect the Committee’s commitment to competing with the Company’s industry peers in recruiting and retaining the most sought-after executive talent. Although the Committee does not target total compensation amounts for each senior executive to a specific benchmark, the Committee does consider the compensation levels from the competitive assessment as one factor in determining these total compensation amounts for each senior executive.

In 2017, for Mr. Moonves, the Committee considered the compensation arrangements for similarly-situated chief executive officer roles at peer diversified media companies (i.e., Discovery Communications, Inc., Time Warner Inc., Twenty-First Century Fox, Inc., Viacom Inc. and The Walt Disney Company) and other media peers (i.e., Comcast Corporation) (collectively, the “industry peer group”). The competitive assessment for the other named executive officers included the compensation data of companies in the industry peer group and data regarding general compensation levels primarily at publicly traded companies included in the general industry index from which the Company may source, or to which the Company may lose, executive talent (i.e., American Broadcasting Company (ABC), Amazon.com, Inc., AT&T Inc., Cablevision Systems Corporation (subsequently acquired by Altice NV), Charter Communications Inc., Cisco Systems, Inc., Comcast Corporation, Dell Inc., Discovery Communications, Inc., General Electric Company, Google LLC, International Business Machines Corporation, NBCUniversal LLC, PepsiCo, Inc., Sprint Corporation, TEGNA, Inc., Time Warner Inc., Verizon Communications Inc., Viacom Inc., and The Walt Disney Company).

Changes in Named Executive Officers’ Compensation Arrangements in 2017

During 2017, the Company entered into new employment agreements with each of Messrs. Moonves and Ianniello and with Mr. Tu, the Company’s Senior Executive Vice President and Chief Legal Officer.

In May of 2017, the Compensation Committee approved a new employment agreement for Mr. Moonves, effective May 19, 2017. This new agreement superseded his prior agreement, which was set to expire in 2019, and extended his employment term for an additional two years through June 30, 2021 in the role of Chairman of the Board, President and Chief Executive Officer. In determining the compensation terms of the new agreement, the Committee considered Mr. Moonves’ stature as one of the most influential leaders in the entertainment industry, his tenure as a Company executive since 1995, and his performance as the Company’s Chairman of the Board, President and Chief Executive Officer, including the creation of premium content across the Company’s portfolio of businesses, efforts to secure profitable retransmission and station affiliation deals and the expansion of over-the-top services. Pursuant to the new agreement, Mr. Moonves’ annual base salary and target bonus were unchanged, his annual grants of restricted stock units (“RSUs”) for 2018 and 2019 also were unchanged, and he was eligible to receive two separate grants of shares of the Company’s stock after June 30, 2019 based on the stock price performance of the Class B Common Stock during two separate specified periods, each ending on June 30, 2019 (the “Existing Performance Share Awards”). The new agreement provided that Mr. Moonves would have continued to receive annual RSU grants in each of 2020 and 2021, on terms consistent with the 2018 and 2019 RSU grants, with a grant date value of $18.5 million for the 2020 grant and a grant date value of $9.25 million for the 2021 grant (which value reflected a 50% proration to take into account the new agreement’s

 

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scheduled expiration on June 30, 2021). Mr. Moonves was also eligible to receive an additional grant of shares of the Company’s stock following the expiration of the employment term on June 30, 2021. This new performance share award was structured similarly to the Existing Performance Share Awards and was subject to the achievement of stock price performance of the Class B Common Stock during the period of May 19, 2017 through June 30, 2021, as adjusted based on the Company’s achievement of established performance goals for calendar years 2019 and 2020, as further described under “Potential Payments upon Termination and Certain Other Events.” Mr. Moonves was also eligible to receive a lump sum cash payment following the expiration of the employment term on June 30, 2021, subject to the Company’s achievement of a threshold level of cumulative adjusted operating income (“COI”). This award, if earned, would have ranged from $20 million to $55 million based on the Company’s COI beginning April 1, 2017 and ending June 30, 2021.

Similar to his prior employment agreement, Mr. Moonves would have been entitled to receive severance payments and benefits in the event that the Company terminated his employment without “cause” or if he resigned his employment for “good reason,” as described under “Potential Payments upon Termination and Certain Other Events.” In addition, similar to Mr. Moonves’ prior employment agreement, the new agreement provided incentives for Mr. Moonves to continue his employment with the Company as a Senior Advisor and/or Producer upon the end of the employment term as described under “Potential Payments upon Termination and Certain Other Events.” The Committee was advised by its independent compensation consultant and received input from outside legal counsel in considering and structuring the terms of Mr. Moonves’ new agreement. The agreement is filed as Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

In July of 2017, the Compensation Committee approved a new employment agreement for Mr. Ianniello, effective July 1, 2017 (the “2017 Agreement”). The 2017 Agreement superseded Mr. Ianniello’s prior agreement, which was scheduled to expire on June 3, 2018, and extended his employment with the Company through June 30, 2022 in his role as Chief Operating Officer. In determining the compensation terms, the Committee considered compensation arrangements for executives with similar scopes of responsibility at industry peers and at other leading U.S. companies, as well as the core objectives set forth in the “Overview of Compensation Objectives” section above. The compensation assessment included an evaluation of annualized base salary, target bonus, annualized expected value of upfront and ongoing long-term incentives, and termination provisions. The Committee also reviewed compensation practices at other leading U.S. companies, including with respect to restrictive covenants and other terms. As a result, under the 2017 Agreement, the Committee increased his base salary to $2,750,000 beginning in the third contract year, and increased his target bonus to 450% of his base salary effective for the 2017 and 2018 calendar years, and to 500% of his base salary for subsequent years. The agreement provides for an annual long-term incentive award target of $12,250,000 for each of calendar years 2018 and 2019, and $13,500,000 for each of calendar year 2020 and each subsequent year during the term of the agreement. The 2017 Agreement provides for an equity-based performance incentive based on the Company’s stock price performance during the period of July 1, 2017 through December 31, 2021, as adjusted based on the Company’s achievement of established performance goals for calendar years 2019 and 2020, as described under “Potential Payments upon Termination and Certain Other Events.” Similar to his prior employment agreement, in the event that the Company terminates his employment without “cause” or if he resigns his employment for “good reason,” Mr. Ianniello will be entitled to receive severance payments and benefits. The 2017 Agreement also provides additional termination payments in certain circumstances following his termination of employment, as described under “Potential Payments upon Termination and Certain Other Events.” Mr. Ianniello’s 2017 Agreement is filed as Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017.

In July of 2017, the Compensation Committee also approved a new employment agreement for Mr. Tu, effective as of June 1, 2017. This new agreement supersedes his prior agreement, which was scheduled to expire on December 31, 2017, and extends his employment with the Company through May 31, 2019 in his existing role as Senior Executive Vice President and Chief Legal Officer. In determining the compensation terms, the Committee considered the compensation arrangements for similar executives at peer media companies, as well as

 

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the core objectives set forth in the “Overview of Compensation Objectives” section above. As a result, the Committee increased his base salary under his new employment agreement to $1,350,000 and increased his annual long-term incentive award target to $3,950,000, beginning with calendar year 2018. Similar to his prior agreement, in the event the Company terminates his employment without “cause” or if he resigns his employment for “good reason,” Mr. Tu will be entitled to receive severance benefits and payments. The new agreement also provides continued vesting for certain equity awards in connection with certain termination scenarios, as described under “Potential Payments upon Termination and Certain Other Events.” Mr. Tu’s new employment agreement is filed as Exhibit 10(b) to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017.

On August 4, 2017, the Compensation Committee amended the employment agreements for Messrs. Ambrosio and Schwartz with respect to the treatment of particular equity awards in connection with certain termination scenarios, as described under “Potential Payments upon Termination and Certain Other Events” and in the amendments filed as Exhibits 10(c) and 10(d), respectively, to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017.

Elements of Executive Compensation

With respect to the 2017 fiscal year, the Company’s compensation arrangements with its senior executives, including the named executive officers, generally consisted of the following elements:

 

   

Base Salary

 

   

Performance-Based Compensation Programs

 

     

Annual Bonus Awards

 

     

Long-Term Incentives

 

   

Retirement and Deferred Compensation Plans

 

   

Other Compensation (Perquisites and Other Personal Benefits)

The Compensation Committee generally considered these elements in determining a senior executive’s compensation package in order to reward for both the long- and short-term performance of the executive and the Company. The Committee did not use rigid guidelines in determining the mix of compensation elements (i.e., long-term versus currently paid out compensation and cash versus non-cash compensation) for each senior executive. However, the Committee did consider the level of base salary of each senior executive as it relates to the allocation of guaranteed versus performance-based compensation.

The Compensation Committee believed that its consideration of these compensation elements effectively achieves the objective of aligning compensation with performance measures that are directly related to the Company’s financial goals and creation of stockholder value, without encouraging senior executives to take unnecessary risks. The Committee selected the financial performance metrics, goals and criteria for the performance-based compensation programs each year and also, in order to avoid distorted performance goals and criteria, approved adjustments to the calculation of those goals and criteria, including pre-approved adjustments for awards, which, at the time of such determinations in 2017, were intended to satisfy the then-existing performance-based exception under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The Committee believed this process results in performance goals and criteria that are challenging, yet realistic, and that will not encourage senior executives to engage in risky business activities in order to achieve unattainable goals or overcome lower results caused by unforeseen events.

A discussion of decisions made by the Compensation Committee with respect to fiscal year 2017 compensation is set forth below.

 

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Base Salary

The Company provides the senior executives with base salary that is sufficiently competitive to attract and retain talented individuals and provides a secure base of guaranteed cash to compensate them for services rendered during the fiscal year. In order to ensure that the majority of compensation is variable, at-risk and tied to performance, the Compensation Committee set base salary levels for the named executive officers at between 9% and 26% of targeted total compensation for 2017. In reviewing proposals for changes to base salary for the named executive officers, the Committee considered the following:

 

   

Appropriate competitive compensation data for the position;

 

   

Individual performance;

 

   

Base salary level for the executive in relation to that executive’s total compensation package;

 

   

Input and recommendations of Mr. Moonves in his role as Chairman of the Board, President and Chief Executive Officer (for named executive officers other than himself);

 

   

The level of the annual merit increase budget across the Company as a whole; and

 

   

Existing contractual obligations, if any.

In reviewing base salary during 2017 for the named executive officers, the Compensation Committee continued to consider their level of base salary as it relates to the allocation of guaranteed versus variable, at-risk compensation, as well as the factors listed above. As a result, Messrs. Moonves, Ianniello, Ambrosio and Schwartz did not receive base salary increases during 2017. Mr. Tu received an increase in base salary in connection with the execution of a new employment agreement as described above under “Changes in Named Executive Officers’ Compensation Arrangements in 2017.”

Performance-Based Compensation Programs

CBS’s performance-based compensation programs generally provide for the opportunity to reward senior executives for contributing to annual financial and operational performance (through annual bonus programs) and for realizing stock price appreciation (through long-term equity incentives). Bonus awards are based on the Compensation Committee’s review of the Company’s financial results and qualitative assessment of senior executive performance against key strategic objectives and are not directly linked to the Company’s stock price performance. Long-term equity incentives encourage executives to make decisions that will create and sustain long-term value for stockholders.

Bonus Awards

The Company provides an opportunity for annual bonus awards under its short-term incentive program (“Bonus Program”). The purpose of the Bonus Program is to benefit and advance the interests of the Company by granting annual bonus awards to executives as “pay for performance”—a reward for their individual contributions to the Company’s annual financial and operational success.

At the beginning of each fiscal year, the Compensation Committee approves funding levels that can be earned for that year for the Bonus Program. These funding levels are based on (i) financial performance goals set by the Committee that are derived from budget determinations for the relevant year, which take into account expected financial performance of the Company’s industry peers for that year, as well as (ii) expected performance against the key strategic objectives identified below. After the end of the fiscal year, the Committee evaluates the Company’s actual performance relative to the funding levels in order to determine the aggregate amount available for payouts under the Bonus Program.

In January 2018, the Committee evaluated the Company’s actual financial performance for 2017, including the levels of achievement against the pre-established performance goals and management’s performance in 2017

 

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against the strategic objectives, relative to the funding levels approved at the beginning of 2017, in order to determine the aggregate amount available for bonus payouts. The aggregate amount of awards provided to the named executive officers, as well as to the other participants in the Bonus Program, is limited by the funding pool resulting from the Committee’s evaluation.

As part of the Bonus Program, the named executive officers and one other senior executive officer were selected by the Committee in early 2017 to participate in the Company’s Senior Executive Short-Term Incentive Plan, as amended (the “Senior Executive STIP”) for 2017, which was a stockholder approved plan that, under then-applicable tax law, provided for deductibility of amounts paid pursuant to the plan. Under the Senior Executive STIP, awards could be paid, in whole or in part, in cash, in the form of stock-based awards issued under the Company’s long-term incentive plan or in any other form prescribed by the Committee.

At the beginning of the 2017 fiscal year, the Compensation Committee set a performance criterion under the Senior Executive STIP, as a first step toward qualifying bonus awards made under the Senior Executive STIP as “qualified performance-based compensation” eligible for deductibility under Section 162(m) of the Code in accordance with then-applicable tax law. Assuming a Committee determination that the criterion is met, the terms of the Senior Executive STIP established for each of the named executive officers a maximum bonus that may be paid under the plan, subject, in certain cases, to the Committee’s negative discretion (“downward discretion”), for deductibility purposes. In the exercise of its downward discretion under the Senior Executive STIP, the Committee has taken into account certain terms in Mr. Moonves’ employment agreement which provided that a portion of his bonus must be, at least, an amount consistent with the level of achievement attained against the “Company-Wide Performance Goal(s)” established for that year by the Committee (provided such achievement level is at least 80%), as described under “Summary Compensation Table for Fiscal Year 2017— Employment Agreements—Leslie Moonves.” While the Committee considers the deductibility of bonus compensation under Section 162(m), the Committee retains the flexibility to determine bonus amounts in excess of amounts that may be deductible under tax laws, which excess amounts may not be deductible. See the “Compensation Deductibility Policy” section below for a discussion of the Section 162(m) performance criterion set for 2017 and related tax reform legislation and deductibility. Despite the Committee’s efforts to structure such bonus compensation to be eligible for deductibility under Section 162(m) as it then existed, because of the uncertainties in the interpretation of Section 162(m) as amended by recent tax reform legislation, including applicable transition relief rules, no assurance can be given that compensation for 2017 that had been intended to qualify for the performance-based exception to the limit on deductibility under Section 162(m) will be deductible under those transition relief rules.

The Compensation Committee considered individual performance factors in determining bonus payouts for the senior executives. In addition to reviewing each executive’s contributions to the achievement of financial goals, for 2017, the Committee also considered the following key strategic objectives: (i) strengthening the Company’s financial position; (ii) providing continuous flow of top-tier content; (iii) continuing to drive growth through strategic transformation of the Company; (iv) maintaining and building the Company’s reputation as one of the most desirable organizations for top “talent”; (v) continuing to ensure a high degree of focus on the importance of a diverse workforce; and (vi) positioning the Company for long-term success. In this regard, the Committee also considered the input and recommendations of Mr. Moonves in his role as Chairman of the Board, President and Chief Executive Officer (for executives other than himself). With respect to Mr. Moonves, for 2017, the Committee took into account his performance evaluation conducted by the Committee, together with the Nominating and Governance Committee, based on the goals and objectives for him approved by the Compensation Committee at the beginning of such year. The Committee’s determination regarding the amount of the annual bonus awards to be paid to the named executive officers takes into account all of the factors it deems appropriate, with no pre-determined emphasis on any individual item, and utilizes discretion to award an appropriate bonus.

The Compensation Committee also considers target bonus amounts for the named executive officers, which amounts are based on competitive practice. See “Summary Compensation Table for Fiscal Year 2017—

 

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Employment Agreements” for a discussion of the named executive officers’ target bonus amounts. The differences in the target bonus amounts set forth in the named executive officers’ agreements reflect the level of relative impact of each of their positions on Company performance.

In determining the bonus amounts for 2017 for the named executive officers, as set forth in the Summary Compensation Table for Fiscal Year 2017, the Compensation Committee took into account their leadership and execution with respect to the Company’s key strategic objectives, which included growing the core content business, emphasizing new revenue streams, markets and growth opportunities, and executing on strategic acquisitions and dispositions. As a result of this leadership and execution, the Company continued to deliver on its long-term strategy and positioned itself to return value to its shareholders. The Committee noted the following accomplishments within this context:

The Company returned value to stockholders and continued to strengthen its financial position.

 

   

The Company continued its commitment to return value to shareholders by growing EPS by 7% from the prior year, which represents the eighth consecutive fiscal year that EPS has increased year-over- year, and maintaining its quarterly dividend at $0.18 per share in 2017.

 

   

The Company retired more than 34 million shares of its Class B Common Stock pursuant to the Company’s share repurchase program and completion of the CBS Radio exchange offer.

 

   

The Company issued $1.8 billion of senior notes, resulting in a reduction of the Company’s weighted average interest expense and extending its overall maturity profile.

 

   

The Company purchased a group annuity contract that reduced the Company’s outstanding pension benefit obligation by approximately $800 million, or approximately 20% of the total obligations of the Company’s qualified pension plans.

The Company Continued to Deliver Top-Tier Content Across All Content-Related Business Units.

 

   

The Network closed out the 2016/2017 television season by placing #1 in viewers for the ninth consecutive season and, through the end of 2017 (i.e., through Week 14 of the 2017/2018 season), ranked #1 in viewers and households (all based on Live+7 ratings).

 

   

From the commencement of the 2017/2018 television season through the end of 2017, the Network, among viewers, was #1 in many categories (Series, Scripted Series, Comedy, New Comedy, and News Program) and had the #1 Program on four nights and the #1 Scripted Program on six nights (in viewers in primetime all based on Live+7 ratings).

 

   

The Company maintained its focus on ownership by holding an ownership stake in more than 80% of the shows on the Network’s fall 2017/2018 primetime schedule.

 

   

The Company continued to deliver on significant live events:

 

     

The Network’s broadcast of the 59th Annual Grammy Awards produced the event’s largest audience since 2014 with more than 26 million viewers;

 

     

CBS Sports’ joint broadcast of the NCAA Men’s Basketball Tournament was the second most- watched since 1994, and the 2017 National Championship Game, which aired exclusively on the Network, drew an average of 23 million viewers, which was up 30% over the prior season’s championship game; and

 

     

Showtime’s production of the Floyd Mayweather and Conor McGregor boxing match was the second highest grossing pay-per-view event in television history.

 

   

The premiere of “Star Trek: Discovery,” the fall kick-off of the NFL on the Network and the season finale of “Big Brother” and the “Big Brother” live feeds led to the biggest number of new subscriptions for CBS All Access in a week and in a month.

 

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“The Late Show” with Stephen Colbert finished the 2016/2017 television season as the most-watched late night program, which marked the first time that “The Late Show” finished as most-watched late night program in more than 20 years, and continued to be the most-watched late night program in the fourth quarter of 2017.

 

   

“The Late Late Show®” (hosted by James Corden) has a rapidly expanding social media audience, with his YouTube channel alone surpassing 13 million subscribers and more than 3.8 billion views.

 

   

The Company’s programming (with respect to CBS Entertainment, CBS News, CBS Sports, CBS Television Stations and Showtime) received, in 2017, 295 Emmy nominations and 62 wins.

 

   

The Company’s content received, for 2017, five nominations for the Golden Globe Awards and one nomination and win for the Screen Actors Guild Awards.

 

   

The Company continued to lead the industry in domestic syndicated programming with three of the top four and seven of the top 10 most-watched weekday programs in syndication, and was #1 in several first-run genres (#1 Talk Show, #1 Court Show and #1 News Magazine).

 

   

WCBS-TV, New York was America’s most-watched television station, and several of the Company’s owned-and-operated television stations (KPIX-TV, San Francisco, WBZ-TV, Boston, WCCO-TV, Minneapolis, KOVR-TV, Sacramento and WJZ-TV, Baltimore) were #1 in their respective markets.

 

   

Showtime had the top scripted series on premium television in 3 out of 4 quarters in 2017, with “Homeland” in the first quarter, “Billions” in the second quarter, and “Shameless” in the fourth quarter. Showtime’s content also received five nominations for Golden Globe Awards, including two for freshman comedy series, “SMILF.”

 

   

CBS Interactive ranked as #7 on the list of Top 10 Internet Properties during 2017, according to comScore.

 

   

CBS.com™ continued to be the #1 TV Network website (in average monthly unique viewers) across platforms in 2017, according to comScore.

 

   

Simon & Schuster continued to produce bestsellers in hardcover, paperback and multi-formats, 195 of which appeared on the New York Times bestseller lists and 30 of which held the #1 position.

The Company Continued to Divest Non-Strategic Assets, Acquire Strategic Assets, Drive Growth through Diversification and Expansion of its Sources of Revenue and Position Itself for Future Success.

The Company:

 

   

completed its strategic initiative to divest the CBS Radio business through an oversubscribed exchange offer and combination with Entercom Communications Corp.;

 

   

acquired Network Ten®, one of three major commercial broadcast networks in Australia, including its rapidly growing digital platform, Ten Play®, which paves the way for further multiplatform distribution opportunities for the Company’s content in overseas markets;

 

   

acquired the assets of Scout Media, which complements 247 Sports®, the Company’s already industry- leading network of websites on college and professional sports team, including recruiting information services by subscription;

 

   

purchased an equity interest in Kapital Entertainment and agreed to oversee the worldwide distribution of Kapital’s television series, and entered into a four-year co-financing and first-look agreement with Imagine Television Studios for scripted and unscripted long-form digital programming;

 

   

increased retransmission and station affiliation revenues by 27% over the prior year, and positioned itself for future success by finalizing two key multi-year retransmission compensation arrangements and 11 key multi-year station affiliation arrangements;

 

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grew the number of subscribers for CBS All Access and Showtime OTT and helped ensure their continued growth by:

 

     

making a full season of National Football League games available for live streaming on CBS All Access;

 

     

adding the Company’s 24-hour streaming news service, CBSN®, to CBS All Access;

 

     

launching exclusive original programming on both services, including “Star Trek: Discovery,” “The Good Fight” and “No Activity” on CBS All Access, and the revival of “Twin Peaks” on Showtime OTT, which generated interest in the services from consumers and led to a surge in new subscribers at multiple times throughout the year; and

 

     

making Showtime OTT available as an add-on feature to subscribers of SlingTV, YouTubeTV and DirecTV Now, which services previously did not offer Showtime; and

 

   

further expanded its brand internationally by:

 

     

concluding licensing deals with Fox Networks Group Asia, Hotstar and Canal+ Group, in which the Company licensed the Showtime brand in seven southeast Asian markets (Malaysia, Indonesia, Singapore, Philippines, Thailand, Taiwan, and Hong Kong), India and France, respectively;

 

     

licensing The CW’s “Dynasty” series to Netflix, which gives Netflix the international “first- window” broadcasting rights to the new series;

 

     

entering into an exclusive, multi-year licensing agreement with Japan’s leading pay-television provider, WOWOW, for the rights to five Network and Showtime series, including “Bull” and “Twin Peaks,” in Japan;

 

     

licensing “Bull,” “The Good Fight” and “MacGyver” to Channel 5, Channel 4, and Sky, respectively, in the United Kingdom;

 

     

closing a multi-platform licensing agreement with Amedia TV, which gives Amedia TV the rights to broadcast certain Network and Showtime programming in Russia, with exclusive rights to broadcast “Twin Peaks” in Russia; and

 

     

significantly increased revenues derived from the inclusion of its content in “skinny bundles,” and positioned itself for future success by executing agreements with Hulu, YouTubeTV, DirecTV Now and fuboTV.

The Company Secured its Reputation as a Desirable Organization for Top “Talent” and Demonstrated its Commitment to Diversity and Inclusion.

The Company continued:

 

   

to capitalize on opportunities to acquire key executive and creative talent, exemplified by the acquisition of key talent with prior work experience at notable companies, including ABC Entertainment, The CW, Discovery Communications, Facebook, Fox Networks Group, Goldman Sachs, iHeartMedia, NBCUniversal, Warner Bros. Entertainment, AMC Networks and VH1;

 

   

its achievement with respect to increasing minority representation in internal promotions and overall minority representation in its workforce (including in higher salary brackets);

 

   

to actively participate in, support and sponsor programs to develop diverse talent in the workplace and to appoint diverse candidates to key executive roles; and

 

   

its commitment to spending on contracts with diverse suppliers such that the Company’s spending with diverse suppliers has nearly doubled since 2011.

 

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With respect to the individual performance of the named executive officers during 2017, the Compensation Committee also determined (in the case of Mr. Moonves) and concurred in the recommendations made by Mr. Moonves (in the case of the other named executive officers) that:

 

   

During 2017, Mr. Moonves continued to demonstrate outstanding leadership in driving the Company’s execution on key strategic initiatives, including producing a steadily increasing volume of premium content in which the Company has an ownership interest, both for CBS Corporation owned outlets and for third parties. Mr. Moonves’ leadership continued to help deliver ratings successes across the Company’s portfolio of networks, adding a number of new shows in 2017 that are performing well at CBS, Showtime and CBS All Access, as well as for third parties. He successfully directed the divesting of the Company’s CBS Radio business and continued to increase revenues from non-advertising sources by growing subscribers to the Company’s over-the-top streaming services and successfully negotiating key retransmission, station affiliation, skinny bundle and international licensing deals. Mr. Moonves’ vision to develop and continue growing the Company’s direct to consumer or “over-the-top” streaming services solidified the Company’s position as a leader in the evolving media landscape, establishing the Company among those best positioned for the digital future. Mr. Moonves continued to improve the strength and reputation of the Company’s brands and businesses in domestic and international markets with the syndication of new programming into the international marketplace, including the continued introduction of the Showtime brand in major markets around the world where previously only certain series were available to viewers. Mr. Moonves also spearheaded the Company’s pursuit and successful acquisition of Australia’s Network Ten, which adds a valuable major broadcast network in a growing market to the Company’s stable of assets and enhances the Company’s plans to expand the reach of CBS All Access to international audiences. Under Mr. Moonves’ leadership, the Company continued to return significant value to shareholders, as demonstrated by maintaining the Company’s quarterly dividend of $0.18 per share during 2017, and retiring more than 34 million shares of Class B Common Stock during 2017. The Compensation Committee also acknowledged Mr. Moonves’ stellar reputation among and successes in communication with members of the investment community, and in management development and human resources, including his personal involvement in acquiring key executive and creative talent, his leadership and execution of the Company’s succession planning and diversity and inclusion programs, and his leadership in fostering a remarkably stable senior management team. Mr. Moonves was instrumental in continuing to lead the CBS Television Network in solidifying its #1 position in certain key metrics and leading the competition with his direct involvement in developing and securing high quality programming and maintaining CBS’s reputation as one of the most highly desirable organizations for top creative talent.

 

   

During 2017, Mr. Ianniello, while serving in a key corporate strategic role as part of the Company’s leadership, provided exceptional leadership during 2017, both in reshaping the Company’s portfolio and in executing on the Company’s financial and operational goals. Mr. Ianniello’s leadership on corporate development activities included a successful implementation of the divestiture of the Company’s Radio business, including the related debt refinancing and exchange offer, as well as the opportunistic acquisition of Network Ten in Australia. As the Chief Operating Officer and principal financial officer during 2017, Mr. Ianniello’s leadership was critical in driving improvements in the Company’s operations in 2017, including the successful management of its finances. Mr. Ianniello focused on executing the Company’s strategic growth initiatives, including the expansion of the Company’s streaming products, inclusion of the Company’s content in skinny bundles, audience monetization initiatives, international licensing opportunities and negotiation of retransmission and station affiliation compensation arrangements. Mr. Ianniello led his team in effectively managing the Company’s finances. The Company generated a record level of revenue and was successful in growing EPS over the prior fiscal year and for the eighth consecutive fiscal year. Under Mr. Ianniello’s leadership during 2017, the Company increased its revenues derived from non-advertising sources, primarily through the negotiations of key retransmission and station affiliation deals that increased these revenue streams by 27% over the prior year and through licensing the Company’s content world-wide. Mr. Ianniello also focused on strengthening the Company’s financial position and returning value

 

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to shareholders by successfully managing the Company’s share repurchase program and restructuring the Company’s debt portfolio, which resulted in a reduction of the Company’s weighted average interest expense and an extension of its overall maturity profile and gave the Company additional financial flexibility. Mr. Ianniello provided oversight of the process culminating in the Company’s successful pension derisking project, including construction of the plan asset portfolio to achieve the best pricing, that reduced its outstanding pension benefit obligation by approximately $800 million. Throughout 2017, Mr. Ianniello successfully communicated an effective message to the investment community and achieved significant savings from strategic tax planning and restructuring. Mr. Ianniello also provided leadership and direction for the Company’s information technology group.

 

   

Mr. Tu manages a highly effective global legal organization which advises, guides and supports the Company’s business activities throughout the world. Mr. Tu manages and oversees both the Company’s extensive internal legal resources and its broad network of external legal advisors, with the goal of providing proactive, cost-effective, high quality and timely support across the Company’s business operations. His areas of responsibility include advising the Company’s management and Board of Directors on corporate governance matters; the timely resolution of disputes through formal and informal adversarial processes and settlement negotiations; oversight of regulatory, disclosure, and public company reporting obligations; advice, guidance and documentation relating to mergers, acquisitions, dispositions, joint ventures, content-production arrangements and other strategic transactions; the negotiation and documentation of key commercial arrangements, including material agreements relating to the licensing and distribution of content, both domestically and internationally; legal support of the Company’s expanding content production activities, including clearance, rights acquisition and in-bound and out-bound licensing; protection of the Company’s intellectual property rights; and leadership of the Company’s global compliance programs. Mr. Tu’s substantial contributions include key commercial arrangements with major distributors and affiliates and new market entrants; strategic transactions relating to the Company (including the Company’s successful divestiture of its CBS Radio business and its acquisition of Network Ten in Australia); a significant restructuring of the Company’s substantial ongoing pension obligations; the protection of the Company’s financial and reputational interest through highly effective advocacy and resolution of legal and commercial disputes; and the continued expansion of the direct-to-consumer distribution of the Company’s content through owned and third-party video streaming services. Mr. Tu’s leadership was instrumental towards inspiring the legal department’s active involvement in community volunteer activities, including the provision of pro bono legal services, and in efforts to drive greater diversity in the legal profession.

 

   

Mr. Ambrosio served as the Company’s chief administrative officer and chief human resources officer. As chief administrative officer, he was responsible for oversight of corporate real estate, strategic sourcing, including travel and supplier diversity, facilities management and corporate security, corporate planning, and corporate social responsibility, including philanthropy and CBS Cares. He also provided management oversight of the Company’s EcoMedia business unit, which connects advertisers with leading non-profits to make tangible, quality of life improvements in communities nationwide. As chief human resources officer, he was responsible for all aspects of the global human resources function. During 2017, Mr. Ambrosio effectively managed the Company’s most significant areas of people and administrative costs, including controlling overall compensation and benefit expenses, reducing sourcing spend across the Company’s business while continuing to focus on increasing the share of the Company’s sourcing spend with diverse suppliers. Mr. Ambrosio’s real estate team executed on a number of important negotiations, including securing tenant renewals in owned locations, securing reductions in real estate occupancy costs in leased locations, and securing new or existing locations for key business units. Together, these efforts contributed to the Company’s reduction in compensation and administrative costs, and will continue to do so in future years. Under Mr. Ambrosio’s supervision, CBS’s EcoMedia business unit completed its 500th community project during 2017, and made significant progress in the development of a new digital business, Givewith. In human resources, Mr. Ambrosio’s leadership was integral to the Company’s execution of key

 

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leadership hires and changes, transitioning several executives to more senior roles and securing the continued employment of key members of the Company’s senior management team. Mr. Ambrosio also oversaw the successful completion of a number of projects involving the Company’s benefit offerings, including the Company’s group annuity purchase that reduced its outstanding pension benefit obligation by approximately $800 million, the transition to a new record-keeper, administrator and trustee for the Company’s defined contribution plans, an expansion of the Company’s benefit offerings and the seamless transition of CBS Radio’s benefits programs in connection with its divestiture. Mr. Ambrosio also ensured that the Company is meeting its recruitment, retention and succession planning needs at the most senior executive levels across the entire Company, addressing the Company’s critical needs for top executive talent. Mr. Ambrosio’s leadership during 2017 has also contributed to the Company’s efforts toward building a diverse workforce and an inclusive workplace, and an increase in community outreach and employee volunteering efforts.

 

   

During 2017, Mr. Schwartz led his team to successfully develop and manage the communications strategy and reputation for all of the Company’s domestic and international business units. Reporting directly to Mr. Moonves while serving as a key member of the Company’s senior management team, Mr. Schwartz continued to execute the communication strategy that emphasizes the Company’s positioning in the evolving media landscape. Mr. Schwartz also provided advice on a wide range of strategic and tactical issues, and advised all company division heads and public relations department senior staffs (who report to him and his senior team) on communications strategies for major announcements and issues. Most notably, Mr. Schwartz oversaw communications campaigns for The CBS Television Network, Showtime, for the divestiture of the CBS Radio business and the acquisition of Network Ten, and for the further development and expansion of the Company’s over-the-top streaming services, including CBS All Access, Showtime “over-the-top,” CBSN, CBS Sports HQ and the upcoming launch of a new streaming version of “Entertainment Tonight.” Throughout 2017, Mr. Schwartz also oversaw all of the Company’s internal communications vehicles, including the weekly publication of CBS Update to all employees and certain members of the analyst community, the ongoing publication of the Company’s award-winning annual newsletter highlighting the Company’s efforts with respect to diversity and inclusion, and the publication of a special issue highlighting the Company’s support of the military and veterans issues.

In determining the individual bonus payouts to the named executive officers for 2017, the Compensation Committee took into consideration the factors above, as well as the historical bonus payouts and performance relative to previous years’ performances. In addition, for Mr. Moonves, the Committee took into account the successes in his role as Chairman of the Board, President and Chief Executive Officer of the Company and his contributions to the creative successes across the Company’s portfolio of businesses. For all of these reasons, the Committee determined to award bonuses in the amounts set forth in the “Summary Compensation Table for Fiscal Year 2017” and related footnotes.

Long-Term Incentive Programs

Long-Term “Management” Incentive Program (“LTMIP”)

The LTMIP is designed as a “pay for performance” vehicle to encourage executives to make decisions that will create and sustain long-term value for stockholders. It is also a vehicle used to retain talent and build executive ownership. Through the Company’s total compensation design, a significant portion of the total compensation opportunity for the named executive officers is directly linked to stock price performance (with equity awards targeted at 34% – 46% of total target compensation for 2017), with the intention of creating alignment with the stockholders.

In determining the target value to be delivered through these equity vehicles, the Compensation Committee reviews competitive market data, the Company’s retention needs, potential stockholder dilution, the expense to be incurred by the Company and prior equity grant practices. Eligibility to participate in the LTMIP is generally limited to executives who have management responsibility.

 

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The type and mix of equity-based vehicles used to deliver value varies primarily by an executive’s level in the organization and the Company’s business needs. The Compensation Committee considers the following objectives in determining the appropriate type and mix of equity-based vehicles:

 

   

Increased alignment with stockholder interests (Stock Options): Provide the opportunity to acquire an equity interest in the Company and share in the appreciation of the value of the stock.

 

   

Increased accountability for senior executive (Performance-Based Stock Awards): Motivate senior executives to focus on Company performance through the achievement of pre-determined financial goals over a designated period.

 

   

Retention of talent in both up and down markets (Time-Based Stock Awards): Provide real value in awards that are earned over a specified vesting period.

The values, mix, and type of annual grants for senior executives are discussed by management and the Compensation Committee and ultimately approved by the Committee, unless the terms have been previously approved and set forth in an employment agreement. In determining the value, mix and type of awards, the Committee takes into consideration the objectives to allocating award types noted above and the competitive assessment of total compensation reviewed by the independent compensation consultant (as discussed in the “Evaluating Senior Executive Compensation” section above) and also reviews the LTMIP with its independent compensation consultant and senior management. For 2017, Messrs. Ianniello, Tu, Ambrosio and Schwartz received LTMIP awards, based on their then-current contractual target values that took into account the compensation assessment and the relative impact of the executive’s position on Company performance, of which 40% was delivered in stock options, 30% in performance-based restricted stock units (“PRSUs”), and 30% in time-based restricted stock units (“TRSUs” and together with the PRSUs, the “RSUs”). Mr. Tu also received a TRSU award under the Company’s Fund-the-Future Program (“FtF”), which provides equity compensation to eligible employees, excluding those actively participating in certain pension plans and employees otherwise subject to a collectively bargained agreement that does not provide for participation in the FtF. The remaining named executive officers are not eligible for the FtF, as they actively participate in certain pension plans.

For Mr. Moonves, his annual grant of RSUs for 2017, which was comprised of 50% PRSUs and 50% TRSUs and had a grant date value of $15.5 million, was awarded in accordance with the terms set forth in his employment agreement. In addition, during 2017, as part of Mr. Moonves’ bonus for 2016, the Compensation Committee granted to Mr. Moonves shares of the Company’s Class B Common Stock having a grant date value of $5 million. (See the “Grants of Plan-Based Awards During 2017” table.)

Performance Goals for LTMIP Awards

Performance Goals for 2017. At the beginning of each year, the Compensation Committee reviews performance goals for the annual awards of PRSUs and considers which metrics offer the best measure of Company performance to reflect the Company’s core objective of pay for performance. In setting the performance goal for the 2017 PRSUs, which also will be used to measure 2017 financial performance for the 2015 and 2016 Performance Share Awards (see “Grants of Plan-Based Awards During 2017—Description of Plan-Based Awards”), the Committee took into account the performance goal from the previous year and sought to establish a performance goal that was meaningful and challenging and designed to motivate performance, without encouraging senior executives to engage in risky business activities in order to achieve unattainable goals or overcome lower results caused by unforeseen events. See also the “Fiscal Year 2017 Executive Summary—Pay for Performance” section above for more information regarding the performance goals for 2017.

For 2017, the performance goal for the most senior levels of management, including the named executive officers, was the achievement during 2017 of a 90% or greater level of the weighted average performance of (i) the percentage of an OI Metric Target (as defined below) of $2.568 billion actually achieved (75% weighting) and (ii) the percentage of an FcF Metric Target (as defined below) of $583 million actually achieved (25% weighting).

 

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In setting the 2017 performance goal, the Compensation Committee selected two metrics: (i) operating income (the “OI metric”) and (ii) Free Cash Flow (i.e., operating income before depreciation and amortization, less cash interest, taxes paid, working capital requirements and capital expenditures) (the “FcF metric”). The “OI Metric Target” is calculated by starting with the Company’s budget for 2017 for the OI metric and then taking into account items approved by the Committee that may otherwise distort the calculation of the performance goal, and the “FcF Metric Target” is calculated by starting with the Company’s budget for 2017 for the FcF metric and then taking into account the same items. The Committee selected the OI metric because it is an important indicator of the Company’s operational strength and performance of its businesses, as it measures efficiency and profitability and incentivizes management to better control expenses. The FcF metric was selected because it gives a clear view of the Company’s ability to generate cash (and thus profits), which allows the Company to pursue opportunities that enhance stockholder value.

The vesting of an annual award of PRSUs is subject to the Compensation Committee’s determination of the level of achievement against a pre-determined performance goal set by the Committee. See “Grants of Plan-Based Awards During 2017—Description of Plan-Based Awards” for vesting schedules. The number of target shares is determined at the time of grant based on the closing price of a share of the Company’s Class B Common Stock on the NYSE on the date of grant (February 23, 2017). The number of shares earned upon vesting of the PRSUs is determined in accordance with the following schedule:

 

   

if the Company achieves less than 80% of the pre-determined performance goal, the award will be forfeited;

 

   

if the Company achieves 80% of the pre-determined performance goal, 80% of the target shares will be earned;

 

   

if the Company achieves 100% of the pre-determined performance goal, 100% of the target shares will be earned; and

 

   

if the Company achieves 120% or greater of the pre-determined performance goal, 120% of the target shares will be earned.

For achievement at intermediate points between 80% and 100% and between 100% and 120%, the number of shares to be delivered will be linearly interpolated. Dividend equivalents accrue on the target number of shares and equal the value of regular cash dividends paid on the shares of the Company’s Class B Common Stock. Dividend equivalents are paid in cash, less applicable withholdings, when the PRSUs vest, but only up to the amount payable with respect to the target number of shares. If the PRSUs do not vest, then the dividend equivalents accrued on those PRSUs are forfeited.

Payout under PRSU Awards for 2017. In February 2018, the Compensation Committee reviewed and discussed the Company’s 2017 performance against the 2017 performance goal. The Committee certified that the 2017 performance goal had been exceeded. Actual performance with respect to the OI metric was $2.423 billion and with respect to the FcF metric was $609 million. Thus 107.7% of the target number of shares underlying the PRSUs granted in February 2017 to the named executive officers vested in accordance with their respective schedules.

Grant Date of Awards

The grant date for equity awards is the date on which the Compensation Committee approves awards under the Company’s LTMIP or, if so determined by the Committee, a future grant date, or a date specified in an employment agreement. The Committee may approve an award that will have a future grant date, with the exercise price of any stock option not to be less than the closing price of a share of the Company’s Class B Common Stock on the NYSE on the date of grant. The Company does not set grant dates intentionally to precede the release of material non-public information. Communications regarding individual grant awards, including the terms and conditions, are provided to recipients as soon as administratively feasible. Annual management grants

 

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awarded in 2017 were approved on February 23, 2017, with a grant date of the same date. The exercise price of stock options granted on February 23, 2017 was the closing price of the Company’s Class B Common Stock on that date (i.e., $66.31).

Other Terms for RSUs/Stock Options

For a description of certain other material terms of the RSU and stock option grants, see “Grants of Plan-Based Awards During 2017—Description of Plan-Based Awards.”

Delegation of Authority With Respect to Awards

The Compensation Committee has delegated to the President and Chief Executive Officer limited authority, with respect to executives who are not senior executives, to grant long-term incentive awards under the Company’s long-term incentive plan to such executives in connection with their hiring, promotion or contract renewal and to modify the terms of outstanding equity grants in certain post-termination scenarios. The Committee delegated this authority in order for the Company to have the ability to (i) act in a timely manner in a competitive environment in connection with the hiring of new executives or the compensating of an existing executive being given a significant increase in responsibility and (ii) maintain flexibility to manage compensation in post-termination scenarios when mutually beneficial to the Company and the executive. The Committee’s delegation specifies the circumstances in which the authority can be used; limits the amount that can be awarded to an individual, the total amount that can be awarded in any period, and, in certain circumstances, aggregate incremental expense that can be incurred by the Company resulting from modifications of the terms of outstanding equity grants; and specifies the method for establishing the grant date. The delegation also requires that the President and Chief Executive Officer report to the Committee periodically on his exercise of this delegated authority.

Stock Ownership Guidelines

In order to further align the senior executives’ interests with those of the Company’s stockholders, the Company has established stock ownership guidelines. The guidelines provide that, within five years, starting in fiscal year 2007 or, if later, in the year in which a senior executive becomes subject to the guidelines, these senior executives are expected to acquire and establish holdings in Company stock equal in value to a multiple of their cash base (base salary less mandatory deferrals, if applicable), depending upon their positions as follows:

 

Senior Executive   Ownership Guideline Multiple

Chairman of the Board, President and Chief Executive Officer

  6x cash base

Chief Operating Officer

  4x cash base

Other Senior Executives

          1x to 3x cash base

All types of equity holdings, with the exception of stock options, are included in determining ownership. The Compensation Committee monitors compliance with these guidelines by receiving an annual progress report from senior management. During 2017, senior management reported to the Committee that all of the named executive officers subject to the guidelines met the guidelines as applied to each of them. The Committee determined to continue to monitor compliance with the guidelines. During 2017, the Committee determined to increase the ownership guidelines multiple to 6x cash base for the Chairman of the Board, President and Chief Executive Officer and to 4x cash base for the Chief Operating Officer.

Retirement and Deferred Compensation Plans

The Company provides active, eligible employees, including the named executive officers during 2017, with the opportunity to build financial resources for retirement through the Company’s broad-based tax-qualified defined benefit and/or defined contribution plans. In addition, eligible executives, including the named executive officers during 2017, participate in the Company’s nonqualified defined benefit and/or deferred compensation

 

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plans. In some instances, participants in these qualified and nonqualified plans may also have frozen benefits in other qualified and nonqualified plans. Information regarding these retirement and deferred compensation plans applicable to the named executive officers is set forth in the narrative following each of the Pension Benefits in 2017 tables and Nonqualified Deferred Compensation in 2017 table.

All Other Compensation

The Company provides for other compensation to participating employees (including the named executive officers during 2017) by providing Company-matching contributions in the CBS 401(k) and 401(k) excess plans and Company-paid life insurance. Compensation paid to the named executive officers in relation to these programs is included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2017.

In certain instances, the Company provides executives, including the named executive officers during 2017, with additional benefits that the Company believes are reasonable and typical for executives in similar industries and helps the Company to attract and retain these executives. Among these benefits are transportation-related benefits, which the Company believes provide security, travel flexibility and efficiencies that result in a more productive use of the executive’s time, given the demands of his position. In addition, during 2017 the Company provided security services to Mr. Moonves, at the Company’s request, due to the significance of the chief executive to the Company and the security issues that surround a senior executive in Mr. Moonves’ position, representing a high-profile company with multinational interests.

The Company also requires that named executive officers who are East Coast-based provide extended services at the Company’s West Coast operations (and vice versa with respect to one who is West Coast-based), for which the Company provides an expense allowance; executives are reimbursed for taxes on imputed income associated with certain expenses. All additional benefits are also described in footnote 7 to the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2017.

Post-Termination Arrangements

During 2017, each of the named executive officers was entitled to post-termination payments and benefits upon the occurrence of a termination without cause or a resignation for good reason and upon death or disability, as set forth in their respective employment agreements. The employment agreements that were in effect during 2017 for Messrs. Ianniello, Tu, Ambrosio and Schwartz also provided enhanced severance payments and benefits in the event of a termination within twenty-four months following certain corporate events. In addition, the agreement that was in effect with Mr. Moonves during 2017 provided for accelerated vesting of outstanding equity-based awards in certain circumstances following a transaction that results in the Company’s stock ceasing to be publicly traded.

The terms of these payments and benefits, and the estimated potential payments that would have been made to each named executive officer if his employment terminated as of the 2017 fiscal year end for the applicable reasons noted above are described under “Potential Payments Upon Termination and Certain Other Events.” In assessing post-termination payments and benefits in connection with senior executive employment arrangements, the Compensation Committee considered competitive practice with respect to comparable executives at media peers as well as prevailing practice and trends with respect to other public companies that are relevant in terms of size and complexity. The objective of these payments and benefits is to recruit and retain talent in a competitive market and, as applicable, compensate executives for restrictive covenants and other obligations following a termination without cause or a resignation for good reason.

Compensation Deductibility Policy

In approving compensation, the Compensation Committee takes into account Section 162(m) of the Code. As it existed in 2017 at the time the Compensation Committee made its decisions for 2017 compensation,

 

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Section 162(m) generally limited to $1 million the federal tax deductibility of some forms of compensation paid in one year to the chief executive officer and the three other most highly compensated executive officers employed by the Company at the end of the year (other than the Company’s chief financial officer) and provided that performance-based compensation may qualify for an exception to the limit on deductibility, if among other requirements, the plan under which such compensation is paid met certain requirements, including stockholder approval. Each of the Senior Executive STIP and the Company’s long-term incentive plan was designed to permit awards that would comply with this Section 162(m) exception for performance-based compensation, and the Company’s stockholders previously approved both of these plans. Legislation recently signed into law in December 2017, the Tax Cuts and Jobs Act (the “Act”), expands the number of individuals covered by Section 162(m) and eliminates the exception for performance-based compensation for taxable years beginning after December 31, 2017, except for otherwise qualified compensation payable pursuant to a written binding contract in effect on November 2, 2017 that is not subsequently materially modified.

In order to provide appropriate compensation, the Compensation Committee has historically approved compensation exceeding the $1 million limitation under Section 162(m), including with respect to a portion of base salary and long-term incentives, and compensation exceeding the maximum bonus amount provided for under the Senior Executive STIP, and the Compensation Committee may continue to approve compensation exceeding the $1 million limitation under Section 162(m) going forward. For 2017, as part of the Bonus Program, the named executive officers were eligible to receive bonus awards under the Senior Executive STIP, and the named executive officers were (and continue to be) eligible to receive long-term compensation under the Company’s long-term incentive plan. Despite the Committee’s efforts to structure such 2017 bonus and long- term compensation to be eligible for deductibility under Section 162(m) as it then existed, because of the uncertainties in the interpretation of Section 162(m) as amended by the Act, including applicable transition relief rules, no assurance can be given that compensation for 2017 that had been intended to qualify for the performance-based exception to the limit on deductibility under Section 162(m) will be deductible under those transition relief rules.

For 2017, in order for bonus awards made under the Senior Executive STIP to be eligible for deductibility under Section 162(m), as it then existed, the Compensation Committee established a performance criterion for the bonus awards, which criterion could not be certain of being achieved at the time it was set. In setting the performance criterion for 2017, the Committee took into account the performance criterion from the previous year and sought to establish a performance criterion that was meaningful and challenging and designed to motivate performance, without encouraging senior executives to engage in risky business activities in order to achieve unattainable goals or overcome lower results caused by unforeseen events.

The Section 162(m) performance criterion established by the Committee for 2017 was the achievement during 2017 of an 80% or greater level of the weighted average performance of (i) the percentage of an OI Metric Target of $2.568 billion actually achieved (75% weighting) and (ii) the percentage of an FcF Metric Target of $583 million actually achieved (25% weighting). The “OI Metric Target” is calculated by starting with the Company’s budget for 2017 for the OI metric and then taking into account items approved by the Committee that may otherwise distort the calculation of the performance criterion, and the “FcF Metric Target” is calculated by starting with the Company’s budget for 2017 for the FcF metric and then taking into account the same items.

Assuming a Compensation Committee determination that the performance criterion had been achieved, the terms of the Senior Executive STIP established a maximum bonus for each named executive officer that could be awarded under the Senior Executive STIP equal to eight times his base salary in effect at the beginning of the year, with the amount of the bonus, if any, actually awarded to any named executive officer under the Senior Executive STIP being subject to the Committee’s downward discretion, as discussed under the “Performance-Based Compensation Programs—Bonus Awards” section above. This framework for establishing a maximum bonus was designed to provide that the awards granted under the Senior Executive STIP would be eligible for deductibility under Section 162(m).

 

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In January 2018, the Compensation Committee reviewed and discussed the Company’s 2017 performance against the 2017 performance criterion. Actual performance with respect to the OI metric was $ 2.423 billion and with respect to the FcF metric was $609 million. The Committee certified that the 2017 performance criterion had been exceeded with actual performance exceeding the targeted level. Therefore, the Committee awarded bonuses to the named executive officers under the Senior Executive STIP.

With respect to the Company’s long-term incentive plan, in 2017, the Compensation Committee also established performance goals for PRSUs, rendering them eligible for deductibility under Section 162(m), as it then existed, as described in the “Long-Term Incentive Programs—Performance Goals for LTMIP Awards” section above.

Employment Contracts

During 2017, all of the named executive officers had employment contracts with the Company, as the Compensation Committee has considered it to be in the Company’s best interest, and as the best means, to secure the employment of each of these executives. The terms and provisions of these contracts are more fully described in the narrative section following the Summary Compensation Table for Fiscal Year 2017 and in “Changes in Named Executive Officers’ Compensation Arrangements in 2017” in this “Compensation Discussion and Analysis.”

The Compensation Committee approves all employment arrangements with senior executives. With respect to employees other than senior executives, employment contracts were subject to an approval process coordinated through the Office of the Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer.

 

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COMPENSATION COMMITTEE REPORT

The following Compensation Committee Report does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such information by reference.

The Compensation Committee Charter states that the primary purpose of the Compensation Committee is to discharge the responsibilities of the Board of Directors relating to the compensation of the Company’s executive officers and other senior executives. Under the Charter, the Compensation Committee’s authorities and duties include, among other things:

 

   

Adopting and periodically reviewing the Company’s philosophy, strategy and principles regarding the design and administration of the Company’s compensation programs;

 

   

Reviewing and approving the total compensation packages for the Company’s executive officers and other senior executives identified by the Committee after consultation with members of management (excluding “Talent,” as such term is currently used in the media or entertainment industries); and

 

   

Overseeing the administration of the Company’s incentive compensation plans and equity-based compensation plans.

The Compensation Committee retains an independent compensation consulting firm to advise the Committee in its review of senior executive compensation. The consultant reports directly to the Compensation Committee.

The full text of the Compensation Committee Charter is available on the Company’s website at www.cbscorporation.com. The Compensation Committee assesses the adequacy of its Charter at least every other year, or more frequently as the Committee may determine.

Based on its review and discussions with the Company’s management regarding the Compensation Discussion and Analysis (“CD&A”), the Compensation Committee recommended to the CBS Corporation Board of Directors that the CD&A be included in this proxy statement and incorporated by reference from this proxy statement into the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 20, 2018.

Compensation Committee

Linda M. Griego

Bruce S. Gordon (Chair), William S. Cohen, Linda M. Griego and Doug Morris were the members of the then-current Compensation Committee who reviewed and discussed with the Company’s management the CD&A included in this proxy statement, which reflected the views of the Compensation Committee as of April 2018. As previously announced, the Company is conducting an internal investigation, and the Board will make a determination whether the Company has grounds to terminate the employment of Mr. Moonves for cause under his employment agreement within 30 days following completion of the final report of the independent investigators on the current internal investigation, but in no event later than January 31, 2019.

Following the Compensation Committee’s review and discussion with the Company’s management of the CD&A included in this proxy statement, the Compensation Committee was reconstituted, such that, as of the date as of this proxy statement, the members of the Compensation Committee are Brian Goldner (Chair), Linda M. Griego and Strauss Zelnick.

 

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EXECUTIVE COMPENSATION

Summary Compensation Table for Fiscal Year 2017(1)

The following table sets forth information concerning total compensation for the Company’s last three completed fiscal years for the Company’s principal executive officer, principal financial officer and the three other most highly compensated executive officers of the Company for fiscal year 2017 who were serving as executive officers at the end of fiscal year 2017 (the “named executive officers”).

 

Name and Principal Position

as of December 31, 2017

(a)

 

Year

(b)

   

Salary

($)

(c)(2)

   

Bonus

($)

(d)(3)

   

Stock

Awards

($)

(e)(4)

   

Option

Awards

($)

(f)(5)

   

Change in

Pension

Value and

NQDC

Earnings

($)

(g)(6)

   

All Other

Compensation

($)

(h)(7)

   

Total

($)

(i)

 

Leslie Moonves(8)

    2017       3,500,000       20,000,000       43,695,967       0       957,708       1,179,048       69,332,723  

Chairman of the Board,

President and Chief Executive Officer

    2016       3,500,000       32,000,000       31,946,942       0       973,220       1,147,704       69,567,866  
    2015       3,500,000       19,000,000       25,499,919       7,199,999       623,231       1,152,883       56,976,032  
                                                               

Joseph R. Ianniello(9)

    2017       2,500,000       12,000,000       4,199,942       2,800,000       253,072       363,474       22,116,488  

Chief Operating Officer

    2016       2,500,000       12,500,000       10,726,720       2,799,993       190,988       321,442       29,039,143  
    2015       2,500,000       8,073,000       12,686,605       2,799,995       57,100       295,446       26,412,146  
                                                               

Lawrence P. Tu

    2017       1,284,808       3,280,000       2,113,678       1,400,000       0       64,903       8,143,389  

Senior Executive Vice President

and Chief Legal Officer

    2016       1,200,000       3,800,000       2,113,667       1,399,997       0       58,642       8,572,306  
    2015       1,200,000       2,700,000       2,113,748       1,399,998       0       69,877       7,483,623  
                                                               

Anthony G. Ambrosio(10)

    2017       1,250,000       1,760,000       1,387,470       924,998       276,054       132,842       5,731,364  

Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer

    2016       964,423       2,200,000       1,049,965       699,998       231,274       137,311       5,282,971  
    2015       875,000       1,260,000       1,049,928       699,999       94,818       136,167       4,115,912  
                                                               

Gil Schwartz(11)

    2017       1,000,000       1,760,000       959,904       639,993       256,628       106,324       4,722,849  

Senior Executive Vice President

and Chief Communications

Officer

    2016       896,923       2,200,000       959,942       639,998       283,759       99,759       5,080,381  
    2015       800,000       1,378,125       809,982       539,996       219,148       91,070       3,838,321  
                                                               

 

(1)

The table below sets forth the following 2017 compensation items: (i) cash compensation comprised of salary and annual bonus awards, (ii) annual equity awards, and (iii) awards in connection with contract amendments/renewals, as more fully described in footnote 1(c) below. The table below differs from the Summary Compensation Table, in that the table below excludes column (g) (“Change in Pension Value and NQDC Earnings”) and column (h) (“All Other Compensation”), and as further described in the footnotes to the table below. This table is not required by SEC rules and is not designed to replace the Summary Compensation Table. It is intended to provide information that the Company believes is useful in understanding and analyzing 2017 compensation decisions.

 

Annual Compensation  
    

 

Cash Portion

    Annual
Equity
Awards
($)(a)
    Total Annual
Compensation
($)
   

Awards in
connection
with Contract
Amendments/
Renewals

($)

 
Name  

Salary

($)

   

Bonus

($)

 

Leslie Moonves

    3,500,000       20,000,000(b)       15,499,962       38,999,962       23,196,010(c)  

Joseph R. Ianniello

    2,500,000       12,000,000       6,999,942       21,499,942          

Lawrence P. Tu

    1,284,808       3,280,000       3,513,678       8,078,486      

Anthony G. Ambrosio

    1,250,000       1,760,000       2,312,468       5,322,468          

Gil Schwartz

    1,000,000       1,760,000       1,599,897       4,359,897          

 

  (a)

Represents the grant date fair value, determined in accordance with FASB ASC Topic 718, of the annual stock and option awards, as applicable, granted in 2017 to the named executive officers, as disclosed in columns (e) and (f) of the Summary

 

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  Compensation Table. For Mr. Moonves, this amount does not include (i) the grant date fair value of the unrestricted shares of the Company’s Class B Common Stock granted to him in 2017 as part of his bonus for fiscal year 2016 performance ($4,999,995), or (ii) the amount included in the “Awards in connection with Contract Amendments/Renewals” column above and described in footnote (c) below, both of which amounts are also disclosed in column (e) of the Summary Compensation Table above.

 

  (b)

See footnote (3) below for a discussion of Mr. Moonves’ 2017 bonus. During 2018, the Compensation Committee determined to grant to Mr. Moonves unrestricted shares of the Company’s Class B Common Stock having a grant date value of $8,000,000. This award will be reportable in the Company’s 2019 proxy statement in accordance with SEC rules.

 

  (c)

Represents the grant date fair value, determined in accordance with FASB ASC Topic 718, of the portion of the 2015 Performance Share Award (provided for in connection with the execution of Mr. Moonves’ employment agreement dated December 11, 2014 (as subsequently amended)) and the portion of the 2016 Performance Share Award (provided for in connection with the execution of an amendment dated February 26, 2016 to Mr. Moonves’ then-current employment agreement (as subsequently amended)), in each case, deemed to have been granted for the purposes of measuring the grant date fair value as provided in FASB ASC Topic 718 relating to the 2017 performance period ($9,447,000 and $13,749,010, respectively), which amounts are disclosed in column (e) of the Summary Compensation Table. See “Grant of Plan-Based Awards During 2017—Description of Plan-Based Awards” for a description of the Performance Share Awards.

 

(2)

Salary includes amounts deferred under qualified and nonqualified arrangements. For 2017, all named executive officers deferred a portion of their salary under qualified and nonqualified deferred compensation arrangements. See the Nonqualified Deferred Compensation in 2017 table for further information on amounts deferred under nonqualified deferred compensation arrangements.

 

(3)

Amounts set forth in the “Bonus” column for 2017, 2016, and 2015 reflect cash payments made in early 2018 for fiscal year 2017 performance, in early 2017 for fiscal year 2016 performance, and early 2016 for fiscal year 2015 performance, respectively.

During 2018, the Compensation Committee determined to grant to Mr. Moonves, as part of his bonus, unrestricted shares of the Company’s Class B Common Stock having a grant date value of $8,000,000. This award will be reportable in the Company’s 2019 proxy statement in accordance with SEC rules.

 

(4)

Amounts reflect the aggregate grant date fair values determined in accordance with FASB ASC Topic 718 of grants of RSUs, and, with respect to Mr. Moonves only, (i) the portion of the 2015 Performance Share Award and the portion of the 2016 Performance Share Award, in each case, deemed to have been granted for the purposes of measuring the grant date fair value as provided in FASB ASC Topic 718 relating to the 2017 performance period ($9,447,000 and $13,749,010, respectively), and (ii) unrestricted shares of the Company’s Class B Common Stock, with a value of $4,999,995, granted in 2017 as part of his bonus for 2016. For the performance-based RSUs granted in 2017 (representing, of the aggregate grant date values included in column (e), $7,749,981 for Mr. Moonves, $2,099,971 for Mr. Ianniello, $1,049,953 for Mr. Tu, $693,735 for Mr. Ambrosio and $479,952 for Mr. Schwartz), the maximum grant date value, determined in accordance with FASB ASC Topic 718, would be $9,299,978, $2,519,966, $1,259,944, $832,483 and $575,943, respectively. For the portion of Mr. Moonves’ 2015 Performance Share Award and 2016 Performance Share Award, in each case, relating to the 2017 performance period, the maximum grant date value, determined in accordance with FASB ASC Topic 718, would be $10,391,700 and $15,123,911, respectively. For a discussion of the maximum number of shares that could have been issued in connection with the 2015 Performance Share Award and the 2016 Performance Share Award, see “Grants of Plan-Based Awards During 2017—Description of Plan-Based Awards” below. For a discussion of the assumptions made in calculating the grant date fair value amounts for 2017, see Note 13 “Stock-Based Compensation” to the audited 2017 consolidated financial statements on pages II-75-II-78 in the Company’s Form 10-K for the fiscal year-ended December 31, 2017.

 

(5)

Amounts reflect the aggregate grant date fair values determined in accordance with FASB ASC Topic 718. For a discussion of the assumptions made in calculating the grant date fair value amounts for 2017, see Note 13 “Stock-Based Compensation” to the audited 2017 consolidated financial statements on pages II-75-II-78 in the Company’s Form 10-K for the fiscal year-ended December 31, 2017.

 

(6)

Amounts relate to changes in pension value only. None of the Company’s nonqualified deferred compensation plans provide for above-market interest or preferential earnings.

 

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(7)

The following table and footnotes describe each component of the “All Other Compensation” column for 2017:

 

Named

Executive Officer

 

Company
Contribution
to 401(k)

Plan

($)

 

Company
Contribution
to 401(k)

Excess Plan
($)

  Company-
Paid Life
Insurance
($)(a)
 

Tax  

    Reimbursement    
($)(b)  

  PERQUISITES AND OTHER PERSONAL
BENEFITS
 

Total

($)(g)

 
  Other
Compensation
($)(c)
  Extended
Service
Expense
($)(d)
  Transportation-
Related
Benefits
($)(e)
 

Security

($)(f)

Leslie Moonves

  3,600   20,631   234,564           —       7,500       —     272,201   640,552     1,179,048  

Joseph R. Ianniello

  8,100   16,708       3,780     198,932       —     93,356     42,598         —       363,474  

Lawrence P. Tu

  8,308   17,250       2,041       37,304       —         —           —           —       64,903  

Anthony G. Ambrosio

  3,600   21,929       1,890     102,710       —       2,713         —           —       132,842  

Gil Schwartz

  4,673   21,000       1,512       79,139       —         —           —           —       106,324  

 

  (a)

Represents premiums paid in 2017 by the Company for life insurance coverage.

 

  (b)

Amounts include tax reimbursement on imputed income associated with the Extended Service Expense (defined below).

 

  (c)

The amount reflects matching charitable contributions made by the Company on Mr. Moonves’ behalf, in his capacity as a director, under the directors’ matching gift program.

 

  (d)

The Company requires that certain East Coast-based senior executives provide extended services at the Company’s West Coast operations (and vice versa), for which the Company provides an estimated expense allowance. The amounts shown in this column represent certain other costs and expenses incurred in connection with providing these services (“Extended Service Expense”).

 

  (e)

The amounts of perquisites and other personal benefits shown in this column include (i) amounts attributable to the personal use of a car and driver and/or personal use of car service, all provided for business-related security reasons, (ii) the incremental cost to the Company of the personal use of the Company aircraft or the personal use of chartered aircraft, as applicable, and (iii) for Mr. Moonves, automobile insurance provided by the Company. The incremental cost to the Company of the personal use of the Company aircraft is calculated by dividing the total variable costs (including fuel, maintenance, landing and navigation fees, catering, flight crew trip expenses, telecommunications, supplies and miscellaneous expenses) by the total flight hours for such year and multiplying such amount by the executive’s total number of flight hours for his personal use for the year (including flights made to reposition the plane in connection with such personal use). Fixed costs which do not change based on usage, such as pilot salaries, hangar rental and insurance, are excluded.

 

  (f)

The amount represents the cost to the Company for the provision of a Company-specified level of regular security coverage (i.e., exclusive of cost for any extraordinary incident coverage) deemed necessary to protect CBS’s business interests. Although the security is directed by and provided at the request of the Company for business purposes, the cost is being reported as a perquisite.

 

  (g)

From time to time, tickets to sporting and other entertainment events are provided to certain employees, including the named executive officers, without charge, to attend these events as they relate to a business purpose. Tickets are made available to employees, including the named executive officers, for personal use if the tickets are not otherwise needed for business use. The Company does not incur incremental costs with respect to tickets to sporting and other entertainment events, as the tickets were purchased by the Company for business purposes and are made available to the named executive officers if the tickets are not utilized for such purposes.

 

(8)

Mr. Moonves separated from the Company as its Chairman of the Board, President and Chief Executive Officer effective September 9, 2018.

 

(9)

Mr. Ianniello was appointed President and Acting Chief Executive Officer effective September 9, 2018.

 

(10)

Mr. Ambrosio separated from the Company as its Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer effective November 1, 2018.

 

(11)

Mr. Schwartz separated from the Company as its Senior Vice President and Chief Communications Officer effective November 1, 2018.

Employment Agreements for 2017

For Fiscal Year 2017, all of the named executive officers had employment agreements that set forth the terms and conditions of their employment with the Company. The material terms of each of these agreements necessary to an

 

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understanding of the information provided in the Summary Compensation Table for Fiscal Year 2017 and the Grants of Plan-Based Awards During 2017 table are provided below and, along with the vesting terms of long-term incentive awards granted to the named executive officers during 2017, in the section “Grants of Plan-Based Awards During 2017— Description of Plan-Based Awards.” See “Potential Payments Upon Termination or Certain Other Events” for a description of arrangements relating to certain named executive officers entered into during 2018, the payments and benefits that would have been provided to the named executive officers in connection with a termination of their employment effective as of December 31, 2017, and enhanced payments and benefits available to certain named executive officers in connection with specified corporate events assuming a termination of employment effective as of December 31, 2017.

Leslie Moonves

On May 19, 2017, the Company entered into a new employment agreement with Mr. Moonves, which superseded his prior employment agreement, as amended, and extended the term of his employment through June 30, 2021. Consistent with his previous agreement, the new agreement provided for an annual base salary of $3.5 million and a target bonus of $20 million, both subject to an annual review and increase at the discretion of the Compensation Committee. The new agreement also provided, consistent with the previous agreement, that a portion of the bonus amount payable to Mr. Moonves, if any, was subject to a payment schedule based on levels of achievement of the “Company-Wide Performance Goal(s)” established by the Compensation Committee, which goal for 2017 was the same as the performance criterion under the Short-Term Incentive Program. Pursuant to the agreement, for 2017, the payment schedule provided that an 80% level of achievement against this goal would result in a payment of at least 75% of his target bonus amount; a 100% level of achievement would result in a payment of at least 100% of the target amount; and a 108% or greater level of achievement would result in a payment of at least 133.33% of the target amount.

Mr. Moonves’ prior agreement provided for an annual RSU award through 2019, which the new agreement continued and extended through 2021, with each award (i) subsequent to the award for 2014 and through and including 2019, having a grant date value that is $1.5 million higher than the prior year’s award, and (ii) beginning with the 2019 award, having a grant date value of $18,500,000 (except for the 2021 RSU award, the value of which would have been prorated by 50% to reflect the agreement’s scheduled expiration on June 30, 2021). Accordingly, on February 23, 2017, as part of the annual LTMIP awards, Mr. Moonves received an annual RSU award with a grant date value of $15.5 million. The Committee determined that the performance goal applicable to one-half of Mr. Moonves’ annual 2017 RSU award would be the same as that set for the other named executive officers.

The new agreement continued to provide, consistent with Mr. Moonves’ prior agreement, the terms for the 2015 Performance Share Award and 2016 Performance Share Award, and also provided for the Cash Performance Award (each as described below under “Grants of Plan-Based Awards During 2017—Description of Plan-Based Awards”). It also provided for a new performance share award, as described below under “Potential Payments Upon Termination or Certain Other Events—Treatment of Mr. Moonves’ Performance Share Awards and Cash Performance Award Upon Termination and Certain Other Events.” Mr. Moonves was provided with life insurance during his employment with the Company in accordance with the terms of his agreement.

Mr. Moonves’ agreement contained restrictive covenants imposing non-competition obligations, restricting solicitation of employees, and protecting confidential information and the Company’s ownership of work product and requiring cooperation in litigation, as well as other covenants, during Mr. Moonves’ employment and for specified periods after the termination of employment.

Joseph R. Ianniello

On July 1, 2017, the Company entered into a new employment agreement with Mr. Ianniello (the “2017 Agreement”), which superseded his prior employment agreement and provided for his continued employment

 

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with the Company as its Chief Operating Officer through June 30, 2022. The 2017 Agreement provides for an annual base salary of $2.5 million consistent with the previous agreement, to be increased to $2.75 million beginning in the third contract year, which shall then be annually reviewed and increased at the discretion of the Compensation Committee. Under the 2017 Agreement, Mr. Ianniello’s annual target bonus for the 2017 calendar year was 450% of his base salary as in effect on November 1, 2017. Pursuant to the terms of his previous agreement, which was in effect at the time of the annual LTMIP awards, Mr. Ianniello was eligible to receive annual grants of long-term compensation, as determined by the Company’s Compensation Committee, based on a target value of $7 million, commencing in 2014.

On September 27, 2018, the Company entered into a letter agreement, effective as of September 9, 2018, with Mr. Ianniello, which modified the 2017 Agreement. Pursuant to the letter agreement, Mr. Ianniello serves as the Company’s President and Acting Chief Executive Officer.

Mr. Ianniello’s employment agreement contains restrictive covenants imposing non-competition obligations, restricting solicitation of employees, protecting the Company’s confidential information and its ownership of work product and requiring cooperation in litigation, as well as other covenants, during his employment and for specified periods after the termination of employment. The agreement also provides for enhanced severance payments and benefits in the event his employment is terminated by the Company without cause or by him for good reason, in each case, in connection with specified corporate events.

Lawrence P. Tu

On July 20, 2017, the Company entered into a new employment agreement with Mr. Tu, which superseded his prior employment agreement and provides for his continued employment with the Company as its Senior Executive Vice President and Chief Legal Officer through May 31, 2019. Effective June 1, 2017, the agreement provides for an annual base salary of $1.35 million (increased from $1.2 million), which may be increased at the discretion of the Compensation Committee, and an unchanged annual target bonus of 200% of his base salary as in effect on November 1st of the applicable year. Pursuant to the terms of his previous agreement, which was in effect at the time of the annual LTMIP awards, Mr. Tu was eligible to receive annual grants of long-term compensation, as determined by the Company’s Compensation Committee, based on a target value of $3.5 million.

Mr. Tu’s employment agreement contains restrictive covenants imposing non-competition obligations, restricting solicitation of employees, protecting the Company’s confidential information and its ownership of work product and requiring cooperation in litigation, as well as other covenants, during his employment and for specified periods after the termination of employment. The agreement also provides for enhanced severance payments and benefits in the event his employment is terminated by the Company without cause or by him for good reason, in each case, in connection with specified corporate events.

Anthony G. Ambrosio

Dated October 5, 2016 and effective as of September 29, 2016, Mr. Ambrosio’s employment agreement, which was subsequently amended on August 4, 2017, provided for his continued employment with the Company as its Senior Executive Vice President, Chief Administrative Officer and Chief Human Resources Officer through September 28, 2020. The agreement provided for an annual base salary of $1,250,000, which was subject to increase at the discretion of the Compensation Committee, and an annual target bonus equal to 125% of his base salary as in effect on November 1st of the applicable year. Mr. Ambrosio was also eligible to receive annual grants of long-term compensation, as determined by the Company’s Compensation Committee, based on a target value of 185% of his base salary.

The agreement contained restrictive covenants imposing non-competition obligations, restricting solicitation of employees, protecting the Company’s confidential information and its ownership of work product and requiring cooperation in litigation, as well as other covenants, during his employment and for specified periods

 

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after the termination of employment. The agreement also provided for enhanced severance payments and benefits in the event his employment was terminated by the Company without cause or by him for good reason, in each case, in connection with specified corporate events.

Gil Schwartz

Dated December 17, 2015 and effective as of July 1, 2016, Mr. Schwartz’ employment agreement, which was subsequently amended on August 4, 2017 and January 11, 2018, provided for his continued employment with the Company as its Senior Executive Vice President, Chief Communications Officer through June 30, 2020 (or, in the event Mr. Schwartz made an election to shorten the term, through June 30, 2019). The agreement provided for an annual base salary of $1,000,000, which was subject to increase at the discretion of the Compensation Committee, and an annual target bonus equal to 125% of his base salary as in effect on November 1st of the applicable year. Mr. Schwartz was also eligible to receive grants of long-term compensation, as determined by the Compensation Committee, based on a target of $1.6 million.

The agreement contained restrictive covenants imposing non-competition obligations, restricting solicitation of employees, protecting the Company’s confidential information and its ownership of work product and requiring cooperation in litigation, as well as other covenants, during his employment and for specified periods after the termination of employment. The agreement also provided for enhanced severance payments and benefits in the event his employment was terminated by the Company without cause or by him for good reason, in each case, in connection with specified corporate events.

 

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Grants of Plan-Based Awards During 2017

The following table sets forth information concerning grants of equity awards under the Company’s incentive programs to the named executive officers in fiscal year 2017.

 

Name  

Grant

Date

   

Committee
Action

Date(1)

    Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards
    Estimated Possible
Payouts Under Equity
Incentive Plan Awards
   

All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units

(#)

    All
Other
Option
Awards:
Number
of
Securities
Under-
lying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)(2)
   

Grant

Date

Fair Value

of Stock

and

Option

Awards

($)(3)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

Leslie Moonves

    1/25/2017       1/25/2017                                           79,365                   4,999,995  
      2/23/2017       11/24/2014                         75,000       150,000       238,334                         9,447,000  
      2/23/2017       2/18/2016                         66,717       158,454       240,143                         13,749,010  
      2/23/2017       2/23/2017                                           116,875                   7,749,981  
      2/23/2017       2/23/2017                         93,500       116,875       140,250                         7,749,981  
      5/19/2017       5/19/2017       20,000,000       33,000,000       55,000,000                                            

Joseph R. Ianniello

    2/23/2017       2/23/2017                         25,336       31,669       38,003                         2,099,971  
      2/23/2017       2/23/2017                                           31,669                   2,099,971  
      2/23/2017       2/23/2017                                                 160,000       66.31       2,800,000  

Lawrence P. Tu

    2/23/2017       2/23/2017                         12,668       15,834       19,001                         1,049,953  
      2/23/2017       2/23/2017                                           15,834                   1,049,953  
      2/23/2017       2/23/2017                                                   80,000       66.31       1,400,000  
      4/3/2017       2/23/2017                                           200                   13,772  

Anthony G. Ambrosio

    2/23/2017       2/23/2017                         8,370       10,462       12,555                         693,735  
      2/23/2017       2/23/2017                                           10,462                   693,735  
      2/23/2017       2/23/2017                                                 52,857       66.31       924,998  

Gil Schwartz

    2/23/2017       2/23/2017                         5,791       7,238       8,686                         479,952  
      2/23/2017       2/23/2017                                           7,238                   479,952  
      2/23/2017       2/23/2017                                                 36,571       66.31       639,993  

 

(1)

The “Committee Action Date” refers to the date on which the Compensation Committee approved the grants reported in the table. With respect to Mr. Moonves, for the portion of the 2015 Performance Share Award and 2016 Performance Share Award (each as defined below) deemed to have been granted for the purposes of measuring the grant date fair value as provided in FASB ASC Topic 718 relating to the 2017 performance period ($9,447,000 and $13,749,010 grant date fair value, respectively), the “Committee Action Date” refers to the date on which the Compensation Committee approved the employment agreement providing for the awards. With respect to Mr. Tu’s April 3, 2017 grant, the “Committee Action Date” refers to the date on which the Compensation Committee approved the grant under the Company’s Fund-the-Future Program (“FtF”).

 

(2)

The exercise price of the options is the closing price of the Company’s Class B Common Stock on the date of grant.

 

(3)

Amounts reflect the fair value on the date of grant, calculated in accordance with FASB ASC Topic 718, of the awards reported in the table.

Description of Plan-Based Awards

Equity awards reported in the Grants of Plan-Based Awards During 2017 table were awarded to the named executive officers under the Company’s long-term incentive programs, except for the unrestricted share award made to Mr. Moonves as part of his bonus for fiscal year 2016 performance and the Cash Performance Award made pursuant to Mr. Moonves’ employment agreement.

 

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RSUs—The number of RSUs awarded is determined by dividing the value to be delivered by the closing price of a share of the Company’s Class B Common Stock on the NYSE on the date of grant. Except for Mr. Moonves’ annual RSU grants and Mr. Tu’s FtF grant, vesting for RSUs occurs in equal annual installments over four years. Some RSU awards are subject to performance conditions (“PRSUs”), as described under “Compensation Discussion and Analysis—Long-Term Incentive Programs—Performance Goals for LTMIP Awards.” With respect to Mr. Moonves’ annual RSU grant for 2017, the PRSUs were scheduled to vest and settle upon the later of the first anniversary of the grant date and the date of the Compensation Committee’s certification of the level of performance achieved, and the RSUs subject only to time-based vesting were scheduled to vest in thirds, with 3313% vesting on each of the first three anniversaries of the date of grant.

2015 and 2016 Performance Share Awards—Pursuant to Mr. Moonves’ agreement in effect for 2017, he was eligible to receive two grants of shares of the Company’s Class B Common Stock. The number of shares that would have been eligible to be earned pursuant to the award made in 2015 (the “2015 Performance Share Award”) would have been determined based on the Company’s stock price performance over the period from January 1, 2015 through June 30, 2019, as adjusted based on the Company’s financial performance during each of 2016, 2017 and 2018, and the number of shares that would have been eligible to be earned pursuant to the award made in 2016 (the “2016 Performance Share Award”) would have been determined based on the Company’s stock price performance over the period from February 18, 2016 through June 30, 2019, as adjusted based on the Company’s financial performance during each of 2017 and 2018. The number of shares that could have been awarded pursuant to the 2015 Performance Share Award (without giving effect to the financial performance adjustment) ranged from 0 to 650,000 shares, with a target award of 450,000 shares, and the number of shares that could have been awarded pursuant to the 2016 Performance Share Award (without giving effect to the financial performance adjustment) ranged from 0 to 436,622 shares, with a target award of 316,907 shares. With respect to the 2015 Performance Share Award, in order for Mr. Moonves to have received shares, the Company’s stock price performance would have had to increase by at least 124.6% from the initial stock price at the beginning of the performance period; for a stock price increase of 153.73%, the target number of shares (450,000) would have been awarded (subject to adjustment), and for a stock price increase equal to or above 188.02%, the maximum number of shares would have been earned (subject to adjustment). With respect to the 2016 Performance Share Award, in order for Mr. Moonves to have received shares, the Company’s stock price would have had to increase by at least 117.84% from the initial stock price at the beginning of the performance period; for a stock price increase of 137.81%, the target number of shares (316,907) would have been awarded (subject to adjustment), and for a stock price increase equal to or above 160.05%, the maximum number of shares would have been earned (subject to adjustment). Generally, for both the 2015 Performance Share Award and the 2016 Performance Share Award, stock price performance would have been determined within 30 days of the end of the performance period. Once the stock price performance was determined, if the threshold level of stock price performance had been achieved, an initial number of shares would have been determined and divided, in the case of the 2015 Performance Share Award, into thirds with one third allocated to each of the 2016, 2017 and 2018 calendar years, and in the case of the 2016 Performance Share Award, into halves with each half allocated to each of the 2017 and 2018 calendar years. Based on the Company’s financial performance in each of these years, as measured by the performance goal set by the Compensation Committee for the PRSUs awarded in each such year, each third (in the case of the 2015 Performance Share Award) and each half (in the case of the 2016 Performance Share Award) of the shares allocated to the respective calendar year (deemed granted for purposes of FASB ASC Topic 718 in each such year) could have been increased or decreased by up to 10%. Accordingly, the portion of the 2015 Performance Share Award and 2016 Performance Share Award deemed to have been granted for the purposes of measuring the grant date fair value as provided in FASB ASC Topic 718 relating to the 2017 performance period is included in the Summary Compensation Table and Grants of Plan-Based Awards Table During 2017. Following such adjustment related to each of 2016, 2017 and 2018 in the case of the 2015 Performance Share Award, and related to each of 2017 and 2018 in the case of the 2016 Performance Share Award, the final number of shares would have been determined and issued to Mr. Moonves no later than 60 days following June 30, 2019.

2017 Cash Performance Award—Pursuant to Mr. Moonves’ agreement in effect in 2017, he was eligible to receive a lump sum cash payment following the expiration of the employment term on June 30, 2021 (the “Cash

 

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Performance Award”). Subject to the Company’s achievement of a threshold level of cumulative adjusted operating income (“COI”) below which no award would have been earned, the Cash Performance Award would have ranged from $20 million to $55 million based on the Company’s COI during the period beginning April 1, 2017 and ending June 30, 2021. The cash payment at target would have been $33 million, subject to the achievement of $13.7 billion COI, the minimum cash payment of $20 million was subject to the achievement of $12.945 billion COI, and the maximum cash payment of $55 million was subject to the achievement of $14.493 billion COI.

Stock Options—The number of stock options awarded is determined by using a Black-Scholes valuation methodology in accordance with FASB ASC Topic 718 employing the same methodologies and assumptions that are applied for purposes of the Company’s financial accounting statements (as reviewed by the Compensation Committee’s independent compensation consultant). Stock options have an exercise price not less than the closing price of a share of the Company’s Class B Common Stock on the NYSE on the grant date and have an eight-year term. Vesting for stock options occurs in four equal annual installments on the first four anniversaries of the grant.

Fund-the-Future Program (“FtF”)—For 2017, the number of RSUs awarded under the FtF equaled the quotient derived by dividing (i) 2.5% of an individual’s eligible compensation (benefits base rate of pay in effect on the grant date, limited to a maximum of $550,000) by (ii) the closing price of a share of the Company’s Class B Common Stock on the NYSE on the grant date, rounded up or down to the nearest whole number. The RSUs vest ratably over three years from the grant date.

For other terms of these awards relating to performance goals and grant dates, see “Compensation Discussion and Analysis—Long-Term Incentive Programs—Performance Goals for LTMIP Awards” and “—Grant Date of Awards.”

Outstanding Equity Awards at Fiscal Year-End 2017

The following table sets forth for each named executive officer information concerning the outstanding equity awards at December 31, 2017, which included unexercised and vested stock options, unexercised and unvested stock options, and unvested RSUs. The market values in this table were calculated using the closing price of a share of the Company’s Class B Common Stock on December 29, 2017, which was $59.00.

 

            Option Awards     Stock Awards
    

Grant

Date

    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
   

Option
Exercise
Price

($)

    Option
Expiration
Date
   

Number
of Shares
or Units of
Stock

That Have
Not Vested
(#)(2)

   

Market

Value

of Shares

or Units

of Stock

That Have

Not Vested

($)

   

Equity
Incentive
Plan
Awards:

# of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

($)

Leslie Moonves

    10/18/2012       290,305       0       34.06       10/18/2020                  
      2/12/2013       500,000       0       43.21       2/12/2021                  
      2/20/2014       548,546       0       65.91       2/20/2022                  
      2/19/2015       228,281       228,282       59.54       2/19/2023                  
      1/2/2015                               60,839       3,589,501      
      2/19/2015                               34,991       2,064,469      
      2/18/2016                               101,914       6,012,926      
      2/23/2017                               242,750       14,322,250      

 

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            Option Awards     Stock Awards
    

Grant

Date

    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
   

Option
Exercise
Price

($)

    Option
Expiration
Date
   

Number
of Shares
or Units of
Stock

That Have
Not Vested
(#)(2)

   

Market

Value

of Shares

or Units

of Stock

That Have

Not Vested

($)

   

Equity
Incentive
Plan
Awards:

# of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

($)

Joseph R. Ianniello

    6/10/2013       483,271       0       47.79       6/10/2021                  
      2/20/2014       279,757       93,253       65.91       2/20/2022                  
      2/19/2015       88,776       88,776       59.54       2/19/2023                  
      2/18/2016       57,283       171,849       45.79       2/18/2024                  
      2/23/2017       0       160,000       66.31       2/23/2025                  
      2/20/2014                               31,822       1,877,498      
      2/19/2015                               107,545       6,345,155      
      2/18/2016                               181,956       10,735,404      
      2/23/2017                               65,777       3,880,843      

Lawrence P. Tu

    2/20/2014       57,597       19,199       65.91       2/20/2022                  
      2/19/2015       44,388       44,388       59.54       2/19/2023                  
      2/18/2016       0       85,925       45.79       2/18/2024                  
      2/23/2017       0       80,000       66.31       2/23/2025                  
      2/20/2014                               8,325       491,175      
      2/19/2015                               18,140       1,070,260      
      4/1/2015                               77       4,543      
      2/18/2016                               37,527       2,214,093      
      4/1/2016                               166       9,794      
      2/23/2017                               32,888       1,940,392      
      4/3/2017                               200       11,800      

Anthony G. Ambrosio

    3/1/2011       62,717       0       23.19       3/1/2019                  
      2/23/2012       67,950       0       29.44       2/23/2020                  
      2/12/2013       51,325       0       43.21       2/12/2021                  
      2/20/2014       28,798       9,600       65.91       2/20/2022                  
      2/19/2015       22,194       22,194       59.54       2/19/2023                  
      2/18/2016       14,320       42,963       45.79       2/18/2024                  
      2/23/2017       0       52,857       66.31       2/23/2025                  
      2/20/2014                               4,164       245,676      
      2/19/2015                               9,070       535,130      
      2/18/2016                               18,764       1,107,076      
      2/23/2017                               21,730       1,282,070      

 

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            Option Awards     Stock Awards
    

Grant

Date

    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
   

Option
Exercise
Price

($)

    Option
Expiration
Date
   

Number
of Shares
or Units of
Stock

That Have
Not Vested
(#)(2)

   

Market

Value

of Shares

or Units

of Stock

That Have

Not Vested

($)

   

Equity
Incentive
Plan
Awards:

# of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have

Not Vested

($)

Gil Schwartz

    2/23/2012       54,360       0       29.44       2/23/2020                  
      2/12/2013       41,060       0       43.21       2/12/2021                  
      2/20/2014       22,215       7,406       65.91       2/20/2022                  
      2/19/2015       17,121       17,121       59.54       2/19/2023                  
      2/18/2016       13,093       39,280       45.79       2/18/2024                  
      2/23/2017       0       36,571       66.31       2/23/2025                  
      2/20/2014                               3,211       189,449      
      2/19/2015                               6,996       412,764      
      2/18/2016                               17,156       1,012,204      
      2/23/2017                               15,034       887,006      

 

(1)

Each option award identified in the above table was, as of December 31, 2017, scheduled to vest as follows: 25% vesting on each of the first four anniversaries of the date of grant, except with respect to the following grants for Mr. Moonves: (i) the 10/18/2012 grant, which vested fully on the first anniversary of the date of grant, and (ii) the 2/20/2014 grant, of which 25% vested on each of the first three anniversaries of the date of grant and the final 25% installment vested on June 30, 2017.

 

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(2)

Set forth below is a schedule of the vesting, described as of December 31, 2017, related to each grant date for the stock awards (RSUs) identified in the above table:

 

Grant Date    Stock Awards Vesting Schedule

2/20/2014

  25% was scheduled to vest on each of the first four anniversaries of the date of grant. One half of each award was subject to the satisfaction of performance conditions relating to 2014.

1/2/2015

  3313% were scheduled to vest on each of the first three anniversaries of the date of grant.

2/19/2015

  25% was scheduled to vest on each of the first four anniversaries of the date of grant, except with respect to Mr. Moonves’ award. For Mr. Moonves, 110,955 vested on the first anniversary of the date of grant following Compensation Committee certification as to the achievement of performance conditions for 2015, and with respect to the other half of his award, 3313% was scheduled to vest on each of the first three anniversaries of the date of grant. One half of each award was subject to the satisfaction of performance conditions for 2015, except in the case of Mr. Ianniello’s award, for which 35,270 shares (at target) were subject to the satisfaction of performance conditions for 2015.

4/1/2015

  3313% was scheduled to vest on each of the first three anniversaries of the date of grant.

2/18/2016

  25% was scheduled to vest on each of the first four anniversaries of the date of grant, except with respect to Mr. Moonves’ award. For Mr. Moonves, 405,880 vested following Compensation Committee certification as to the achievement of performance conditions for 2016, and with respect to the remainder of his award, 3313% was scheduled to vest on each of the first three anniversaries of the date of grant. One half of each award was subject to the satisfaction of performance conditions for 2016, except in the case of Mr. Ianniello’s award, for which 45,861 shares (at target) were subject to the satisfaction of performance conditions for 2016.

4/1/2016

  3313% was scheduled to vest on each of the first three anniversaries of the date of grant.

2/23/2017

  25% vested on each of the first four anniversaries of the date of grant, except with respect to Mr. Moonves’ award. For Mr. Moonves, 125,876 vested following Compensation Committee certification as to the achievement of performance conditions for 2017, and with respect to the remainder of his award, 3313% was scheduled to vest on each of the first three anniversaries of the date of grant. One half of each award was subject to the satisfaction of performance conditions for 2017. See also paragraph below this chart.

4/3/2017

  3313% was scheduled to vest on each of the first three anniversaries of the date of grant.

For RSUs with a grant date of 2/23/2017, amounts in this column, with respect to the portion of each award that is subject to performance conditions, reflect actual achievement of the applicable performance conditions for 2017. The table above does not include the 2015 Performance Share Award or the 2016 Performance Share Award, or any portion thereof, as those awards are not outstanding at fiscal year-end 2017 in accordance with SEC rules.

 

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Option Exercises and Stock Vested During 2017

The following table sets forth information concerning each exercise of stock options and the vesting of stock awards during 2017 for each of the named executive officers.

 

     Option Awards     Stock Awards  
Name   Number of Shares
Acquired on Exercise
(#)(1)
   

Value Realized
on Exercise

($)

    Number of Shares
Acquired on Vesting
(#)(2)
    Value Realized
on Vesting
($)(3)
 

Leslie Moonves

    1,500,000              45,996,190       659,846              43,257,503  

Joseph R. Ianniello

    136,869              2,956,696       169,153              11,066,835  

Lawrence P. Tu

    28,641              626,837       30,131              1,984,361  

Anthony G. Ambrosio

    16,334              680,804       20,677              1,352,982  

Gil Schwartz

    87,435              3,577,106       17,009              1,113,329  

 

(1)

Represents stock options that were exercised during 2017 (i) for Messrs. Moonves, Ianniello and Ambrosio, all of which were pursuant to the executive’s 10b5-1 plan, and (ii) for Mr. Schwartz, a portion of which (15,810) was pursuant to the executive’s 10b5-1 plan.

 

(2)

Represents RSUs that vested during 2017 and unrestricted shares that were awarded to Mr. Moonves in 2017 as part of his bonus for 2016. The net shares delivered to each named executive officer after withholding for applicable taxes were as follows: Mr. Moonves, 283,394 shares; Mr. Ianniello, 74,461 shares; Mr. Tu, 14,440 shares; Mr. Ambrosio, 9,948 shares; and Mr. Schwartz, 7,481 shares.

 

(3)

Represents the number of shares underlying RSUs that vested during 2017 and the number of unrestricted shares awarded to Mr. Moonves in 2017 as part of his bonus for 2016, multiplied by the closing price of the Company’s Class B Common Stock on the NYSE on the applicable vesting date.

Pension Benefits in 2017

The following tables set forth information concerning each qualified and nonqualified defined benefit pension plan that provides payments in connection with retirement with respect to each of the named executive officers, except for Mr. Tu, who does not participate in any such plan. The first table sets forth information with respect to pension plans pursuant to which the applicable named executive officers were accruing benefits as of December 31, 2017, and the second table sets forth information with respect to pension plans pursuant to which the applicable named executive officers had an accumulated benefit but were not accruing benefits as of December 31, 2017. None of the named executive officers received payments under these pension plans during 2017.

Pension plans pursuant to which the applicable named executive officers were accruing benefits as of December 31, 2017:

 

Name   Plan Name   Number of Years
Credited Service
(#)(1)
   

Present Value
of Accumulated
Benefit

($)(2)

 

Leslie Moonves

  Qualified—CBS Retirement Plan Component of CBS
Combined Pension Plan (CCPP)
    13.5               684,278    
   

Nonqualified—CBS Retirement Excess Pension Plan

(CREPP)

    13.5               9,143,592    

Joseph R. Ianniello

  Qualified—CBS Retirement Plan Component of CCPP     14.0               427,245    
    Nonqualified—CREPP     14.0               904,524    

Anthony G. Ambrosio 

  Qualified—CBS Retirement Plan Component of CCPP     12.0               443,042    
    Nonqualified—CREPP     12.0               964,423    

Gil Schwartz

  Qualified—CBS Retirement Plan Component of CCPP     12.0               502,716    
    Nonqualified—CREPP     12.0               1,128,161    

 

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(1)

The years of credited service under the plans identified in the table above differ from the years of actual service with respect to Messrs. Moonves, Ambrosio and Schwartz, who had been employed by the Company since 1995, 1985 and 1981, respectively, and Mr. Ianniello, who has been employed by the Company since 1997. Their respective credited service for benefit accruals began in the following years: Messrs. Moonves and Ianniello, 2004; and Messrs. Ambrosio and Schwartz, 2006. Prior to their participation in these plans, Messrs. Moonves, Ianniello, Ambrosio and Schwartz participated in the pension plans identified in the table set forth below.

 

(2)

The present value of each applicable named executive officer’s accumulated benefit at December 31, 2017 in these plans was calculated assuming commencement of benefits at age 65 (or current age if older than 65), using a discount rate of 3.94% and mortality rates in accordance with the RPH-2015 mixed collar sex distinct table multiplied by 1.03 and with generational projection of BB-2D with a long term rate of 0.75% from 2015.

Pension plans pursuant to which the applicable named executive officers had a frozen benefit and were not accruing benefits as of December 31, 2017:

 

Name   Plan Name  

Number

of Years
Credited
Service
(#)(1)

   

Present

Value of

Accumulated
Benefit

($)(2)

 

Leslie Moonves

  Qualified—Cash Balance Component of CCPP     9.0       210,208  
    Nonqualified—CBS Supplemental Executive Retirement Plan (SERP)     9.0       2,510,955  
    Nonqualified—CBS Bonus Supplemental Executive Retirement Plan (Bonus SERP)     3.8       769,868  

Joseph R. Ianniello

  Qualified—Cash Balance Component of CCPP     6.3       73,557  
    Nonqualified—SERP     6.3       8,817  

Anthony G. Ambrosio 

  Qualified—Cash Balance Component of CCPP     25.5       305,679  
    Nonqualified—SERP     25.5       85,192  
    Nonqualified—Bonus SERP     14.1       49,653  

Gil Schwartz

  Qualified—Cash Balance Component of CCPP     29.1       565,532  
    Nonqualified—SERP     29.1       304,706  
    Nonqualified—Westinghouse Executive Pension Plan (WEPP)     17.7       834,292  

 

(1)

The years of credited service under the plans identified in the table above differ from the years of actual service, as Messrs. Moonves, Ambrosio and Schwartz had been employed by the Company since 1995, 1985 and 1981, respectively, and Mr. Ianniello has been employed by the Company since 1997. Their respective years of credited service under these plans reflect actual service through the date on which these plans froze their respective benefit accruals, as follows: Cash Balance Component of CCPP and SERP for Messrs. Moonves and Ianniello, December 31, 2003; Cash Balance Component of CCPP and SERP for Messrs. Ambrosio and Schwartz, August 14, 2010; CBS Bonus SERP for Messrs. Moonves and Ambrosio, March 31, 1999; and WEPP for Mr. Schwartz, March 31, 1999.

 

(2)

The present value of the applicable named executive officer’s accumulated benefit at December 31, 2017 in these plans was calculated assuming commencement of benefits at age 65 (or current age if older than 65), a discount rate of 3.94% and mortality rates in accordance with the RPH-2015 blue collar sex distinct table multiplied by 1.04 and with generational projection of BB-2D with a long-term rate of 0.75% from 2015.

 

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Description of Pension Benefits

The Company currently maintains several qualified and nonqualified defined benefit plans as a result of various mergers, acquisitions and divestitures involving the Company and its various businesses, as well as changes implemented by the Company and its predecessors in retirement programs. Most of these plans, including all of the plans identified below, are closed to new participants and operate only for employees who are grandfathered into these plans. The normal retirement age for all Company-sponsored pension plans is 65. See the two immediately preceding tables for the applicable named executive officers’ participation in these plans.

Pension plans pursuant to which the applicable named executive officers were accruing benefits as of December 31, 2017:

CBS Combined Pension Plan (“CCPP”)

The Company maintains the CCPP, a tax-qualified defined benefit plan for eligible employees who satisfied age and service requirements prior to the CCPP’s closure to new participants. The CCPP contains seven separate components, including the CBS Retirement Plan Component (described below) (which became a component as of December 31, 2011), and the Cash Balance Component (described below) (which became a component as of April 1, 1999). Each of the components has been closed to new participants generally since March 31, 1999, except that the CRP Component has been closed to new participants since July 2010. For all of the components, employees are fully vested in their accrued benefit upon completion of five years of vesting service. The Company pays the cost of the benefits provided by the CCPP. Eligible compensation for purposes of the CCPP is limited by federal law; for 2017, the limit was $270,000 (the “Annual Limit”). Early retirement reductions differ in each of these components of the CCPP; however, each component defines early retirement eligibility as age 55 with 10 years of vesting service while actively employed.

CBS Retirement Plan Component of the CCPP (“CRP Component”). All of the named executive officers (except for Mr. Tu) participated in the CRP Component during 2017. For existing participants, participation in the CRP Component began on the later of the date he or she attained age 21 or completed one year of eligibility service. For each year of credited service up to a maximum of 30 years, the benefit formula for calculating an age 65 accrued benefit under the CRP Component is 1.25% of the participant’s final average compensation up to the Social Security covered compensation amount, plus 1.75% of the participant’s final average compensation above the Social Security covered compensation amount. Final average compensation includes eligible salary, commissions, overtime and short-term incentive awards. If an employee who participates in the CRP Component reaches age 55 with 10 years of eligibility service, he or she is considered eligible for an early retirement benefit. The reductions for retiring early are 6% per year for each year that the benefit begins between ages 65 and 60, plus 4% per year for each year that the benefit begins between ages 60 and 55. The normal forms of payment for a married or single participant are a 50% joint and survivor annuity or single life annuity, respectively. All optional forms of payment under the CRP Component are actuarially equivalent to the normal forms of payment.

CBS Retirement Excess Pension Plan (“CREPP”)

The Company maintains the CREPP, an unfunded nonqualified defined benefit plan, to provide benefits to employees who are participants in the CRP Component and whose annual base salary and commissions have exceeded the applicable Annual Limit. The benefits under the CREPP are calculated by determining the excess, if any, of (i) the benefits that would be payable under the CRP Component if it were not subject to the Annual Limit, over (ii) the benefits actually payable under the CRP Component. Early retirement reduction factors under the CREPP are identical to those of the CRP Component. The maximum amount of total annual compensation that may be taken into account under the CRP and the CREPP together is $750,000, except with respect to Mr. Moonves. Pursuant to the terms of Mr. Moonves’ employment agreement in effect during 2017, the maximum amount of compensation that could have been taken into account for him equaled the amount of his base salary. Employees are fully vested in their accrued CREPP benefit upon completion of five full years of vesting service. The normal forms of payment for a married or single participant are a 50% joint and survivor annuity or single life annuity, respectively. All optional forms of payment under the CREPP are actuarially equivalent to the normal forms of payment.

 

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Pension plans pursuant to which the applicable named executive officers had an accumulated benefit but were not accruing benefits as of December 31, 2017:

Cash Balance Component of the CCPP (“Cash Balance Component”)

Messrs. Moonves, Ianniello, Ambrosio and Schwartz had, as of December 31, 2017, frozen benefits in the Cash Balance Component of the CCPP (described above). The cash balance benefit is expressed in the form of a hypothetical account balance. Benefits accrue monthly at a rate generally between 2%-12% of eligible compensation; the rate may increase with service. Eligible compensation is generally base salary. Interest credits are applied monthly to the prior month’s balance, with a minimum interest rate of 5%. The normal forms of payment for a married or single participant are a 50% joint and survivor annuity or single life annuity, respectively; however, a lump sum payment option is available for this component. All optional forms of payment under the Cash Balance Component are actuarially equivalent to the normal forms of benefit. The named executive officers participating in the Cash Balance Component as of December 31, 2017 were eligible to commence receiving benefits upon termination from employment at any age, without any early retirement subsidy, and to the extent an annuity payment is elected, an early retirement supplement and subsidy are available on the portion of the benefit accrued prior to March 31, 1999.

CBS Supplemental Executive Retirement Plan (“SERP”)

The Company maintains the SERP, an unfunded nonqualified defined benefit plan, for eligible employees who participate in certain components of the CCPP whose annual base salary has exceeded the applicable Annual Limit. The benefits under the SERP applicable to the named executive officers are calculated by determining the excess, if any, of (i) the benefits that would be payable under the Cash Balance Component if it were not subject to the Annual Limit, over (ii) the benefits actually payable under the Cash Balance Component. The normal forms of payment for a married or single participant are a 50% joint and survivor annuity or single life annuity, respectively. All optional forms of payment under the SERP are actuarially equivalent to the normal forms of payment.

CBS Bonus Supplemental Executive Retirement Plan (“Bonus SERP”)

The Company established the Bonus SERP, an unfunded nonqualified defined benefit plan, to provide benefits based on short-term incentive awards to certain employees who are participants in certain components of the CCPP. This plan has been closed to new participants since March 31, 1999, at which time all benefits vested. The benefit is based on 50% of the average of a participant’s highest five consecutive short-term incentive awards for the last 10 years, multiplied by 1.7% times years of credited service up to a maximum of 35. Benefits under the Bonus SERP applicable to the named executive officers have been frozen since March 31, 1999. Early retirement benefits shall be reduced in accordance with the provisions of the Cash Balance Component. The normal forms of payment for a married or single participant are a 50% joint and survivor annuity or single life annuity, respectively. All optional forms of payment under the Bonus SERP are actuarially equivalent to the normal forms of payment.

Westinghouse Executive Pension Plan (“WEPP”)

The WEPP is an unfunded nonqualified defined benefit plan, which provides benefits based upon an executive’s final average compensation which are offset by benefits payable under the CCPP. This plan has been closed to new participants since March 31, 1999, at which time all benefits vested. The WEPP normal retirement formula is as follows: the sum of the participant’s average monthly base salary and average monthly short-term incentive awards is multiplied by the product of the participant’s executive service times 1.47%. The early retirement reduction factors for the WEPP are identical to those in the applicable component of the CCPP. The normal form of payment is a single life annuity. All optional forms of payment under the WEPP are actuarially equivalent to the normal form of payment. As of December 31, 2017, Mr. Schwartz was the only named executive officer with an accumulated benefit in the WEPP.

 

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Nonqualified Deferred Compensation in 2017

The following table sets forth information concerning nonqualified deferred compensation.

 

Name   Plan Name   Executive
Contributions
in Last FY
($)(1)
    Registrant
Contributions
in Last FY
($)(2)
   

Aggregate

Earnings

in Last FY

($)(3)

    Aggregate
Withdrawals/
Distributions
($)
   

Aggregate
Balance at
Last FYE

($)

 

Leslie Moonves

   Deferred salary plans      507,000       20,631       2,621,999       0       26,326,269  
    Deferred bonus plans     0       0       273,559       0       2,598,247  

Joseph R. Ianniello

  Deferred salary plans     111,500       16,708       109,550       0       1,533,213  
    Deferred bonus plans     0       0       0       0       0  

Lawrence P. Tu

  Deferred salary plans     51,383       17,250       23,072       0       289,933  
    Deferred bonus plans     0       0       108,209       0       1,027,763  

Anthony G. Ambrosio

  Deferred salary plans     169,500       21,929       189,755       0       2,414,103  
    Deferred bonus plans     0       0       0       0       0  

Gil Schwartz

  Deferred salary plans     127,500       21,000       (3,142     0       962,295  
    Deferred bonus plans     0       0       0       0       0  

 

(1)

Executive contributions pursuant to deferred salary and bonus plans are included in the “Salary” and “Bonus” columns, respectively, in the Summary Compensation Table for Fiscal Year 2017.

 

(2)

Amounts reported are included in the “All Other Compensation” column of the Summary Compensation Table for Fiscal Year 2017.

 

(3)

Amounts reflect earnings or losses on all amounts deferred in 2017 and prior years in nonqualified plans, net of deductions for fees. No portion of these amounts is included in the Summary Compensation Table for Fiscal Year 2017, as none of these plans or arrangements provided for above-market or preferential earnings during 2017, as noted in footnote (6) to the Summary Compensation Table for Fiscal Year 2017.

Description of Nonqualified Deferred Compensation

Set forth below is information with respect to each plan under which deferrals of compensation are reflected in the table above.

Deferred Salary Plans

CBS Excess 401(k) Plan for Designated Senior Executives (“Excess 401(k) Plan”)

The Company maintains supplemental 401(k) plans, including the Excess 401(k) Plan, an unfunded nonqualified deferred compensation plan intended to provide benefits to employees who are eligible to participate in the CBS 401(k) Plan and whose annual base salary and actual commissions exceed the applicable Annual Limit. A participant can defer between 1% and 15% of his or her eligible compensation through payroll deductions on a pre-tax basis. Eligible compensation generally includes base pay or salary, including pre-tax contributions to the CBS 401(k) Plan and the Company’s group health and welfare plans, flexible spending accounts and contributions to the commuter reimbursement account plan, plus overtime, commissions, hazard pay and shift differential pay. For 2017, the Company matched Excess 401(k) Plan contributions based on the rate of matching contributions under the CBS 401(k) Plan (60% of the first 5% of eligible compensation deferred on a pre-tax or Roth 401(k) basis for January of 2017 and 70% of the first 5% of eligible compensation deferred on a pre-tax or Roth 401(k) basis for the remaining months of 2017). Company contributions are fully vested after five years of service. Matching contributions made by the Company to the CBS 401(k) Plan and the Excess 401(k) Plan together are not made with respect to compensation in excess of $750,000.

Deferred amounts are reflected in phantom notional accounts and are credited with earnings and/or losses as if the deferred amounts were actually invested in accordance with the participant’s investment elections under the Excess

 

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401(k) Plan with respect to investment options which are the same as those available under the CBS 401(k) Plan. The Company’s matching contributions are also reflected in phantom notional accounts, which are credited with earnings and/or losses as if the matching contributions were actually invested in accordance with the participant’s investment elections under the Excess 401(k) Plan. The Excess 401(k) Plan offers 20 investment options in which Excess 401(k) Plan balances may be notionally invested, and participants may change or reallocate investment directions on any business day on which the NYSE is open. The vested portion of a participant’s Excess 401(k) Plan account is distributed in cash after termination of employment in accordance with the participant’s distribution election, either in a lump sum payment or in installment payments. All of the named executive officers actively participated in the Excess 401(k) Plan during 2017.

CBS Supplementary Employee Investment Fund (“SEIF”)

The SEIF was established to provide benefits to employees who were eligible to participate in the former CBS Corporation’s qualified defined contribution plan and whose annual base salary exceeded the Annual Limit during the applicable years. This nonqualified deferred compensation plan, which is partially funded using a rabbi trust, was closed to new participants as of 1998 and ceased permitting new contributions effective January 1, 2002. Participants were permitted to contribute 1% to 12.5% of their eligible compensation, which was matched by the former CBS Corporation. Eligible compensation generally included base pay or salary and excluded bonus payments, overtime compensation, deferred compensation and additional compensation. The SEIF offers six investment options in which participants’ pre-2002 contributions may be invested and in which pre-2002 matching contributions may be notionally invested, and participants may reallocate investment directions on any business day on which the NYSE is open. Payouts under the SEIF are made in cash after termination of employment in accordance with the participant’s distribution election, either in a lump sum payment or installment payments. As of December 31, 2017, Mr. Moonves was the only named executive officer with a balance in the SEIF.

CBS Deferred Compensation Arrangements

The Company previously required certain senior executives to defer specified amounts of their base salary compensation, as determined by their respective employment contracts. Deferred amounts are held in phantom accounts and are credited with earnings and/or losses as if the deferred amounts were actually invested in accordance with the participant’s investment elections with respect to investment options which are the same as those available under the Excess 401(k) Plan. These arrangements are not funded. Distributions are made in accordance with the individual’s respective employment contract. As of December 31, 2017, Mr. Moonves was the only named executive officer with a deferred compensation balance in connection with these arrangements due to deferral requirements from a prior employment contract with the Company.

Deferred Bonus Plans

CBS Bonus Deferral Plan for Designated Senior Executives (“BDP”)

The Company maintains bonus deferral plans, including the BDP, an unfunded nonqualified deferred compensation plan intended to provide benefits to employees who are eligible to participate in the CBS 401(k) Plan and whose annual base salary exceeds the Annual Limit. Participants can defer between 1% and 15% of their short-term incentive plan bonus to the BDP on a pre-tax basis. Deferred amounts are reflected in phantom accounts and are credited with earnings and/or losses as if the deferred amounts were actually invested in accordance with the participant’s investment elections under the BDP with respect to investment options which are the same as those available under the CBS 401(k) Plan. Amounts deferred under the BDP are distributed in cash after termination of employment in accordance with the participant’s distribution election, either in a lump sum payment or installment payments. As of December 31, 2017, Messrs. Moonves and Tu maintained a balance in the BDP with respect to bonus amounts paid prior to 2017.

 

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Potential Payments upon Termination and Certain Other Events

Arrangements Relating to Certain Named Executive Officers Entered into during 2018

As described in this proxy statement, certain named executive officers separated from the Company during 2018. The discussion below provides information about the separation arrangements entered into during 2018 with each such named executive officer.

Arrangements Relating to Mr. Moonves

Pursuant to a Separation and Release Agreement entered into on September 9, 2018 (the “Termination Date”), Mr. Moonves resigned as a director of the Company and as Chairman of the Board, President and Chief Executive Officer. Within 30 days following the Termination Date, the Company contributed $120,000,000 to a grantor trust. In the event the Board determines that the Company is entitled to terminate Mr. Moonves’ employment for cause under his employment agreement and Mr. Moonves does not demand arbitration with respect to such determination, the assets of the grantor trust will be distributed to the Company and the Company will have no further obligations to Mr. Moonves. Any dispute related to the Board’s determination is subject to binding arbitration as set forth in the separation agreement. In the event of arbitration, the assets of the grantor trust will also be distributed to the Company upon a final determination in the arbitration that the Company was entitled to terminate Mr. Moonves’ employment for cause. The Board will make a determination whether the Company has grounds to terminate the employment of Mr. Moonves for cause under his employment agreement within 30 days following completion of the final report of the independent investigators in the current internal investigation, but in no event later than January 31, 2019.

In the event that the Board determines that the Company is not entitled to terminate Mr. Moonves’ employment for cause, or in the event of a final determination in arbitration that the Company is not entitled to terminate Mr. Moonves’ employment for cause, the assets of the grantor trust will be distributed to Mr. Moonves. Mr. Moonves has agreed to perform transition advisory services for the Company for one year following his resignation (or, if earlier, until the date the Board determines the Company is entitled to terminate his employment for cause) in order to provide for a smooth transition of his duties. In order to facilitate such transition services, the Company will provide Mr. Moonves with office services and security services for up to two years following his resignation. Mr. Moonves will retain his obligations under post-termination restrictive covenants from his employment agreement, and the Company will retain its obligations under the arbitration and indemnification covenants in the employment agreement. The parties also agreed to a mutual release of claims, excluding any rights granted under the separation agreement (including the Company’s right to assert the termination of Mr. Moonves for cause).

Arrangements Relating to Mr. Schwartz

On September 21, 2018, the Company entered into a separation agreement (the “Schwartz Separation Agreement”) with Mr. Schwartz, which provides for Mr. Schwartz’s separation from the Company, effective November 1, 2018. The Schwartz Separation Agreement provides for substantially the same severance payments and benefits as his employment agreement, except that, in addition, Mr. Schwartz will receive a bonus for 2018 based on the same amount as the bonus he received for fiscal 2017, prorated through November 1, 2018.

Arrangements Relating to Mr. Ambrosio

On October 11, 2018, the Company entered into a separation agreement (the “Ambrosio Separation Agreement”) with Mr. Ambrosio. The Separation Agreement provides for Mr. Ambrosio’s resignation from the Company, effective November 1, 2018 (the “Ambrosio Separation Date”).

The Ambrosio Separation Agreement provides for substantially the same severance payments and benefits as his employment agreement, except that Mr. Ambrosio will also receive: (i) a bonus for 2018 equal to his target bonus for fiscal 2018, prorated through November 1, 2018, and eligibility for additional bonus compensation for

 

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fiscal 2018 in an amount to be determined by the Company’s Chief Executive Officer, in his sole discretion, payable in 2019 at the same time bonuses are paid to the Company’s senior executives; (ii) in addition to the severance bonus set forth in his employment agreement, an incremental amount of $626,250 and (iii) in addition to the accelerated and continued vesting of equity based awards provided for in his employment agreement, continued vesting of all outstanding stock option and restricted share unit awards for an additional period ending four months later than the period set forth in the employment agreement.

In addition, the Ambrosio Separation Agreement provides that during the period from November 2, 2018 through December 31, 2019 (the “Consulting Period”), Mr. Ambrosio will provide non-employee consulting services to the Company, on a non-exclusive basis, and will receive consulting fees of $100,000 per month. For the portion of the Consulting Period through June 30, 2019, the consulting services may be terminated by Mr. Ambrosio for any reason and may be terminated by CBS if the Company’s Chief Executive Officer reasonably determines, in good faith, that Mr. Ambrosio is no longer able to provide the consulting services. After June 30, 2019, either party may terminate the consulting services upon 30 days’ prior written notice. In addition to the monthly consulting fee, Mr. Ambrosio will be eligible to receive a bonus for 2019 based upon the Chief Executive Officer’s assessment of his performance during the Consulting Period, which bonus shall not exceed $1,200,000 and shall be subject to proration if the Consulting Period is terminated early for any reason.

Potential Payments Pursuant to Arrangements in Effect With the Named Executive Officers as of December 31, 2017

During 2017, all of the named executive officers had employment agreements providing for payments upon certain types of termination of employment. In addition, Mr. Moonves’ employment agreement provided for acceleration of his outstanding equity awards and his cash performance award in the event that the Company’s stock ceases to be publicly traded. The tables and narrative below set forth estimated potential payments that would have been made to each named executive officer if his employment had terminated as of December 31, 2017, and, in the case of Mr. Moonves, payments related to an acceleration of equity awards and his cash performance award in the event that the Company’s stock had ceased being publicly traded as of December 31, 2017. In determining the benefits payable upon certain terminations of employment, the Company has assumed in all cases that the executive has complied and continues to comply with all of the restrictive and other covenants included in his employment agreement and has not become employed by a new employer in those cases where the employment agreement requires mitigation by the executive.

 

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The following tables and narrative indicate the incremental payments and benefits that would be owed by the Company to the executive beyond what the named executive officer had