John Schnatter is clearly a business survivor. You might not know who he is by reference to that name, but there is a strong likelihood you do through his moniker Papa John.
As in pizza. Lots of pizza.
Schnatter is the founder and chief shareholder of Papa John’s, one of the largest delivery and take-out pizza chains in the United States. Schnatter is unsurprisingly a very wealthy man with a demonstrated record of commercial success.
Candidly, too, he has confronted challenges, including huge setbacks that have recently impacted both his business and his personal reputation in materially adverse ways.
To wit: Schnatter recently found himself under harsh public scrutiny following a report that he had employed racially insensitive language. That information had such a negative impact that he had to relinquish his apex position as Papa John’s Chairman.
He now says that doing so was premature and a flat-out mistake. A member of his legal team states that Schnatter “is not going to go quietly into the night.”
Papa John’s board of directors fears such rhetoric and any possibility that Schnatter might try to reinject himself as a power player at the company he founded. The board is especially concerned that he might try to add to the shares he already owns (as a 30% stakeholder, he is already Papa John’s largest shareholder).
To ward off that possibility, the board recently approved a so-called “poison pill” strategy that it might employ at any time over the next year as it works its way through obviously troubled times. If Schnatter or any group connected with him tries to add to his holdings to a degree that could enable them to regain control of the company, the board will dilute their ownership. The poison pill tactic enables it to do so via an offering of discounted shares to other parties.
A recent New York Times article notes that while a poison pill strategy is commonly used against rivals and takeover entities, “it has rarely been used to preemptively rebuff a company founder.”