Dinn, Hochman & Potter, LLC

Papa John's shareholder disputes places company at risk

Better ingredients may make better pizza, but they don't always make better business. When the brand of a company is tied to the identity of the founder and CEO, it may be difficult to salvage the reputation of the product if the founder's own reputation is in trouble. Ohio fans of Papa John's pizza may be following the shareholder disputes that could affect the future of the chain.

The founder of the pizza company, John Schnatter, recently resigned under a cloud when news leaked that he had used a racial slur during a recent conference call. Schnatter says he resigned because the company's heavy-handed treatment of him gave him no choice. In fact, he explained that he had used the offensive word but only explaining that one of his competitors had used it. Schnatter insists he never used the word as a racial epithet and never would, and that he regrets giving in to pressure to resign.

Because Schnatter is the largest shareholder in the company with 29 percent of the stock, the company is adopting a so-called poison pill measure to prevent him from taking over the company. This step prevents a single shareholder from gaining more than 15 percent of stock in Papa John's unless the board of directors approves. Despite his resignation, Schnatter is still on the board of directors.

Although the value of Papa John's stock continues to drop, both the board of directors and Schnatter have plans for the future of the company. However, as with many shareholder disputes, it remains to be seen how the controversy will affect the fate of the company. When Ohio businesses face similar internal conflicts, they turn to a skilled attorney who has experience in handling complex litigation.

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