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Papa John's Founder Trying To Regain Control Of Company After Using Racial Slur


Papa John's is cooking up a poison pill to use against the pizza company's founder, John Schnatter. A poisoned pill isn't something that's hidden under pepperoni slices and grated mozzarella. It's the name of a business tactic used to try to prevent a hostile takeover. It limits the amount of stock someone can hold without board approval - in this case, to prevent Schnatter from owning more of the company than he already does. Schnatter resigned as Papa John's chairman earlier this month after apologizing for using a racial slur in a conference call. Noah Kirsch has been writing about Papa John's for Forbes magazine. He joins me now. Welcome to the program.

NOAH KIRSCH: Hi. Thanks for having me.

CORNISH: OK. So as it stands, John Schnatter is Papa John's' largest shareholder, right? He owns 30 percent of the company. So what is the board afraid of here? Why take this action?

KIRSCH: There's been a lot of contention in the last couple of weeks about the future direction of the company. Schnatter is very intent on staying involved. Franchisees and the company itself don't seem to want that. And what the board is trying to do in this case is limit the potential that Schnatter can acquire majority control.

CORNISH: And we mentioned his apology for using a racial slur in a conference call. Is that the only thing that they believe he's done that's damaged the brand?

KIRSCH: That was a story that we published roughly two weeks ago, revealing that back in May Schnatter made offensive comments during a media training exercise. But we published a follow-up story last week that details a very long-standing pattern of inappropriate conduct at that company involving Schnatter and other executives.

CORNISH: Right. You interviewed 37 current and former Papa John's employees. And you describe essentially a bro culture. What did that look like?

KIRSCH: It looked like an environment that was extremely unpleasant to work in if you were not a member of the inner circle and certainly if you weren't a white male, quite frankly. For many employees, it meant enduring inappropriate comments during meetings and company off-sites. I heard from one former female employee who said that John Schnatter asked the size of her bra and whether she slept with her previous boss. I've heard from more current employees who said that one senior leader of the company made remarks about pornography with a junior female employee and that the top executives of that company knew that that stuff was going on.

CORNISH: What has Schnatter had to say about these claims?

KIRSCH: Schnatter denies most of the claims in our story related to inappropriate conduct. So there's clearly a disconnect between what he perceives to be reality and what many people who have worked there see as the truth.

CORNISH: OK. So he denies these allegations and yet the CEO of Papa John's, Steve Ritchie, right now, he did respond to your reporting saying that the company was taking some steps to confront these problems. Do you think he can adequately address the work culture there?

KIRSCH: It's not really for me to say whether he can address it. What I can tell you is that Ritchie sent a note to employees last Thursday after the publication of our story saying that he was, quote, "personally offended by Schnatter's actions as depicted in our story." But it's important to note that Ritchie's letter to employees didn't actually address many of the allegations about himself and the fact that he allegedly directly enabled the culture that's been happening there.

CORNISH: John Schnatter did step away from control of Papa John's before - right? - and within three years, he was back in charge. So can he get around the board's decision on Sunday to limit his stake in the company? I mean, could he still end up essentially pulling the strings there?

KIRSCH: It's difficult to say. And, frankly, I think we're gearing up for a long-term battle, possibly a legal battle, over Schnatter's future with the company. What I can tell you is that virtually every source I spoke with thinks that by virtue of the leadership structure that's currently in place and their seeming loyalty to Schnatter, you're likely to see retained influence on his behalf.

CORNISH: Is there a Papa John's without essentially Papa John?

KIRSCH: That's essentially what the company is trying to figure out right now. It's certainly what it's trying to achieve by removing Schnatter from its advertising materials and trying to get him off of the board.

CORNISH: In the meantime, what does it mean for all the franchisees?

KIRSCH: It's really important to note that there are tens of thousands of people who work at this company who are being directly impacted by the actions of just a couple of folks at the top. And remember; when sales drop and the stock plummets, John Schnatter's still worth more than half a billion dollars. But for the average person who works in a franchise, their livelihood is directly tied to the business.

CORNISH: Noah Kirsch - he's been leading Forbes' coverage of the leadership shakeup at Papa John's. Thank you for speaking with ALL THINGS CONSIDERED.

KIRSCH: Thanks so much for having me.

CORNISH: We've also reached out to Papa John's for comment but have not yet received a response. Transcript provided by NPR, Copyright NPR.