What Does 30% Ownership Get Papa John’s Founder?

Papa John’s International Inc.’s (NASDAQ: PZZA) founder, John Schnatter, has been thrown out as board chair and spokesman for his company because of racist remarks. He has regret about his resignation. He owns 30% of the company, but it is not clear what that gets him because it is still a minority interest.

Schnatter has to either convince his board that he was a victim of bad advice, which he claims, or throw them out if he cannot. A public company board is not going to reverse a decision based on what it sees as an ethical problem, but also an image problem for a company that is already being beaten in the pizza wars.

Schnatter is also up against a number of institutions that hold shares. JPMorgan, BlackRock, Vanguard and Eminence Capital own 27% of the company among them. Other institutions push that number much higher. The pressure they can put on the board and Schnatter himself is considerable.

Schnatter wants to be the company’s spokesman, which may be the single most important thing to him. Any public relations or marketing executive would tell him those days are behind him, unless he wants to deeply wound his own company.

Among the few alternatives left to Schnatter is to sell his shares, which are worth about $600 million. However, no one may want to buy a block of stock that big. Among other things, it would be hard to sell in the future without taking the stock price down further.

Schnatter’s best bet would be to leave the company and its board, on which he still has a seat. That would open the door for a turnaround and make him richer. He probably won’t do that because he likes to see himself on TV.

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