A double standard

John Schnatter, founder of the solidly profitable Papa John’s (Nasdaq:PZZA) was forced out last week for using a naughty word, while Elon Musk remains CEO of the eternally loss-making Tesla (Nasdaq:TSLA) despite tweeting one. The last three decades have supposedly made massive improvements in corporate governance. Well, whatever that is, it doesn’t seem to work in any rational fashion.

The Schnatter and Musk cases, to an outside observer, seem remarkably parallel. Schnatter, who had already been relieved of his status as CEO for criticizing the National Football League, which Papa John’s sponsors, had been forced to undergo pubic relations training with a PR firm Laundry Service. In the course of that training, he gave an example of racism in earlier era, saying that Colonel Harland D. Sanders (1890-1980), the founder of Kentucky Fried Chicken, was prone to use the n-word. Laundry Service reported Schnatter to the Papa John’s Board, who used it as an excuse to fire him altogether, something they had clearly been itching to do. What’s more they then unilaterally put in place a poison pill provision blocking Schnatter from attempting to buy control of the company (he currently owns 30% of the shares).

Schnatter founded Papa John’s in 1984 and had run it ever since, growing it to sales of $1.7 billion, 2017 net income of $107 million and a market capitalization of $1.5 billion. In the other example, Elon Musk CEO of the perpetually loss-making Tesla (admittedly with a market capitalization of a bloated $52 billion) wrote a tweet calling an unconnected rescuer of the young Thai footballers a “pedo,” possibly a less “bad” word than the n-word but an offense surely worsened by being direct rather than merely a quotation and in a public forum. Yet there appears to be no question of career damage for Musk, provided his increasingly implausible management of Tesla succeeds even remotely along the lines of his forecasts.

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