Up to four directors are rumored to resign from Paramount's board of directors, citing disagreements over how to handle a potential sale of the company, according to news reports. When multiple directors of the same company announce their resignations at the same time, questions arise about what is happening on the board. This situation is a reminder that all corporate board members should recognize that there may come a time when it is in their best interest to voluntarily step down from their board positions.
In Paramount's case, these include former Spotify executive Dawn Ostroff, former Sony Entertainment president Nicole Seligman, investment banking executive Frederick Terrell, and longtime attorney for Paramount chairman and controlling shareholder Shari Redstone. Rob Krieger is rumored to be resigning from the board due to disagreements. How a potential sale of the company will be handled. Paramount shareholders Aspen Sky Trust and Matrix Asset Advisors are jointly opposing Skydance Media's exclusive negotiations to acquire the company through Redstone's National Amusements. A letter sent by shareholders to the board detailed the reasons for their opposition and threatened legal action if talks were not halted.
According to the report, the letter states, “Merger discussions and/or transactions that systematically circumvent competitive bidding in favor of exclusive negotiations with a single company, particularly those in which that bidder overrides the financial condition of the sole shareholder with the financial condition of its own company. “If you are offering to promote your business more than others.'' The general basis is an aversion to fair market valuations of companies…Such an outcome would at least provide a reason to investigate the ethical motives underlying the transactions. Certainly, such an outcome would expose Paramount to liability for investor losses based on breach of fiduciary duty (among other duties) and would subject the board of directors involved in this reprehensible conduct to liability. There is a possibility that individuals will be held liable, and a security compliance investigation should be initiated. ”
The letter suggests several factors that may have influenced the resignation of Paramount directors. The bill calls into question the ethics of directors, accuses boards of violating their fiduciary duties, and says that if a company is sued for its actions, it could expose the board to personal liability. ” suggests that there is. The potential legal implications here are significant enough to force the director to resign if he or she fails to persuade the board to go in a different direction. So was Paramount's resignation as a way to step up for shareholders? Although we cannot be certain, there are other reasons why a director may consider leaving the board.
When ethical boundaries are about to break. Every board member has their own sense of what behavior is ethical and what is not. Having ethical standards is part of good governance, and if a director's personal ethics don't align with the ethics of their board, it's probably a good time to resign.
Where legal and safety issues are consistently ignored. If a company lacks compliance issues and the board appears unable to work with management to quickly alleviate the problem, it may be wise to exit before a major crisis occurs.
If you have reached a term or age limit for serving as a director of the company. All good boards take succession planning seriously, and that includes replacing board members. Before you leave, check to see if there are any candidates who can take your place.
When you no longer have a voice in the boardroom. If your opinion doesn't seem to be reflected by other board members, or if your contribution to the board appears to be minimal, it may be time to consider exiting. Directors need to add value to the board, and if that value is in question, efforts to remove you from the board may soon begin.
