Investors—including portfolio acquirers, equity partners, bond holders and commercial lenders—know their finances and reputation are at risk of sudden and substantial impairment when corporate management behaves irresponsibly, illegally or unethically.

This may be especially so for various institutional investors that rely on the support of their own stakeholders. For example, a university endowment with a substantial position in a company that is thrusted into the news when its management is found to have behaved unethically, might also face criticism from its students, faculty, alumni and donors. In any case, once the investing public learns specific details of corporate misconduct, the financial damage can become severe, long-lasting, and over time, may contribute to the company’s brand eventually fading.

Case in point, in 2019, “eBay’s former Senior Director of Safety and Security, and six other members of eBay’s security team” engaged in “absolutely horrific, criminal conduct”. The case centered on stomach-turning personal and morally reprehensible cyberstalking directed at a married couple that blogged, in part, about matters that were critical of eBay. Some of the shocking activities included, the company arranged to have the couple surveilled at their home. They posted “ads for fictitious sexual events” directing strangers seeking intercourse to the home. They also sent emotionally terrifying items to the couple’s home including a pig fetus, a book on the death of a spouse, a bloody pig mask, live cockroaches, and other frightening items.

After an FBI investigation of the company’s activities, on June 15, 2020, the Department of Justice (DOJ) announced charges against eBay and seven members of the company’s security team. The president and CEO stepped down. Months later, the company’s stock had declined more than 50% from $80.59 to below $40. The stock has averaged $47.73 per share in 2024 as of May 29, 2024.

On January 11, 2024—some five years after the cyberstalking incidents—the DOJ announced seven individual felony convictions. The company was assessed a $3 million fine and agreed to a deferred prosecution agreement. A 24-page criminal information filed in the case detailed the charges and also discussed the role of some of the company’s top executives that were not charged. Less than two weeks later, eBay announced it would cut 1,000 jobs—9% of its fulltime workforce—after laying off 500 (4%) of its workers a year earlier.

“Once an industry pioneer”, eBay’s financial and reputational suffering due in part to its corporate misconduct, has been substantial, long term and ongoing still now five years later.

As another example, prior to 2017, Papa John’s founder, former CEO and chairman, John Schnatter, was known the world over as “Papa John”—the face of the Papa John’s Pizza brand. In late 2017, however, Colin Kaepernick led NFL player protests to bring attention to racial injustice and inequality against Blacks in the US. In response, Schnatter made offensive comments about NFL players, who were mostly Black. Some of Schnatter’s comments claimed NFL players were “all beating their wives up…. [,] on steroids or pot….”, and then he used the N-word during a separate corporate business meeting.

Word spread rapidly throughout the Black community through social media and other circles. Many viewed Schnatter’s comments as racist and voiced their disgust.

Papa John’s suffered substantial PR damage as a result of Schnatter’s comments. For example, the brand was dubbed the “Official Pizza of the Alt-Right” by a Neo-Nazi organization. Predictably, it also suffered substantial financial decline as Black customers refused to buy Papa John’s pizzas.

The company’s stock “crashed 11% in hours and kept falling… [while] franchise sales dropped an estimated 5% or more.” The company’s quarterly report reflected “corporate revenue fell 5% [and] net income, meanwhile, was down 40%”. “Schnatter lost his CEO title” and was eventually ousted from the company.

(A familiar refrain in the eBay and Papa John’s cases as well as other cases we plan to discuss is sometime after the misconduct becomes public, the CEO and some high-ranking executives are terminated. Though this consequence may personally affect those individuals, particularly their future career opportunities, it appears they are not being held personally responsible civilly or criminally. As we will discuss in future communications, many TPG/Exactech managers who were accused of misconduct continued their employment or affiliation in managerial or high-ranking positions. Some have even since been promoted, despite that it appears the company has long been aware of many of the allegations.)

Schnatter later attempted to rehabilitate his image and regain affiliation with Papa John’s. In doing so, he stated his goal was “to get rid of this N-word in my vocabulary…”

In the midst of the fallout, it was also later discovered that, reminiscent of the allegations of sexual misconduct and employee surveillance purported to have occurred at TPG/Exactech, it turns out that similar charges had also been waged against Schnatter. Some were later quietly settled.

The blowback from Papa John’s self-inflicted PR catastrophe had a severe financial impact on its investors. To restore the brand’s image and bridge the divide with the Black community, management invested substantially.

Papa John’s entered into an $8.25 million three-year agreement with former basketball superstar Shaquille O’Neal to replace Schnatter as the face of the brand. The deal also added O’Neal as a member of the company’s board of directors and the owner of nine Papa John’s franchise locations. These actions were an attempt to lure back Black customers who had abandoned the brand following Schnatter’s racist comments. In 2022, Papa John’s paid an additional more than $11 million to O’Neal to extend the earlier contract for another three years.

Papa John’s has spent seven years and invested $10’s of millions to remediate damages caused by the intentional misconduct of one individual yet it likely has former-Black customers that are discontent and will never again buy their products. Based on the company’s renewal of O’Neal’s contract, it appears the indirect financial cost to investors will continue at least through 2025, again, all due to Schnatter’s irresponsible behavior. Thus, ignoring any financial loss due to the enterprise growth disruption, the past and future cost paid by investors due to Schnatter’s racist comments is substantial.

When management behaves irresponsibly and unethically, investors often pay a steep price. Customers bail, talented individuals seek opportunities elsewhere and investors opt out due to the increased risk. Thus, earnings decline and the stock price almost certainly plummets, injuring existing investors who were left in the dark.

On the other hand, had investors been better informed of management’s misconduct and the company’s poor culture, they would have used that information to reach a better decision. Thus, they would have adjusted their risk models and perhaps come to a different decision.

This website seeks to inform investors and other stakeholders of some of the alleged conduct within TPG/Exactech so that each individual can come to his or her own decision as to the company culture and investment risk.