Corporate Governance

The Story of Paramount Communications v. QVC Network

By Harvard Law School Program on Corporate Governance

In the chapter The Story of Paramount Communications v. QVC Network: Everything Is Personal, which is forthcoming in the book Corporate Stories (J. Mark Ramseyer ed., Foundation Press, 2009), I tell the story of the famous contest between Viacom and QVC over the acquisition of Paramount.

The battle over Paramount lends support to the view that non-pecuniary motivations can sometimes explain battles for corporate control and management behavior better than pecuniary motivations. The selection process that brings executives to top management positions and their wide discretion to shape company strategy once in office leaves ample room for ambition, pride, envy, or animosity to filter into their decisions. It is hard to prove the existence of these drivers, let alone measure them, but they are very real in the minds of market professionals. In the jargon of corporate lawyers and investment bankers, who must consider these factors in any deal negotiation, there is even a special term for them: ?social issues?. The three-way fight between Paramount, Viacom, and QVC is a textbook example of social issues at work. All of the key players in the story seemed to have had them: Sumner Redstone, Viacom’s chairman, was willing to pay almost any price to own a film studio; Barry Diller, QVC’s chief executive, was willing to go to great lengths to get back at Martin Davis, Paramount’s chief executive, for pushing him out of Paramount; and Martin Davis was willing to leave a lot of money on the table and cede control of his empire to stop Barry Diller. This is also consistent with claims that control is especially valuable to corporate decision-makers in the media sector, presumably because it comes with access to non-pecuniary benefits such as visibility, influence, and glamour.

The full paper is available for download here.

Full post as published by The Harvard Law School Corporate Governance Blog on January 10, 2009 (boomark / email).