Should Sinclair Management Be Liable to its Shareholders?

[Quetzal]

Should Sinclair Management Be Liable to its Shareholders for Putting Politics Over Business?

On Friday, October 22, Sinclair Broadcast Group pre-empted an hour of regularly scheduled programming to air what the company described as a "special one-hour news program." The program, "A POW Story: Politics, Pressure and the Media," included footage from "Stolen Honor: Wounds That Never Heal," a documentary that portrays Senator John Kerry's protests against the Vietnam War in a negative light. But it also included some clips from a pro-Kerry documentary and commentary from Kerry supporters.

Though Sinclair has denied it, press reports suggest that its stations--which include affiliates of every major network--were originally going to air "Stolen Honor" in its entirety, without any accompanying pro-Kerry footage. That plan, however, triggered a boycott movement, led by Kerry supporters who objected to the content of Stolen Honor, to Sinclair's failure to air programs equally critical of President Bush, and to the timing of the program. And that movement reportedly caused sponsors to put pressure on Sinclair to revise its programming. Ultimately, "A POW Story," in addition to presenting both pro- and anti-Kerry footage, focused nearly as much attention on the controversy surrounding the program itself as on Kerry's anti-war activities.

Meanwhile, a Sinclair press release denied that the company caved to outside pressure or changed its plans, asserting that it had never formally decided to air all of "Stolen Honor" in the first place. Given the content of the program Sinclair did show, however, the denial is open to question. Was the plan all along to run a program presciently responding to a controversy that did not yet exist at the time the company first decided to run the program?

Whatever the cause of Sinclair's reversal, Sinclair's critics are not satisfied. Sinclair faces legal action or potential legal action on at least four fronts. In this column, I will discuss those suits--and focus, in particular, on how one of them raises interesting and important issues at the intersection of corporate law and the First Amendment.

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Should Sinclair Management Be Liable to its Shareholders for Putting Politics Over Business?

[ClintonTyree]

1. Shareholders.............

would have a legitimate suit against Sinclair because of their actions. The shareholders trust the Company to do everything in their power to increase shareholder value. Sinclair's insistence to air "Stolen Honor" in the face of lost revenue from advertisers was a blatant political action for their own selfish purposes. They acted against that shareholder/management trust that dictates that the Company's main goal is to increase shareholder value.
A first year law student could successfully prosecute this case and win. It remains to be seen if any shareholders are pissed off enough to pursue it.

[Gyre]

2. Not to mention

that they breached a "fiduciary duty" to the shareholders; thus making their behavior that much more harmful to the shareholder's interests, on their own whim, and proportionately more severely punished. The crux of that concept is the degree of trust vested in them by the shareholders.

Gyre

[atre]

3. Absolutely

The case there is virtually clear cut for a shareholders' derivative suit.

The directors may also be liable, depending upon their complicity in this venture.

[GettysbergII]

4. WaPo: Sinclair Chief Denies Political Agenda

What never ceases to amaze me is the compulsion of the wingnuts to boldly lie their asses off when caught with the smoking gun, the bloody corpse, the means, motive, opportunity and live video feed from several camera angles.

http://www.washingtonpost.com/wp-dyn/articles/A62667-2004Oct25.html

It's as if Bill Gates were to say he doesn't spend much time on the computer, or that Daniel Snyder actually prefers bridge to football. The head of the nation's largest collection of television stations insists that he rarely watches the shows his stations air, including parts of the anti-John Kerry documentary that brought so much controversy to his doorstep over the past two weeks.

In a rare, wide-ranging and sometimes feisty and combative interview on Friday, David D. Smith, chief executive of Sinclair Broadcast Group Inc., said he has been mischaracterized as a Republican activist who has attempted to use his family-controlled company to support GOP causes. He denied trying to sway the presidential election by requiring his stations to air a special on Friday that included several minutes of "Stolen Honor: Wounds That Never Heal," which features former Vietnam POWs saying their captors used Kerry's postwar testimony before Congress against them.