A Looming Question for Paramount’s Board: How to Navigate Shari Redstone

Shari Redstone won control over her media empire in 2018 after a hard-fought struggle with CBS. In the years since, she held off on selling the family business, merging Viacom and CBS to put iconic franchises like “60 Minutes” and “Top Gun” under one roof.

Now, Ms. Redstone has decided to sell her controlling stake in Paramount, a decision that could put her in conflict with some of the company’s shareholders.

The question that Paramount’s board has to answer — and may eventually have to defend in a courtroom: Is the deal under consideration good for all shareholders, or just Ms. Redstone?

“Are these decisions that are being made in the best interest of Paramount generally?” said Eric Talley, a law professor at Columbia. “Or are they basically the types of decisions that are only going to give Shari Redstone a nice nut but pretty much stick it to the other minority shareholders?”

The challenge lies in the company’s complicated ownership structure. Ms. Redstone’s stake in Paramount is owned by National Amusements, a holding company that she controls. She has endorsed a deal to sell National Amusements to Skydance, a media company controlled by the tech scion and Hollywood executive David Ellison. Because of the structure of the deal, the sale of National Amusements hinges on a related agreement being reached for Skydance to merge with Paramount.

Its common for influential shareholders like Ms. Redstone to be paid extra for their shares, commonly called a “control premium.” Under the deal terms currently under discussion, Ms. Redstone will get paid for all of National Amusements — including its theater chain, its real estate and its controlling stake in Paramount — potentially setting up different incentives for Ms. Redstone and everyone else who owns Paramount stock.