On July 1, Paramount Global settled the lawsuit brought by President Trump claiming personal harm from alleged “election interference” in the editing of an interview with Kamala Harris by CBS News’ 60 minutes.  The agreement called for the company to pay $16 million in cash, minus legal fees, to Trump’s future presidential library.[1]  Presumably the FCC will now approve the broadcast license transfers necessary in the Paramount/Skydance merger, since eliminating this roadblock was the business justification that the Paramount Global directors presumably relied upon in deciding to approve the settlement.

What are the company’s shareholders rooting for?  What should they be rooting for? Here are some thoughts.

First, the shareholders should root for Alvin Bragg, the Manhattan district attorney, to launch a bribery investigation.  Paramount Global is headquartered in Manhattan, so he would have jurisdiction.  The New York Penal Law, Section 200.04, makes it “bribery in the first degree when the person … agrees to confer … (2) any benefit valued in excess of one hundred thousand dollars upon a public servant upon an agreement or understanding that such public servant’s vote, opinion, judgment, action, decision or exercise of discretion as a public servant will thereby be influenced.”

To be sure, both Brendan Carr, chair of the FCC, and Paramount Global have disclaimed any link between settlement of the lawsuit and the FCC process.  But really?  That factual matter presumably would be the subject of Bragg’s investigation. Among the relevant facts are that Carr and his Republican co-commissioner, Olivia Trusty, are Trump appointees, and, according to positions consistently taken by the Trump Administration in seeking to remove commissioners from various other regulatory agencies, they both serve at the president’s pleasure.  This president has commanded an unusual degree of alignment from his appointees.  Moreover, President Trump’s executive order, “Ensuring Accountability for All Agencies,” claims that “officials who wield vast executive power must be supervised and controlled by the people’s elected President.”

Coincident with the lawsuit, Trump did not recuse himself from any subsequent decision-making by the FCC with respect to Paramount Global matters and thus is in the chain of command over any FCC decision regarding the company.  The “benefit” is the contribution to a presidential library, a vehicle for personal aggrandizement that is a thin substitute for a check deposited in the president’s account (the initial ask).

Without a belief that this payment would advance the necessary governmental approvals, what would be the possible business justification for the directors’ decision to reward rather than dispute such a tenuous claim despite significant reputational damage and the alienation of key employees?  Media companies commonly contest specious defamation claims despite the litigation costs for these reasons.

U.S. Chief Justice John Robert’s opinion in Trump v. United States presumably protects the president against a bribery charge but would not protect Paramount Global or its officers and directors.  Paramount Global shareholders should be rooting for Bragg to proceed and should be rooting as well for a bribery conviction of the company.

The Paramount Global shareholders’ desires may have little influence on Bragg, who faces a series of prudential and political decisions in deciding whether to proceed with an investigation and then an indictment. So the shareholders should herald the filing of a derivative action against the directors of Paramount Global in Delaware Chancery Court, and should be hoping that the derivative action results in a judgment imposing significant liability for the directors, $16 million, and significant board “refreshment” as well.

The important precedent here is In re Massey Energy Co. Deriv.  Cl. Action Litig.[2] as recently adumbrated by Vice Chancelor Will in In re Transunion Deriv. Stockholder Litig.[3]: “the most basic obligation of directors and officers: to ensure that, in seeking profit, a corporation conducts lawful business by lawful means. Loyal fiduciaries must endeavor in good faith to maintain the corporation’s fidelity to its material legal duties. If they intentionally fail to do so, personal liability for breach of fiduciary duty may follow.”

Without even an antecedent criminal conviction, the Delaware Chancery Court could decide, applying the standards of either the New York State or federal[4] bribery statutes, that the actions of Paramount Global in settling the Trump lawsuit with the expectation of advancing the FCC’s approval of the Skydance merger constituted a “bribe,” and that in pursuing and approving this unlawful behavior by the company, the directors and officers breached their fiduciary duty, here the duty of loyalty.  Monetary recovery would attach to this personal liability finding.

Now, why would the Paramount Global shareholders root for both Bragg and plaintiffs’ attorneys to pursue these cases against the company, despite the potential criminal and civil sanctions?

A relevant precedent here is Smith v. Van Gorkom.[5]  Although perhaps best known for deciding that directors’ breach of the duty of care could result in monetary liability (later reversed by statute), the case’s enduring importance is its reshaping of merger practice by ruling out a strategy that could extort directors’ agreement to a bidder’s semi-coercive offer.

The target, TransUnion, received a somewhat attractive bid conditioned on virtually immediate acceptance and a merger agreement with provisions that would disadvantage a competitive bidder.[6]  Despite internal evidence that this was a low-ball bid, but not wanting to lose this opportunity, the TransUnion directors accepted the bidder’s terms. Subsequently the Delaware Supreme Court held that the directors’ haste and lack of due diligence violated their duty of care and imposed monetary liability.

The relevance is that, in its forthright declaration of directors’ duty in confronting a takeover bid, the ruling took the directors off the horns of a dilemma: accept the bid on these draconian terms to give the shareholders the option of whether to approve, or reject the bid because of these draconian terms and face shareholder anger, rejection, and possible legal liability for letting such an opportunity slip by.  The court said the directors’ duty of care required due diligence, which meant that that they could not accept such a coercively structured initial offer.

The ruling, which tied the directors’ hands, had this important impact on the takeover market: Rush-rush take-it-or-leave offers designed to coerce directors’ acceptance were now off the table.  Knowing that directors could not accept such offers, bidders did not make them; what would be the point?[7]  The outcome in Smith v. Van Gorkom provided not only relief for the TransUnion shareholders, but also protection for the shareholders of all public companies that might become take-over targets.  Even though the risk of directors’ personal liability was substantially eliminated by subsequent legislative enactment,[8] the case established what fiduciary duty required.

Let’s bring the analysis back to Paramount Global and indeed all media companies in the United States. The shareholders want a ruling, either in a criminal proceeding or shareholder derivative suit, that Paramount Global’s payment to settle the Trump suit was in fact a bribe and thus unlawful.  If so, in a future case the officers and directors of Paramount Global (and other media companies) could not make such a payment. The teaching of Massey is that such payment would be a violation of directors’ fiduciary duty to restrain the company from violation of material legal duties.  Such payment would be to intentionally allow the company to violate material law, a breach of the duty of loyalty, which is not exculpated under post-Smith v. Van Gorkom legislation.

Usually in settling litigation against the corporation, officers and directors weigh the risk of an adverse judicial resolution. In a case brought by the president for some media malfeasance, the risk is adverse government action. Payment in such a case is presumptively a bribe.  It would be no defense for officers and directors to say that settlement of such litigation would serve the interest of the corporation and the shareholders by advancing a necessary government approval or reducing the risk of adverse government action.  The payment could not be made. The directors would be off the horns of a dilemma that the Paramount Global directors imagined for themselves.

Here’s the critical benefit: If officers and directors cannot approve such payments, then it will be far less likely that such specious claims will be brought in the first place. This, after all, is the argument for robust enforcement of the anti-money laundering statutes; if company officials face criminal exposure for making or taking a bribe, they are less likely to be pressured to pay one.  In the case of news organizations, this would free up reporting and lead to less self-censorship.  If nevertheless the president asserted a media malfeasance claim, the companies would have strong incentives promptly to test its legal bona fides rather than engage in protracted negotiations that cannot end with a payment.[9]

A final thought: A major achievement of Delaware corporate law over the past decade has been the establishment of the principle that directors have a duty to oversee the corporation’s compliance with law and that, in particular, directors violate their fiduciary duty of loyalty if they intentionally permit illegal behavior, or at least violations of important regulatory proscriptions. Winking at parking violations might fall below the threshold; bribe-making would not.  In addition to public enforcement actions brought against the corporate entity, the law-compliance obligation  can be policed through shareholder derivative suits, in effect private attorneys general seeking damages against the duty-violating officers and directors.

We are plainly in the world of the second best. Ordinarily the threat of eventual prosecution would deter a president against the withholding of government action to extract a private benefit. Chief Justice Roberts closed down that first best approach.  So now we need to run deterrence through the agents of the victim, through sanctioning officers and directors who approve the payoffs.  “Just say no” has another act.

ENDNOTES

[1] Apparently, the consideration also included a side agreement for CBS to broadcast “public service announcements,” assessed value of at least another $16 million, “to promote causes supported by the president.” See Charles Gasparino, “How a secret ‘side deal’ helped seal Paramount’s $16 million settlement with Trump,” NY Post, July 2, 2025, available at   https://nypost.com/2025/07/02/media/how-secret-side-deal-helped-seal-paramounts-16m-settlement-with-trump/.

[2] 2011 WL 2176479 (Del. Ch. May 31, 2011) (Strine, V.C.). See also Leo E. Strine, Jr., Kirby M. Smith & Reilly S. Steel, Caremark and ESG, Perfect Together: A Practical Approach to Implementing an Integrated, Efficient and Effective Caremark and EESG Strategy, 106 Iowa L. Rev. 1885, 1893 (2021) (describing “the first principle of corporate law: corporations may only conduct lawful business by lawful means”).

[3] 324 A.2d 869 (Del. Ch. 202 (Will, V.C.) (citations omitted).

[4] 18 U.S.C. Section 201(b) provides: “Whoever— (1) directly or indirectly, corruptly gives, offers or promises anything of value to any public official … or offers or promises any public official … to give anything of value to any other person or entity, with intent— (A) to influence any official act; ***

shall be fined under this title or not more than three times the monetary equivalent of the thing of value, whichever is greater, or imprisoned for not more than fifteen years, or both, and may be disqualified from holding any office of honor, trust, or profit under the United States.”

[5] 488 A.2d 858 (Del. 1985).

[6] The bid was made on a Thursday; acceptance was required by midday Sunday. The proposed merger agreement would give the bidder a stock option for 10 percent of the target’s stock, with an exercise price of the target’s pre-deal stock price, designed to give the first bidder a significant advantage competing with subsequent bidders.

[7] A variation of this argument was made in Jonathan R. Macey & Geoffrey P. Miller, Trans Union Reconsidered, 98 Yale L. J. 127 (1988)

[8] 8 Del. Gen. Corp. Law §102(b)(7).  Exculpation of officers and directors from personal monetary liability does not apply for a breach of the duty of loyalty.

This post comes to us from Jeffrey N. Gordon, the Richard Paul Richman Professor of Law at Columbia Law School.