Headlines have framed Paramount—Netflix competition Warner Bros. Discovery (WBD) is a clash of Hollywood heavyweights – and only one bidder can win. This framing may miss a larger point. The real question is whether the WBD board ran a fair process and ultimately fulfilled its most basic obligations to shareholders.
As someone who studies corporate strategy and governance for a living, I find this incident troubling, not because the board occasionally chooses controversial deals, but because the behavior on display reflects a deeper pattern of process failure. When a board precommits to a preferred outcome and then modifies its rationale for rejecting an alternative, the problem is not strategic disagreement. This is a governance breakdown.
What does the board of directors owe shareholders when the company is running?
When multiple bids are made, the board’s job is not to protect the vision, management team or carefully crafted deal structure. It is to maximize value for shareholders through open, rigorous and fair processes. This does not mean that the highest nominal bid will definitely win. But it does mean that competing offers must be carefully evaluated, negotiated in good faith, and rejected only on substantive, transparent and consistently applied grounds.
By that standard, WBD’s handling of the Paramount acquisition raised red flags.
Premium cash offer deserves serious market testing
Paramount’s offer isn’t subtle. It was an all-cash takeover offer of $30 per share, significantly higher than Netflix’s $27.75 per share offer, which was a mix of cash and Netflix stock and hinged on a multi-step deal that would first divest WBD’s legacy cable network. Governance scholars and courts have long recognized one advantage of cash offers: they remove valuation ambiguity. Shareholders know exactly what they will get, when they will get it and what risks they will no longer bear.
In contrast, the Netflix deal requires shareholders to accept execution risk, market risk and regulatory delays. It may succeed. But it’s not without risks, and boards shouldn’t pretend they are.
In this case, a truly neutral board would favor comparison, not bias. It should put pressure on both bidders, expose weaknesses, fix requirements, and allow competitors to do what they do best. This is how shareholders ultimately benefit. Instead, our board appears to have settled on a preferred path early on and viewed alternatives as administrative inconveniences rather than proposals to be tested.
The board’s public explanations—especially its recent rejection of Paramount’s revised bid—reinforce that impression. Paramount’s offer has been rejected due to a series of evolving financing issues and structural flaws, although these have since been addressed and modified. At the same time, the complexity of the Netflix deal and the market and regulatory risks it faces are seen as manageable, even benign. This asymmetry is difficult to defend.
Notably, WBD has increasingly relied on reasoning that suggests it is “losing” — focusing on relatively minimal costs such as the termination fee it must pay Netflix, technical issues with the debt exchange that must be resolved, and incremental interest payments. While each risk is certainly important to shareholders, boards should focus on why the best deal is being made, not why not.
Of course, from my years of studying these deals, it’s clear that every big deal has flaws on first contact. But serious board negotiations exposed these flaws. They did not use this as a reason to avoid negotiations altogether. When bidders improve terms, add guarantees, but still encounter changing standards, shareholders have the right to ask whether the process is truly about value, or about preserving the chosen deal structure.
What’s missing is transparency. Shareholders have yet to receive a clear, side-by-side, risk-adjusted explanation as to why lower-priced, more complex deals dominate higher-priced cash takeover bids. They were also not provided with evidence that Paramount was given a fair opportunity to address what they viewed as deficiencies. From a governance perspective, this omission is more important than any single item in any proposal.
When process failure becomes a market problem
This is a disturbing fact. Many boards like to say they welcome competition. But in reality, some will welcome it only if it confirms decisions that have already been made. When competition threatens to derail a carefully negotiated plan, it is often relabeled as “uncertain,” “risky,” or “untrustworthy,” regardless of the value it provides.
Courts can police the most egregious abuses, but litigation is a blunt tool. More effective discipline comes from shareholders who demand accountability and directors who remember who they serve. The board does not lose legitimacy if it changes its mind when faced with a higher offer. It loses legitimacy by evading challenge.
If the WBD board truly believes the Netflix deal is superior, it should welcome a transparent market test. It should disclose its assumptions, explain its trade-offs, and demonstrate its work. Until then, skepticism is not only justified, but reasonable.
Good governance is not about choosing the right story. It’s about running the right processes. Shareholders deserve a board that is willing to test its beliefs through the market rather than hide behind it. Regulators should be asking the same questions as they watch another mega-deal reshape a key industry.
The views expressed in Fortune opinion pieces are solely those of the author and do not necessarily reflect the views and beliefs of: wealth.