NYT's Unfair Shareholder Rules Come Under Fire
Just as television is hypocritical when it comes to diversity (both political and otherwise), many newspapers which are run by liberals are equally hypocritical when it comes to how they structure shares of their stock.
The New York Times is the best example of this--editorially, the paper puts forth an image of empowering the powerless and standing up for the little guy. But when it comes to its own finances, the paper is decidedly in favor of the elites, refusing to let the majority of stockholders in the New York Times company have a voice in who its board of directors are. Instead, these shareholders must defer to a small elite--primarily comprised of members of the Sulzberger family--who own the voting Class B shares.
What this boils down to is that the Sulzberger family, led by the ranting leftist Arthur "Pinch" Sulzberger, is trying to take money from investors and remain completely unaccountable about how it runs the Times company into the ground. It's a classic case of having your cake and eating it too, and in this case, it's harming the company severely.
Fortunately, some Times investors have had enough of this offensive situation. The investment firm Morgan Stanley has stepped forward and said that it can't continue:
Hat tip: NRO Media blog.
Mr. Elmasry, whose London fund owns a 7.6% stake in New York Times, submitted resolutions yesterday to be voted on at next year's annual meeting, one of which asks the publisher to switch to a one-share, one-vote system.
New York Times is controlled through trust ownership by the descendants of Adolph S. Ochs, who purchased the paper in 1896, through their ownership of 4.4% of the publisher's nonvoting Class A shares and 88% of the Class B voting shares.
In his proposal, Mr. Elmasry argues that the Times system is unfair because the owners of the nonvoting shares, which he says represent more than 99% of the company's economic interest, "elect only four of the thirteen directors" while the owners of the voting shares, which he says represent less than 1% of the company's equity interests, elect nine directors. "The dual class voting structure fosters a lack of board and management accountability," he wrote in his shareholder proposal.
New York Times spokeswoman Catherine Mathis said the dual-class structure can't be changed without the approval of six of the eight family members in the trust. "And they have given no indication of any desire to change it," she added.
Even if Mr. Elmasry's proposal won a shareholder vote, it would be only a symbolic victory. He thinks such a show of support would give the board ammunition in a negotiation with the family, according to a person familiar with his thinking.
The dual-class structure is relatively common among media companies in the U.S., and defenders say it preserves the editorial independence of media outlets. As the newspaper industry has faced declines in circulation and advertising dollars, amid heightened competition from Internet outlets, some investors are getting restless. [...]
"It might seem quixotic at first glance, but we have seen some companies in recent years eliminate some dual-class structures," said Patrick McGurn, executive vice president of Institutional Shareholder Services Inc., which advises investors on how to vote in corporate elections. ISS hasn't said how it will recommend investors vote on the proposal, but he said ISS is generally opposed to unequal voting structures. [...]
Mr. Elmasry hopes giving shareholders a stronger voice could prompt a change in management, according to a person close to the situation. "We know that the company's relative underperformance is tied to the current management," this person said, citing events such as the $450 million purchase of About.com and the estimated $495 million to $533 million the company is spending on the construction of a new headquarters.