Institutional Investor Services, an independent firm that helps large money managers decide how to vote in proxy matters, is recommending that shareholders withhold votes for board members of The New York Times Company (NYT). Morgan Stanley, a big NYT shareholder has been trying to convince that company that its poor performance in the newspaper industry requires a new approach that would probably mean a new board and new management.
The problem with Morgan’s plan is that the Times is controlled by the founding Sulzberger family which has set up two tiers of shares. The family’s trust controls most of the voting shares which allows it to appoint the majority of the board.
The idea behind family control is that it will protect the editorial independence of the company. It should also prevent a greedy shareholder from taking the company over and slashing the editorial budget, crippling the Times’ ability to be the premier newspaper product in the country.
Trying to dislodge the Sulzbergers is waste of time. The trust structure is not going to be dismantled. And the family has a most compelling argument. Investors who put their money into NYT stock knew about the voting control issue when they bought their stock. No one was suckered in.
It would be nice to think that the NYT could be taken over and broken into pieces that would fetch more than the company’s current market cap. But, there is no guarantee that the parts are worth more than the whole. Newspapers are not particularly attractive properties.
As for the management at NYT, they are in a race to improve revenue from their online properties like NYTimes.com while the sales of their newspaper subscriptions and advertising lineage fall.
Even if they lose the race, outside shareholders can stand and watch, or sell their stock.
The Sulzbergers don’t care.
Douglas A. McIntyre
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