Investment Firm Gives No Confidence Slam to NYT Stock

The New York Times Co. has been taking a beating over their increasing steep decline in the company's share price, extravagant executive compensation and the dual roles of Class B shareholder Arthur Sulzberger Jr. who acts as both the Chairman and Publisher of the company. These factors have prompted influential wall street investment advisor Institutional Shareholder Services to advise Class A shareholders to withhold votes for 4 directors who are up for election this month. A virtual vote of no confidence by one of the most influential investment advisors in the business according to the Gawker Manhattan Media News and Gossip website.

The Wall Street hostilities directed at West 43rd Street are heating up! Influential investment advisor firm Institutional Shareholder Services (better known by the slithery acronym ISS) issued a report yesterday advising that NYT Co. Class A shareholders withhold votes for the four directors that are up for election later this month. The Class B shareholders—those are largely Sulzberger family members—control the votes for the remaining nine directors on the board. So by telling Class A shareholders to withhold their votes, ISS is, obviously, telling the non-family shareholders to tell the Times that they don't like the way the company is being run. Meouch! What else does ISS have to say? And why is this a big deal, anyway?

Well, for one thing, having ISS on your side is pretty important to companies; They issue reports about corporate governance and stock options that are taken fairly seriously on Wall Street. So for them to be issuing this report a couple of weeks before the Times' big annual meeting—well, it's certainly not a show of support for the way the company is being run. [all emphasis mine]

The Gawker report notes that the share price of the New York Times Co. has slipped a whopping 54.56% since June of 2002 from its high of $51.50 to Tuesday's close of $23.40.

This comes on the heels of a Wall Street Journal article that noted how Morgan Stanley portfolio manager Hassan Elmasry was upset with Sulzberger and the way the Times has been conducting business. The fund that Elmasry manages has a stake in the Times Co.

Highlights of the ISS advisory report indicate broad dissatisfaction with the the Time's board. This is along the same lines of complaints iterated by Hassan Elmasry when he addressed the Times board in February.

According to Gawker ISS is unhappy with the board structure that has put too much control in Sulzberger's family.

"Vice-Chairman Michael Golden (Arthur Sulzberger Jr.'s cousin) "is among the most highly compensated executive officers of the company"; his sister, Lynn Dolnick, is also a vice chairman and executive officer of the company.

ISS also noted examples of excessive executive pay as a concern.

ISS is also not letting Times Co. CEO Janet Robinson off the hook. Robinson's total compensation in 2006 was $3,814,000, with $1,841,000 coming from "non-equity incentives," which "may include annual performance-based cash bonus, multi-year performance cash award, or awards where performance measure are not stock price driven and are not settled in company stock." Interesting! Also, the other executive officer made a ton of money, too.

The Times wouldn't be receiving this level of scrutiny if the company's share price had held up over the past few years. But it's gone from a high of $51.50 in June 2002 to Tuesday's close of $23.40—which is not only a steep decline, but also a much steeper rate of decline than the newspaper companies in its peer group, which ISS defines as Gannett Co., Tribune Co., the Washington Post Co. and Dow Jones Co.

This story has far reaching implications for the New York Times that goes beyond the overall makeup of the Time's media conglomerate. Company structure and holdings are a big factor. But it has also been noted that newspapers are under increasing pressure from publications on the internet. Multimillionaire investor Steven Rattner who is an expert in media and communications spoke at a panel sponsored by the Columbia Journalism Review where he noted that the loss on the print side is not being made up for on the online side.

"Whether people want as much old-fashioned solid journalism as much as they used to is not completely obvious to me," he said. That was not what other participants, who included the American Prospect's Robert Kuttner, the Times' Jill Abramson, Bloomberg's Amanda Bennett, and's Jim Brady, wanted to hear. (Who knows what Sewell Chan, out in the audience, thought.) Regarding the shift from print to online, Rattner said, bluntly, "It's a negative-sum game. The loss of readership on print side is not being made up for on online side."

When moderator and Columbia J-School Dean Nick Lemann asked Rattner if "all you wanted to do was make money, what would your newspaper look like?," Rattner seemed dismissive of the most recent attempts at launching newspaper-like publications online: "If you look at new journalistic enterprises that have worked, unfortunately most of the examples are ones that we would not be proud of or want to be associated with, like the Huffington Post, the Drudge Report, things like that." And he said: "It's not obvious that the conventional for-profit model is going to provide the quality of journalism that people in this room think should exist." - src Gawker

While not being an expert in this area I would imagine that one of the reasons newspapers haven't been able to make up readership losses on the print side stems from the breadth of alternative resources on the internet. When people leave print avenues aside they turn to the internet for something that is more tailored to their personal tastes. Simply launching the same old newspaper in internet form isn't enough; especially if the quality of the print form is in question to begin with. It is clear to me that when given a choice many readers have decided to look elsewhere for quality journalism.

Terry Trippany is the editor at Webloggin

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