Beset by calls for reform from angry shareholders and a dismal stock price on Wall Street, the beleaguered New York Times Co began to fight back two weeks ago, saying it had "no intention" of dismantling an ownership system that gives the Ochs-Sulzberger family absolute power over the media giant.
For the past century, the family has controlled the company but sharks are circling as the New York Times struggles to adjust to the Internet and achieve market value commensurate with its place as one the world's most influential newspapers.
The circling sharks include Maurice "Hank" Greenberg, the 81-year-old former insurance tycoon and a man with a personal fortune of US$3.2 billion. Greenberg has amassed only 100,000 publicly traded shares out of 143 million outstanding, but enough to drive the shares up 9 percent and renew speculation that the family will ultimately be forced to accede to investors' demands.
As things stand, no amount of stock could give Greenberg control of the firm as a second class of stock concentrates voting power in the hands of the family, descendants of Adolph Ochs, who purchased the paper in 1896. It is a change the Sulzbergers continue to rule out.
Last week, chief executive Janet Robinson told a media conference in New York that given turmoil in the newspaper business, she was pleased the Times had a dual class structure "designed to protect these institutions in times of stress."
Technically, the Sulzbergers can resist change indefinitely but, in practice, continuous public criticism of their management may force them to improve cash flow by making deep cuts or relinquishing control altogether, media critic Michael Wolff said.
"The reality is they don't have a very good business but they believe that they will develop into the premier online brand." Wolff said.
"No one knows what the online newsworld is going to turn into. They will tell you they get 40 million Web unique users a month, but the reality is they get a paltry 10 million to the New York Times and 30 million to About.com, a Web site that represents about the lowest order of information online," he said.
The fundamental problems facing the Times company, which also owns the Boston Globe, the International Herald Tribune and 15 regional US papers, are the same as those causing panic across the entire newspaper industry: falling circulation, a loss of advertising and a readership that's migrating to the Internet or disappearing altogether.
The Times has never successfully diversified its holdings and, unlike the Washington Post Co's board member Warren Buffett, has no outside directors with any weight.
"The New York Times encourages everyone else to pay attention to corporate governance issues yet it does not have one truly serious person on the board," Wolff said.
Several US newspaper groups have recently been sold or broken up. The Tribune Co, which owns the Los Angeles Times, is currently reviewing bids for its assets from buyers that include music mogul David Geffen and supermarket billionaire Ron Burkle.
But a hostile takeover of the New York Times, the beating heart of liberal, intellectual values in the US, is of a different symbolic order. The Ochs-Sulzbergers, said New Yorker media writer Ken Auletta, have "imbued the place with a sense that journalism matters more than profit margins or the stock price."
Being a cradle of high values and good intentions as counterweight to the diminishing fundamentals of the newspaper industry hasn't impressed Wall Street. Citigroup has cut its rating on the Times company to "sell," saying it is highly vulnerable to the popularity of the Internet. The firm's share price has halved in four years and fallen over the past six months. Significant shareholders, led by Morgan Stanley Investment Management's Hassan Elmasry, who owns a 7.6 percent stake, want to force the Sulzbergers to change the company's dual-class share structure, saying it "fosters a lack of board and management accountability."
Although Greenberg says he is not interested in making a hostile bid for the paper, he recently reached out to Morgan Stanley chief executive John Mack in a bid for support in a buy-out effort.
The Sulzbergers, meanwhile, with just 5 percent ownership of the firm, have met investment manager Steven Rattner to discuss taking the firm private. After three generations of Sulzbergers the family's shareholding is diffuse -- and when relatives start agitating for an improvement in their small stock holding and dividends, the direct line of the family will find it hard to resist. But they cannot buy the firm back without making a public offer and risking a hostile takeover.
The Times wouldn't be so vulnerable if there was more confidence in Arthur "Pinch" Sulzberger, the 55-year-old chairman and publisher of the paper.
Young Arthur, as he is known, has presided over two of the paper's most troubling episodes: the Jayson Blair saga, in which a young reporter was backed by the news editor, Howell Raines, even when it was clear he was fabricating stories; and the Judith Miller saga, in which Sulzberger backed the controversial defense reporter after it was clear her stories on Iraqi weapons of mass destruction were compromised by her proximity to the Iraqi National Congress and the administration.
Criticizing Sulzberger is a popular New York media custom -- the New York Post publishes a regular "Pinch-o-Meter" and Sulzberger hasn't helped himself with a touchy-feely management style (he bought a toy moose to an angry post-Jayson Blair staff meeting, to symbolize the "thing-people-don't-want-to-talk-about").
"You get a bad king every once in a while," said Gay Talese, who wrote the Times' definitive history, The Kingdom and the Power.
After a recent editorial in the Wall Street Journal cheered on Morgan Stanley's efforts to reform the class structure of the Times, the paper's managing editor, Bill Keller, struck back.
"At a time when serious journalism is being downsized and hollowed out -- when most papers don't have a correspondent in Iraq, when foreign bureaus are evaporating, when serious news organizations are telling their political reporters not to travel -- my paper seems to be one of the last that still understands you can't make journalism without journalists," Keller said.
"The New York Times Co will not be sold," ranted New York magazine after Greenberg's share acquisition was made public.
"The Sulzbergers have all the power and, much as one might like to mock Arthur Jr, and much as he may have made some stupid decisions, they're not going to let anyone else buy it," it said.
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