What's at stake in the Times's 2-tier stock battle
COMMENTARY | April 26, 2007
Bezanson and Cranberg say newspapers miscalculated in going public but that relinquishing family voting control, as big investors want, would be bad for readers and for the fabric of democracy.
By Randall Bezanson and Gilbert Cranberg
Americans who do not own stock in the New York Times Company nevertheless have a big stake in the battle roiling the company over its two classes of stock.
To appreciate why, it helps to know that newspaper companies miscalculated when, beginning in the 1960s, they turned themselves into publicly-owned businesses by selling their stock to the public and listing them on stock exchanges. Stock analysts who follow the firms told us for our book on publicly traded newspaper companies that the move was bad for journalism because it forced enterprises with a public-service mission to compromise the mission by becoming just like any other business whose No. 1 priority is the bottom line. The Times and a few other companies tried to safeguard the journalism by issuing two classes of stock, one publicly traded, the other non-traded and chiefly in the hands of family members committed to quality journalism.
The family Class B shares have lots of voting power, though there are many fewer shares. By this mechanism, the families have control over the company; the regular shareholders who own the Class A stock have most of the ownership. That is, the owners don’t have control.
The big institutional investors – mutual funds, retirement plans, large shareholder interests, and now the investment bankers – are pushing to unwind the voting control of families. The New York Times Company is the target at present, with Morgan Stanley, T. Rowe Price and Private Capital Management leading the charge.
We all should hope that they lose the battle.
What’s in it for them? For the mutual funds the payoff is earnings and share price. Without family control, the shareholders – read institutional investors – will reign and force greater financial efficiency: cut the journalists, cut the news hole to make more room for ads, target the market for news to reach the best consumers, the highest socioeconomic group. For the investment bankers the payoff is not only stock value, but their potential cut of the fees from sale of the company or its divisions. All of this makes economic sense – except for what it does to readers and the fabric of democracy, which depends on an informed public.
The two-class formula has enabled the Times to invest heavily in news coverage and produce what is arguably the world’s greatest newspaper. The expensive foreign bureaus and well-staffed Washington bureau would not be possible if the Times danced to the tune of investors interested primarily in the company’s stock price. Journalists in particular, and the country generally, have benefited incalculably by the paper’s ability to produce a rich diet of news and information.
Yes, family control is undemocratic. It is a brake against the markets. But the same can be said of journalism and news. They serve our democracy by being independent, even of the majority will of the voting booth and certain of the democratic demands of the financial markets. The press is undemocratic at its core. So while democracy and equal voting rights might be important for General Motors and Morgan Stanley, that doesn’t make them important for a news organization.
The Class A owners who are clamoring to change the rules knew what they were getting into when they invested in the Times Company. What they got was not a stake in the usual business but in a national resource. Those for whom the Times is indispensable can only hope that the Sulzberger family does not splinter and succumb to the counting house mentality.
Randall Bezanson and Gilbert Cranberg authored, with John Soloski, “Taking Stock: Journalism and the Publicly Traded Newspaper Company.”