The View From 1776

In a February 3, 2007, article in the New York Times, reporter Katharine Q. Seelye wrote:

The Ochs-Sulzberger family, which controls The New York Times Company, said yesterday that it was withdrawing most of its personal assets, worth hundreds of millions of dollars, from Morgan Stanley.

Hassan Elmasry is a portfolio manager for Morgan Stanley Investment Management, the bank’s asset management arm, which owns more than 7 percent of the Times Company’s shares. Since June 2005, he has been pushing for the Times Company to change its corporate structure, saying that the current arrangement limits accountability.

It should also be noted that the assets the Sulzbergers are withdrawing from Morgan Stanley’s management, to the extent that they are invested in New York Times stock, have a market value distressingly lower than when Arthur Sulzberger, Jr., took over management of the Times.

What causes the ruckus is the two-tier stock capitalization of the Times.  Publicly traded Class A shares are entitled to elect 30% of the company’s directors.  Class B Shares owned by the Sulzbergers, with 88% in a family trust, are entitled to elect 70% of the directors, which means that management is essentially unaccountable to outside investors.

If you are a liberal-progressive-socialist, you will love the editorial views of the Times, which pervade so-called “news,” as well as the editorial page.  But whether liberal or a conservative, all observers agree that the paper has undergone marked changes since the 1997 accession of Arthur Sulzberger, Jr., to the CEO position.

From an editorial viewpoint, the Times’s long-time liberal stance has been shifted even farther to the left.  The paper is rabidly anti-Bush, anti-Christian, pro-UN, and a cheerleader for liberal-progressive “social justice.” The Times repeatedly is embroiled in scandals, from the Jayson Blair affair and the Judith Miller farrago, to deliberately revealing national security secrets and knowingly presenting false versions of stories to comport with its editorial positions.  All of them pivot off editorial intentions to attack the administration and Judeo-Christian values.

From a financial viewpoint, the Times has performed poorly compared to its competition.  The stock price over the past two years of booming stock markets has dropped 41%.  In late December, Standard & Poor’s cut NYT’s long-term corporate and unsecured debt to BBB+ from A-.

Total revenues have been flat, growing less than 7% over the last four years.  In that period, from 2002 to 2005, net income after taxes dropped 18.9%, and in 2006 turned into a net loss almost twice as large as the preceding four years’ average earnings.

Among investors the consensus is that Arthur Sulzberger, Jr., lacks judgment.  Preoccupied with pushing a bevy of social justice causes, from affirmative action to same-sex marriage, young Mr. Sulzberger has roiled the Times management and its reporting staff.

Former CEO of General Electric Jack Welsh has assembled an investment group to bid for the Time’s Boston Globe.  And former AIG insurance group chief Hank Greenberg heads another group that would like to gain a board position on the parent Times company in order to reorient its policies.

Both groups see the Times’s poor performance as opening an opportunity to buy and rehab underperforming assets, in the classic Graham-and-Dodd value-investment mode.

Even the super-liberal New Yorker Magazine has taken a shot at Mr. Sulzberger., as reported in the New York Daily News:

Hard Times: New Yorker punches out Pinch

In a must-read profile for media soothsayers, writer Ken Auletta raises the question of whether Pinch [Arthur, Jr.] Sulzberger can survive journalistic embarrassments and shrinking profits.

In the final analysis, even socialists have to pay attention to the capitalist marketplace.  Non-family shareholders may not be able directly to unseat Mr. Sulzberger, but the family is paying dearly in diminished asset value for his ideological preoccupations.

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