ROBERT SIEGEL, host:
It's not every day that the hereditary boss of one great family-controlled but publicly traded newspaper comes to the defense of the hereditary boss of another great family-controlled but publicly traded newspaper. In the editorial pages of, you guessed it, yet a third family-controlled but publicly traded newspaper.
But that is what happened this morning in the pages of The Wall Street Journal. Donald Graham, the president and CEO of The Washington Post, wrote in defense of The New York Times Company. Some shareholders want to end The Times' practice of having two classes of common stock - one class for the insiders who pick most of the directors, and another class for outside investors. As Graham writes, Washington Post stock has a similar structure. And as The Journal notes at the end of its piece, Dow Jones and Company, which owns that paper, also has a dual-class share structure, which is controlled by the Bancroft family.
Well, joining us is Greg David, editor of Crain's New York Business. Welcome to the program.
Mr. GREG DAVID (Editor, Crain's New York Business): Thank you.
SIEGEL: And I'd like to ask you first: how come? And are these dual class stock structures, or are they unique to the newspaper business?
Mr. DAVID: They're not very common at all, and they have been primarily used by media companies where long-time, family-owned companies like the Grahams with The Washington Post Company or the Sulzbergers with The New York Times Company decided they wanted access to the public market so they could raise a lot of money but wanted to keep control of the companies. And that's where these dual structures originated.
SIEGEL: On the one hand, we could say they wanted to have their cake and eat it. On the other hand, say in The Washington Post example, Donald Graham writes, they brought in Warren Buffet, and everyone - those who can vote for the directors and not - are doing very well.
Mr. DAVID: Well, that's a very interesting case because The Washington Post Company is exempt from the kinds of pressures that are being brought to bear for - at The Times and at The Journal. And that's because they've done such a great job, maybe because of Warren Buffet. You know, The Washington Post Company owns Kaplan, this enormously successful educational company, and it's just doing tremendously better than the other two companies.
SIEGEL: Well, let's talk about The News York Times, and who is it, who among the shareholders want to undo this dual-class share structure, and why?
Mr. DAVID: Well, the fight is being led by Morgan Stanley and a fund within Morgan Stanley that has been a long-time owner of The Times stock. And they want to undo it because The Times has performed so poorly in their view. In the last two years, the stock has fallen from $33 to $24 a share, while the rest of the market has moved far higher.
And the company has been essentially impervious to the demands of shareholders to do better. The company says, we're in the business of doing great journalism and profits will have to be second. And the shareholders say, well, we're the owners of the company, and our interests should be first. And that's the heart of this conflict.
SIEGEL: But the Sulzberger family could say accurately, you're the owners of some stock in this business. We, the Sulzberger family, have owned this ever since my great grandfather bought the paper back in whenever, and we are committed to this institution as people who buy the stock might not be.
Mr. DAVID: Well, that's sort of true, but I think fundamentally, in terms of the ownership, it's just one share of stock. You all own the same amount. It's just these group of shareholders have been anointed as special. And the question is whether that's a good thing.
Now, some people say it is a good thing, because media companies are different, and The New York Times journalism is different and it should be protected. But the alternate point of view is, well, the marketplace matters, and The Times isn't doing well by the marketplace.
SIEGEL: Now, the means by which the people who want to end this dual-stock system that The Times - the means of their attempting to do that is at tomorrow's stockholder meeting. They're asking stockholders to withhold their votes from the inside, the family's choices to be directors. Is there also any possibility of, say, SEC action, or a lawsuit to undo this system?
Mr. DAVID: No. And what's very interesting about Tuesday's vote is it's purely symbolic. Even if the votes are withheld, that won't change anything. Only the Sulzbergers can change it. Now, over time, if the stock continues to fall, if investors vote with their feet, by leaving, maybe something will happen then.
But no, as you pointed out earlier, people knew what they were getting into when they bought the stock. If the Sulzbergers don't change it, nothing will change.
SIEGEL: Well, Greg David, thank you very much for talking with us. And you can assure us that Crain's New York Business doesn't have a dual-stock ownership system?
Mr. DAVID: No, we're owned by two brothers and the rest of the family, and very happily privately held.
SIEGEL: And you're the editor. Thanks a lot for talking with us.
Mr. DAVID: My pleasure.
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