Morgan Stanley Investment Management, which owns 7.6% of the New York Times Company, is not very happy with the performance of its shares. And with good reason - the company has lost half its value in the past four years.
So last spring, in an attempt to wrest more value out of its shares, Morgan Stanley launched a campaign to shake up the way the company is structured. That effort, which heated up even more this week, has the potential to not only change the fundamental ownership of the Times, but offers a chilling peek at a possible future for many of the nation's most important newspapers.
The Times company has a two-tier stock structure, which allows members of the Sulzberger family to maintain control of the board of directors while owning far less than a majority of company shares.
Hassan Elmasry, who runs the Morgan Stanley fund that owns the Times Company's stock, this week sent the company a report he commissioned that criticized that structure and charged the company with bad corporate governance. The company replied by noting that Elmasry's protests were a moot point because only the Sulzberger family itself had the power to change the ownership structure, and they weren't inclined to do so.
"The structure has been in place before we went public in 1969," explains Catherine Mathis, VP of corporate communications at the Times Company, "and the family trustees have given no indication of any desire to change it."
Morgan Stanley would not make available the report it commissioned on the issue. Paul Verbinnen, president of Citigate Sard Verbinnen, which was hired by the Times Company to handle the issue last spring, did not return a call for comment.
What makes this more than another Wall Street spat are the possible implications of Elmasry's move. Times publisher and chairman Arthur Sulzberger has not only presided over the tanking of the stock price, but has been roundly criticized in journalism circles for, among other things, the Jayson Blair and Judith Miller scandals, his own failure to be as popular as his father, and his decidedly second-tier nickname ("Pinch").
So while Sulzberger indeed has the legal power to stave off his own demise, his position is weak. A full-on proxy fight by Morgan Stanley could further undermine Wall Street's confidence in the company, and lead to a frantic search for answers that would inevitably have other shareholders sharpening their knives.
But the loss of family control of the world's most important paper would be a terrible blow for journalism as a whole. The past year has seen once-mighty publicly held newspaper companies crumble under the pressure of impatient institutional investors. The resulting fire sales have almost universally led to layoffs and clouds of doubt in the newsroom.
Arlene Morgan, who spent many years at Knight Ridder before joining Columbia University's Graduate School of Journalism as associate dean, says, "I am still in mourning over what happened to the company, and to society in general, from the forced sale of that organization" last summer.
"The expectations of continued growth for an industry [in] this type of transition are totally unrealistic," Morgan says via e-mail. "The shareholders of any media company should understand that before they allow their greed to continue to downgrade the importance of the work that we do."
The Wall Street Journal and The Washington Post, the second and third-most important papers in the US, are also family-owned. Both publications appear to be safe for now, but a similar ownership challenge could be as close as the next market downturn. These titans' reporting only gets more important as most of their competitors close foreign bureaus and slash staff.
If family-owned papers want to endure, they must consider the financially terrifying prospect of going private.