The Grey Lady and Sides of Beef

At this week’s New York Times’ (NYT) shareholder meeting, there will be an effort, led by Morgan Stanley, to eliminate the company’s two-tiered share voting system. One class for the family, another for everyone else. These systems are common with newspapers because it allows the founding families to retain control.
In today’s Wall Street Journal, Donald Graham, the CEO of the Washington Post, comes to the defense of the Times’ not-quite-so-democratic share structure.

(I)f the stock structure were eliminated, a line of buyers eager to purchase the company would form within minutes. No one could say no. The line would include private equity firms, high-ego billionaires, international media companies lacking a famous property and lots more.
Who would bid the highest? Perhaps a principled owner, dedicated to the welfare of the Times and the Boston Globe; willing to anger its friends on a regular basis, as good newspapers do; and prepared to spend money and run other risks to sustain the paper like the Sulzbergers. Or maybe the bidder would be someone quite different.

Oh dear! Not just a billionaire, but a high-ego one at that. Personally, I’ve never met a billionaire with a low ego. Or a newspaper publisher, for that matter.
Graham writes that if the new rule is adopted, it “would lead to the New York Times Co. being auctioned off like a side of beef.”
Well, what’s so bad about that? We sell lots of things in a manner very similar to how a side of beef is sold. That’s capitalism. Ever been to an art auction? Or rather, what’s so wrong with a side of beef being sold off just like a media company? It’s a two-way street. I’m stunned at how little faith Graham has in the free market.
These two-tiered systems are manifestly undemocratic, and will eventually lead to sclerotic companies. Graham believes there’s a difference between public spiritedness and the values of the free market. That’s a false symmetry. If the Times’ values are profit-enhancing, as Graham suggests, then the free market will find them. Plus, there’s no guarantee that a family-controlled business will adhere to those values.
I’m not against different share classes per se. I don’t think they’re a great idea, but I can understand why some families would want to maintain control of their businesses. What I object to is the Graham’s argument that it’s based on some high-minded principle. It’s not. When any organization isn’t held fully accountable, it will eventually suffer.
The divine right of kings died out a long time ago. It’s about time newspapers followed.

Posted by on April 23rd, 2007 at 10:40 am


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