New York Times Co. Gets A Vote Of No-Confidence

The Wall Street hostilities directed at West 43rd Street are heating up! Influential investment advisor firm Institutional Shareholder Services (better known by the slithery acronym ISS) issued a report yesterday advising that NYT Co. Class A shareholders withhold votes for the four directors that are up for election later this month. The Class B shareholders—those are largely Sulzberger family members—control the votes for the remaining nine directors on the board. So by telling Class A shareholders to withhold their votes, ISS is, obviously, telling the non-family shareholders to tell the Times that they don't like the way the company is being run. Meouch! What else does ISS have to say? And why is this a big deal, anyway?

UPDATE: NYT spokeswoman Catherine Mathis responds!

Well, for one thing, having ISS on your side is pretty important to companies; They issue reports about corporate governance and stock options that are taken fairly seriously on Wall Street. So for them to be issuing this report a couple of weeks before the Times' big annual meeting—well, it's certainly not a show of support for the way the company is being run.

ISS is not happy with the makeup of the Times' board, nothing that Vice-Chairman Michael Golden (Arthur Sulzberger Jr.'s cousin) "is among the most highly compensated executive officers of the company"; his sister, Lynn Dolnick, is also a director on the board.

ISS is also not thrilled by having Arthur Sulzberger Jr. in the dual roles of Chairman and Publisher, noting that it "further disenfranchises Class A shareholders by vesting the power of Chairman in an insider, Mr. Sulzberger... He is ultimately accountable to himself, both as Chairman and as a Class B shareholder. Neither he nor other members of the management team is accountable to the company's Class A shareowners in any meaningful way."

ISS is also not letting Times Co. CEO Janet Robinson off the hook. Robinson's total compensation in 2006 was $3,814,000, with $1,841,000 coming from "non-equity incentives," which "may include annual performance-based cash bonus, multi-year performance cash award, or awards where performance measure are not stock price driven and are not settled in company stock." Interesting! Also, the other executive officer made a ton of money, too.

The Times wouldn't be receiving this level of scrutiny if the company's share price had held up over the past few years. But it's gone from a high of $51.50 in June 2002 to Tuesday's close of $23.40—which is not only a steep decline, but also a much steeper rate of decline than the newspaper companies in its peer group, which ISS defines as Gannett Co., Tribune Co., the Washington Post Co. and Dow Jones Co.

Ultimately, the withholding of votes by Class A shareholders essentially can't change anything at the Times. But as the ISS report concludes, "While we do not advocate removal of the Class A directors, we believe that a strong message to effect change is necessary... Strong independent oversight of management and accountability to shareholders would also help improve performance at the company."

Times spokeswoman Catherine Mathis issued the following statement: "We are disappointed that ISS has recommended a withhold vote for our Class A directors. We note, however, that they did not advocate their removal, which we see as recognition of the high quality of our Board members. They are very talented and qualified senior executives with extensive experience and expertise in corporate strategy, capital allocation, brand management and media. All are valuable contributors to our efforts to improve performance as we manage through a historic transformation in the media business."