The Association of U S West Retirees



Shareholders of Times Co. Hold Out 42% of Board Vote
By Landon Thomas Jr.
New York Times
Wednesday, April 25, 2007

Shareholders of The New York Times Company gave voice yesterday to their growing displeasure with the company’s management and financial performance by withholding votes representing 42 percent of the Class A shares at the annual meeting.

The votes withheld represented more than half the investors who are not part of the Ochs-Sulzberger family, and they were a significant increase from the 30 percent withheld at the annual meeting last year.  But it was unclear whether yesterday’s vote to elect directors was enough to sustain a public campaign led by the chief critic of the Times Company, Hassan Elmasry of Morgan Stanley Investment Management.  Mr. Elmasry has asked the Times Company to unify its two-class share structure.

Both sides claimed some degree of satisfaction yesterday.

The Times Company, which said that it had been prepared for a result closer to 50 percent, said all directors had agreed to stay despite the vote.

“We understand shareholder frustration as reflected in today’s vote,” said Arthur Sulzberger Jr., the chairman and publisher.  He reiterated at the annual meeting that the Sulzberger family trust, which has sole power to combine the company’s Class A and Class B shares, would make no such move.  The Sulzberger family controls 89 percent of Class B shares.

The vote was symbolic, as Class A investors led by Mr. Elmasry can elect only 30 percent of the board;  Class B shareholders have the power to elect 70 percent of the directors.

Mr. Elmasry, who has been sharply critical of the company’s investment strategies, called the vote “an emphatic call for accountability.”

But now that Mr. Elmasry has met with the board and prompted steps like asset sales and an increased dividend, there will be increased expectations for him to produce additional results.

“Shareholders have had a choice all along between complaining and exercising their rights,” said Gary Lutin, an investment banker who gives advice on corporate control battles.  “If shareholders want to be taken seriously, they should nominate four directors to the board, which is their right.”

Given the large measure of investor dissatisfaction, corporate governance experts say that if Mr. Elmasry had put up his own slate of directors for Class A shareholders to elect, there would have been a strong likelihood that they would be elected, which would have given dissident investors a powerful new presence on the Times board.

In yesterday’s vote, each of the four Class A directors, James M. Kilts, Raul E. Cesan, William E. Kennard and Doreen A. Toben, received 71.7 million votes in support and 52.4 million against.  Mr. Elmasry has made the case that the Times Company needs to devote more resources to support The New York Times.  But he has not articulated an alternative business strategy on how the company could perform better during a time when all newspaper companies are struggling with the transition from a print-based to a digital-based advertising model.

Still, that the protest vote was higher than last year’s, even after the Times Company had announced a series of shareholder-friendly measures like a dividend increase, shows how deep investor discontent is.  For the time being, however, board members, as well as the Sulzberger family, seem unified in their support for Mr. Sulzberger.

At yesterday’s meeting, Mr. Sulzberger put on a strong face.  Surrounded by the other 12 directors, top management and family members, including his father, Arthur Ochs Sulzberger, he defended his tenure and the company’s strategy of developing its fast-growing digital properties.

Amid the barbs, he was even able to find a small measure of support from an unlikely source.

“Arthur, we have had our disagreements,” said Evelyn Y. Davis, a shareholder rights gadfly who has been criticizing chief executives at annual meetings for more than 40 years.  “But I love you. What more do you want?”