PressEthic

Of Arthur Sulzberger Jr., chairman of the New York Times Company and publisher of The New York Times, Seth Mnookin has said:

Sulzberger is keenly aware that he sits at the head of a company that his family – and the country – regards more as a public trust than as anything so prosaic as a business concern.

(“Hard News: The Scandals at The New York Times and Their Meaning for American Media”, Random House, 2004)

These days, however, the Ochs-Sulzberger family has no choice but to start thinking prosaically.

Last month Morgan Stanley Investment Management, an eight percent shareholder in the publicly-traded New York Times Company, called for changes in the corporate structure to give shareholders more control. As The Houston Chronicle’s Loren Steffy reports, Morgan Stanley hopes to remove the special class of stock that gives the Sulzberger family a majority vote and thus shields management from accountability.

The dual-class share structure was originally adopted to protect the newspaper from business interests, thus prioritizing the democratic contribution to be made through quality journalism – a goal to which the Sulzbergers have historically been committed.

But as the print media industry becomes less profitable, prioritizing high quality journalism is no longer a feasible business model.

As Steffy points out:

Years ago, Newsweek's Jonathan Alter spoke at a conference in which he said as journalists we have two allegiances: readers and the truth.

Publicly traded media companies, though, have a third: investors.

And New York Times Company investors are not too happy right now.

Last year, shareholders watched the value of their stock fall by 35 percent. This year they saw a nine percent decrease, and further declines are expected over the next twelve months. With analysts changing their ratings to “sell,” shareholders have run out of patience with the family-run corporation.

Morgan Stanley has asked shareholders to vote on its proposal at the annual meeting in April.

Unless Arthur Sulzberger Jr. and his executives can come up with a convincing counter-proposal, it looks like The New York Times Company could soon be faced with two options: go private or remove the special class of stock owned by the Sulzbergers and open the company up to the forces of business interests.

While private shareholders are more likely to be willing to prioritize reader satisfaction over the value of their dividends, self-proclaimed “Newsosaur,” Alan Mutter argues that the public to private migration could be a dangerous move.

Although some wishful thinkers believe a management-led buyout could shield the New York Times from the disenchanted investors pummeling the stock of its parent company, the heavy debt required to take NYT Co. private would put more profit pressure than ever on the Gray Lady and her sister publications.

That pressure almost certainly would lead to sharp reductions in the abundant resources – staff, bureaus, travel budgets and more – that enable the Times to be the newspaper of record for the world’s largest and most powerful democracy.

The alternative, however, could be equally damaging to Times.

Removing the Ochs-Sulzbergers from the head of the company would be to remove the influence that has been a source of continuity throughout the New York Times' 154 year history. As Mnookin writes, “Understanding the Times means, to some extent, understanding the Sulzberger clan.”

It is impossible to tell whether or not the Times would remain "the paper of record" following either of these moves. What is clear, however, is that this is a pivotal moment in the history of the New York Times and its parent company.