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The Case Against Arthur Sulzberger at The New York Times

His run as chairman since 1997 has been terrible for investors


Dow LeaderboardIf Arthur Sulzberger were named Arthur Smith there is no way that he would be running New York Times Co. (NYSE:NYT) or any other publicly traded company for that matter. His track record for shareholders is that bad.

Sulzberger, 60, has been chairman of the New York-based publisher since Oct. 16, 1997. Shares of the company closed that day at $54.49 ($21.68 when splits and dividends are considered). The stock closed on Wednesday at $7.79. That’s a decline of nearly 86% (65% if you count splits and dividends). On Sulzberger’s first day, the S&P 500 closed at 704.41. On Wednesday, it closed at 1,243, an increase of over 75%. At the end of 2006, NYT reported revenue of $2.62 billion. Wall Street analysts are forecasting revenue of $2.34 billion for this year, a decline of almost 11%.

The performance of Sulzberger and his family deserves closer scrutiny in light of the unexpected retirement of Times CEO Janet Robinson, who is one year older than the chairman. Sulzberger has become the interim CEO with Robinson’s departure. While it’s true that the Sulzberger family have been stalwart defenders of the First Amendment, they aren’t shy about paying themselves well. Arthur Sulzberger’s total compensation for 2010 was $6 million, down less than 1% from $6.06 million in 2009.

Robinson’s, however, fell more dramatically, from $6.7 million to $5.3 million, decrease of about 21%, according to the company’s latest proxy. The difference in treatment of the two executives shows that blood is thicker than ink (or digits), particularly since Robinson was credited with helping implement the Times’s successful digital strategy.

The Times is a family business. Sulzberger’s great-grandfather Adolf S. Ochs acquired the namesake newspaper in 1896. Ever since the death of Ochs’s daughter Iphigene Ochs Sulzberger in 1990, control of the company was passed to a trust he established controlled by her four children, including Arthur Ochs Sulzberger, the current chairman’s father and successor as chairman and publisher.

Designed to ensure editorial integrity, the trust is the largest holder of Class A and Class B shares. Individual family members are also huge holders. Sulzberger himself controls 7.18 million Class A shares and 739,770 Class B shares. Mexican billionaire Carlos Slim, whose $250 million loan to the company was repaid earlier this year, raised his ownership stake in the Times to 10.6 million shares, or 7%, earlier this year.

Sulzberger won’t get fired. Indeed, making him the permanent CEO is one option that’s likely being considered. The board — which is stacked with family members — should reject the idea. Ford Motor (NYSE:F) went through a similar process when it named Alan Mulally as CEO to replace a family member, William Clay Ford. It was one of the smartest decisions any board ever made because Mulally is widely considered to be one of the best CEOS in America. Thanks to his efforts, Ford is by far the financially strongest U.S. automaker and was the only one that didn’t need a bailout.

The Sulzbergers need their own Mulally. Arthur Sulzberger isn’t the right man for the job.

Jonathan Berr doesn’t own shares of the listed stocks.

Article printed from InvestorPlace Media,

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