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Times: 'We Will Deliver'

Chairman Sulzberger sidesteps a groundswell of activist discontent.
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New York Times

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clung stubbornly to shrinking shareholder support at Tuesday's annual shareholder meeting in New York.

The Times Square meeting found Arthur Sulzberger Jr., embattled chairman and publisher of the company's flagship newspaper, preaching to the choir. He fielded no questions that directly challenged the company's controversial dual-class share structure, which has come under fire on Wall Street.

Hassan Elmasry, a senior portfolio manager with Morgan Stanley Investments, whose fund owns a 7% stake in the publishing conglomerate, wasn't present at the meeting. But the impact of his campaign for change in the company's corporate structure was felt when the votes were tallied.

Roughly 42% of the company's Class A shareholders, the public investors that own the vast majority of its equity, voted to withhold support from the Times' four Class A directors. That marks an increase from the 30% that voted to withhold support last year.

The results amount to a rebuke to The Times from its institutional shareholder base. But the Class B shareholders were unanimous in support for the company's nine Class B directors, rendering Wall Street's revolt against the company's corporate structure as little more than a symbolic gesture at this point.

"We understand shareholder frustration as reflected in today's vote," said Sulzberger in a statement. "At the same time, many shareholders have expressed to us that we are pursuing the key actions needed to improve performance and returns to shareholders."

Elmasry and his supporters have argued that the company's dual-class share structure gives the majority of its owners no sway over its board of directors and, in turn, its management. He blames this arrangement, in part, for the company's poor stock performance in recent years as the newspaper industry has suffered the effects of the Internet's rapid rise. Its shares have shed roughly half their value over the last four years. They were recently down 15 cents, or 0.6%, to $23.83.

Elmasry's complaints became public around the time that New York Times rebuffed overtures from former

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CEO Jack Welch to buy

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, the chief laggard in the company's portfolio. Meanwhile,

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reported that both Welch and former


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CEO Hank Greenberg contacted Morgan Stanley CEO John Mack after Elmasry went public.



said Greenberg, himself a victim of bad press, casually suggested he and Mack work together to take over The Times, citing an unnamed source.

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CEO Donald Graham said if the Times abandoned its dual-class share structure, it would "run crazy risks" with the future of its brand.

"Why? Because if the stock structure were eliminated, a line of buyers eager to purchase the company would form within minutes," said Graham, whose own company uses a similar capital structure. "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."

The Times' structure preserves control of the publishing empire in the hands of its longtime controlling family, the Ochs-Sulzberger family trust, which owns 89% of the Class B shares and 19% of the company's Class A shares. The Times adamantly rejects Elmasry's arguments against the arrangement and defends its structure as a necessary protection of the newspaper's editorial operations and independence from the short-term whims of Wall Street's quarterly culture.

At the meeting, Sulzberger said the company used the dual class share structure when it went public in 1969 "specifically to get us through times like this."

He said the structure is "neither an ivory tower nor a fortress" used to shield the company from its responsibilities to shareholders.

"The dual class stock structure is hardly unique to The New York Times Company," Sulzberger said. "It is not an accident that what are generally agreed to be the three best newspapers in the U.S. -- The



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-- all have this capital structure in common.

"More than 300 companies today trade using a dual class structure," he says. "Indeed, there are a number of companies going public today using this structure." He cited companies including Craig McCaw-controlled





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"Only the trustees of the Ochs/Sulzberger family have the ability to change that, and we are unanimous in our commitment to retain it," he added.

Sulzberger also defended his dual role at the company as chairman and publisher of The Times, which has also been criticized by Elmasry. He says the two positions allow him to coordinate to the company's editorial operations with its overall strategic direction.

New York Times CEO Janet Robinson pointed out that the company, through its print and digital media properties, reaches an audience of over 17 million people, up by roughly 2 million from the same measure in 2004. Its flagship newspaper Web site is the No. 1 newspaper site in the world, and its combined properties on the Web range from the ninth to the thirteenth largest presence on the Internet.

She also said, "We believe that newspapers in print will be around for a long time," citing their continued profitability.

In essence, The Times is recognizing the deterioration of its business model in the digital age, but it's asking shareholders for patience as it traverses from print to the Web and carves out a new business model that can turn its massive reach into profits.

Meanwhile, in a jab at Elmasry and his growing band of shareholder activists, Sulzberger pointed out that everyone who bought shares of New York Times did so with full knowledge of the dual-class share structure and its limitations.

"We are grateful to all of our shareholders who did so believing, as we do, that this structure is necessary for the stability and integrity of a journalistic enterprise," he said. "We will deliver shareholder returns."