WHEN THE FAMILY BUSINESS IS THE NEWSPAPER BUSINESS

Proxy statements and web sites show families still control papers

Traditionally, newspaper ownership has been a family business. Much like other businesses of the late 19th and early 20th centuries, fathers handed the newspaper to sons (and if there were no sons, to sons-in-law).

Many of those enterprises grew and prospered under family ownership; others withered and died. But by the mid-'60s, the growing companies had realized two things: Sometimes family members were too conservative in a business sense (if not a political sense), and sometimes their peers lost it all when a key family member died and inheritance taxes forced a sale.

The Times Mirror Co. was the first family-owned newspaper company to go public, in 1964; the Washington Post Co. was among the last, with Katherine Graham buying the first share of the company for $24.75 on June 15, 1971.

To make these transitions from family ownership to public companies more palatable, two classes of stock were issued. One class, which controlled the election of the board of directors, was issued to the family; the other class, traded on Wall Street, had no voting rights.

Nonetheless, it was uncomfortable. In his sterling 1979 work on the news business, The Powers That Be, David Halberstam quotes Katherine Graham of the Washington Post as asking her friend Otis Chandler of Times Mirror, "Otis, do I really have to make my salary public?"

Halberstam writes that the experienced public company official said yes. (He goes on to explain that Post Executive Editor Benjamin Bradlee quit the Post Co. board before the business went public, specifically so his reporters wouldn't know his then-$100,000 yearly salary.)

But the discomfort of dealing with Wall Street and letting all that business information out to the public record wasn't without its rewards. Graham, in her 1997 Pulitzer Prize-winning autobiography Personal History, says, "The advent of Warren [Buffett] was only one of the positive things that resulted from our going public. It gave us some proper discipline about profit margins, although I worry about the overemphasis at times on the price of the stock."

As this is written, Post Co. stock hovers at $547 a share.

I'm thinking about newspaper stock and newspaper families right now for two reasons. First, Correspondent Marion J. Love has written a lucid and compelling article, inside this issue, on the revelations that come from reading the proxy statements of the publicly held companies (she also calculates what a 1993 $100 investment in those companies would be worth today). Second, a movement by a series of groups – including the Newspaper Association of America – is urging Congress to drop what they call the "death tax."

Among the leaders of the end-the-death-tax movement is the Blethen family of Seattle, owners of the Seattle Times and recent acquirers of the former Guy Gannett Communications, which includes the Portland (Maine) Press Herald. On the web site that the Times maintains for the anti-death tax movement, the authors say, "Because of the death tax our nation has seen the number of locally owned, family newspapers steadily shrink."

Whether family ownership (or merely just control) of the newspaper companies is a good thing or bad is beyond my ability to say. But it is clear that some of the greatest U.S. newspapers at the close of the 20th century are controlled by the families that have controlled them for generations.

The companies that really care about excellence seem to be family-controlled. Executives of one family-owned newspaper company who have had experiences in both private and public operations extol the virtues of their employers.

Exceptions to the rule do exist, of course. How often have we watched families fight for control of a business, only to see the property liquidated to end the battle?

There are good families and bad families; let us hope that your business is run by one of the good ones.

– David M. Cole

Inside ...

• With acquisitions raising prices, weeklies are suddenly hot
• Proxies show outside investors see benefits to family control
• Four newspapers explain circulations losses to transient problems
• ASNE/APME diversity project spotlights just how local news is
• Belo, Tribune and Times Co. deploy new Internet units
• Beyond banners: upping click-throughs
• Persons

From NEWSINC., June 7, 1999, Copyright © 1999, The Cole Group. All Rights Reserved.