Barbarians Inside the Gates?

The New York Times faces a situation where the barbarians are already inside gates of the business and are looking to demand change to the way business is done at the flagging paper. The Times share price has plummeted (the five year chart shows the wreckage) and there's no sign of a correction anytime soon. Editorial decisions have been horrid, and the business decisions have been just as bad, leaving a sour taste in the mouths of investors, who are demanding changes.

Unlike Morgan Stanley, Harbinger and Firebrand do not say that they want to eliminate the two-tier share structure that allows Arthur Sulzberger Jr., the chairman and publisher, and his family to control the company.

But they do want to elect board members who are not hand-picked by, and beholden to, the current management, led by Mr. Sulzberger and Janet L. Robinson, the chief executive. (Mr. Sulzberger and Ms. Robinson declined to be interviewed for this article.)

The funds are challenging the company’s investment decisions, including its commitment to the struggling newspaper industry beyond the flagship New York Times. Like many analysts, they see The Boston Globe and a group of 15 local papers as a drain on the company, which should, they argue, be focused on extracting the greatest possible advantage from the Times brand.

The investors say they want the company to sell assets like those newspapers, a minority stake in the Boston Red Sox and the new corporate headquarters in Midtown Manhattan, using the proceeds to invest more aggressively in Internet companies.

Executives of the hedge funds would not state their criticism for publication, but a person close to them said: “I think it’s safe to say that the whole is less than the sum of its parts. It’s not clear how a newspaper, a baseball team and Midtown real estate add value to one another.”

The nominating committee of the Times Company board has agreed to meet with the hedge funds’ four nominees for directors to be elected by Class A shareholders, raising the possibility of a negotiated deal rather than a proxy fight. At last year’s meeting, dissidents did not nominate a slate of directors, but in a sign of displeasure with the company’s performance, investors withheld votes representing 42 percent of the Class A shares.

If Harbinger, which is part of the Harbert Management Corporation, and Firebrand persuade enough shareholders to vote with them, the Times Company could be faced with the uncomfortable prospect of having directors nominated by dissident shareholders on its board.

The Times Business Section reports on the ongoing problems, but the Times reporter, Richard Perez-Pena couldn't get Mr. Sulzberger and Ms. Robinson to be interviewed for the article. How sad is that that the business reporter for the Times couldn't get the owner/publisher and the CEO to go on the record?

This is the second major effort by dissident shareholders to force change on business practices at the paper. Someone is going to have to talk sense into Pinch Sulzberger to turn things around, or else the shareholders are going to go elsewhere.