For a long time we have been hearing from business journalists about the wonders of "shareholder democracy," about "Soviet-style" corporate managers who want to crush it, and about how the SEC isn't doing enough to help the defenders of the little people. No newspaper has been more vocal on this than the NYT, led by its business columnist Gretchen Morgenson (see my archive on her columns). As I have often discussed, Gretchen has paid little attention to whether shareholder activists really represent the best interests of ordinary investors.
Gretchen has also been very vocal on another story – the one about the SEC whistleblower Gary Aguirre and his allegations about supposed insider trading by Morgan Stanley head John Mack. Another example of Gretchen defending the little guy against a powerful conspiracy by corporate managers and government.
And Gretchen has directed her screeds against mutual funds that care more about the pension fund management business that they get from corporate managers than about serving their customers.
Now it also happens that the NYT has nonvoting A shares, and B shares owned by the Ochs-Sulzberger family. The B shares, with a tiny fraction of the total investment in the company, control 9 of 13 board seats. Because Times stock is down 40% over the last 2 years, the American and Global Franchise Strategies Portfolio, run by Hassan Elmasry, which owns 7.6% of Times' A shares, is getting restive. Last December the SEC blocked Elmasry's attempt to get a shareholder vote on this dual class structure.
By the way, the hedge fund is run by Morgan Stanley.
And now we hear from Fortune (HT Dealbreaker) that "the Ochs-Sulzberger family recently put in a request to pull the majority of its assets from [Morgan Stanley]." The Times CEO, Janet Robinson, says "The Times company does not want to open its doors to the kind of turmoil that really rips apart an organization."
Apparently one person's "shareholder democracy" is another person's "turmoil."
Fortune also reports:
A source close to Mack said that he would have preferred that Elmasry had never gone after the paper of record. But this person emphasized that the Morgan Stanley CEO, who works on the opposite end of Times Square from Sulzberger, has never sought to interfere. Such meddling would conflict with Elmasry's obligation to his investors.
Gretchen, who has had no problem aggressively going after John Mack and corporate managers and mutual fund managers who are in bed with corporate managers and aligned against investors, hasn't had a whole lot to say about the Stalinist corporate structure in her own backyard.
I should add that I see no problem with the NYT having any corporate structure it wants. Its shareholders had fair notice of this structure when they invested. But I don't see such an attitude from Gretchen, who has touted a single, unrealistic, vision of what corporate governance should look like. This is about journalistic integrity and evenhandedness, not about corporate governance.
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