Sulzberger family capitulates on NYT outside directors

The New York Times today carries the news that,

"The New York Times Company has struck a deal with a pair of hedge funds that want to shake up the company, giving the funds two seats on the board in order to avoid a proxy fight, the two sides announced Monday."

This represents the first time the Sulzberger family has compromised with ordinary shareholders (Class A stock) who own roughly 90% of the equity, but who can only elect a minority of shareholders. The terms of the agreement not only allow the hedge funds two seats on the board, they expand the board and slightly lower the percentage of directors elected by the Class B shareholders, a Sulzberger family trust.

Under the new arrangements one outside director will be added, raising that total from 4 to 5, while one inside (elected by the family trust) director will also be added, raising that total from 9 to 10. The outside directors go from 30.8% (4 out of 13) of the board to 33.3% (5 out of 15) of the board.

The two new outside directors, Scott Galloway and James Kohlberg, will now gain access to internal data. They may, in theory, determine that management is doing a good job. Or they may add significant insight which will influence the Sulzberger's directors to change company policy and strategy. The third possibility is that they will find themselves opposed to the policies of the majority of the board, and will seek to change the board's opinion by lobbying members of the family, or by going public.

It is far too soon to know what will happen, But since the Times still has a valuable brand franchise and has not done a very good job exploiting new technologies, I would think alternatives two and three are more likely than one.

Hat tip: Lucianne Goldberg
The New York Times today carries the news that,

"The New York Times Company has struck a deal with a pair of hedge funds that want to shake up the company, giving the funds two seats on the board in order to avoid a proxy fight, the two sides announced Monday."

This represents the first time the Sulzberger family has compromised with ordinary shareholders (Class A stock) who own roughly 90% of the equity, but who can only elect a minority of shareholders. The terms of the agreement not only allow the hedge funds two seats on the board, they expand the board and slightly lower the percentage of directors elected by the Class B shareholders, a Sulzberger family trust.

Under the new arrangements one outside director will be added, raising that total from 4 to 5, while one inside (elected by the family trust) director will also be added, raising that total from 9 to 10. The outside directors go from 30.8% (4 out of 13) of the board to 33.3% (5 out of 15) of the board.

The two new outside directors, Scott Galloway and James Kohlberg, will now gain access to internal data. They may, in theory, determine that management is doing a good job. Or they may add significant insight which will influence the Sulzberger's directors to change company policy and strategy. The third possibility is that they will find themselves opposed to the policies of the majority of the board, and will seek to change the board's opinion by lobbying members of the family, or by going public.

It is far too soon to know what will happen, But since the Times still has a valuable brand franchise and has not done a very good job exploiting new technologies, I would think alternatives two and three are more likely than one.

Hat tip: Lucianne Goldberg