- The Washington Times - Tuesday, April 24, 2007

NEW YORK (AP) - New York Times Co. Chairman Arthur Sulzberger Jr. acknowledged shareholder frustrations at the company’s annual meeting yesterday, where investors delivered another rebuke to the newspaper company’s financial performance by withholding 42 percent of their votes for four directors.

While the results are largely symbolic because the Sulzberger family controls the rest of the 13-member board, the large amount of shares withheld reflects growing impatience about the company’s lagging stock price and was even larger than last year’s 30 percent withhold vote. Directors need a plurality of votes cast to be elected.

Addressing shareholders from a somberly lit stage at a Broadway theater in Manhattan, Mr. Sulzberger said that he, his family, the Times’ board, managers and employees were all disappointed with the company’s stock price, which is down by about half from mid-2004.

Mr. Sulzberger pointed to the “tremendous dislocations and challenges that the digital world has created for us and for all in our industry, most obviously in financial performance.”

“Even as we see strong digital revenue growth, we continue to see declines in our print revenue,” he said.

Like other newspaper publishers, the Times has been struggling in its core newspaper business as many readers and advertisers migrate to the Internet. Mr. Sulzberger promised to keep costs under control and further build up the company’s print and online businesses.

The Times has been trying to capitalize on its strong presence online, where its Web site is one of the most visited, but last week the company said it expects 2007 online revenue to increase at a rate below its forecast of 30 percent because of a slowdown in online advertising growth.

In addition to NYTimes.com, the company has several other Web operations including the topic-based reference site About.com and Web sites associated with its other newspapers, including Boston.com, the online site connected with the Boston Globe.

B. Espen Eckbo, a professor of finance at the Tuck School of Business at Dartmouth College in Hanover, N.H., and the founding director of the Center for Corporate Governance there, called the magnitude of the withhold vote “absolutely serious” and said the board would have to consider very carefully the concerns raised by shareholders.

“If a family-controlled firm ignores the governance demands of the day, I believe the stock price will eventually suffer,” Mr. Eckbo said. “It is in the family’s interest to be on top of these things and make sure the board represents not just their interests but also those of the minority shareholders.”

With a “for” vote of 58 percent each, none of the four directors elected by the publicly held Class A shareholders was in danger of losing his or her seat because all directors on the board are elected by a plurality of votes cast. The Sulzberger family controls the Class B shares, which elect the other nine directors.

Directors are nominated by a three-person “nominating and governance” committee of the board, consisting of former Federal Communications Commission Chairman William Kennard, who is elected by Class A shareholders and chairs the committee, and two directors elected by Class B shareholders, Brenda Barnes and Ellen Marram. All are considered “independent” directors under New York Stock Exchange rules.

The remaining nine directors unanimously won election. Only holders of the Times’ Class B shares, which are controlled by the Ochs-Sulzberger family, vote for those directors.

In the run-up to the vote, two shareholder advisory firms had recommended that investors withhold their votes for the publicly elected directors as a gesture to push for corporate governance changes, including the separation of the roles of chairman of the company and publisher of the Times. Both roles are currently held by Mr. Sulzberger.

One investor in particular has been vocal in his frustration: Morgan Stanley Investment Management fund manager Hassan Elmasry. He says the company’s two-class share structure fosters a lack of accountability to shareholders.

That structure, which has been in place since the Times went public in 1969, can only be changed by a vote of the Sulzberger’s family trustees, and Mr. Sulzberger repeated yesterday that the family has no intention of doing so.

Mr. Elmasry’s fund, which owns 7 percent of the company’s Class A shares, said in a statement after the meeting that the withhold vote represents “a clear mandate for meaningful change” at the Times and “an emphatic call for accountability.”

The Times’ shares have been declining steadily since mid-2004, when they traded in the mid-$40s per share. In trading yesterday on the New York Stock Exchange, the shares fell 8 cents to $23.90.

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