- The Washington Times - Thursday, May 14, 2009

Correction: A story in May 14 editions of the Washington Times stated incorrectly that a Chicago Tribune editorial had berated the American International Group for paying huge bonuses to employees. In fact, the editorial said that the public has an economic stake in the survival of AIG, and that if bonuses were paid to employees who are key to the company’s future, they can be justified. The Times story also quoted an unnamed blogger as saying: “Using the employees’ pension money to pay stockholders and executive bonuses - priceless.” In fact, the Tribune is a private company and does not have stockholders. No pension money was used to pay bonuses.


Two months after editorializing about a troubled financial company that doled out hefty management bonuses, a bankrupt news media company is doing the same thing.

“Money for nothing?” blared a Chicago Tribune editorial in mid-March, responding to news that American International Group Inc. planned to give $450 million in bonuses to its top executives during a very public federal bailout.

But this week, the Tribune Co. - which owns the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, the Hartford Courant and other dailies, along with 23 TV stations - received permission from a Delaware bankruptcy judge to pay out $13.3 million in bonuses to some 700 local and corporate managers.

The payouts come as $2.7 million in severance pay to 68 employees who lost their jobs last year remains frozen.

Tribune Chief Financial Officer Chandler Bigelow III explained the rationale for the bonuses during an appearance in U.S. Bankruptcy Court on Tuesday, using an argument reminiscent of that used by AIG.

“We need to motivate and incentivize the key people who will implement change. These are really good people we’re talking about. They’re the best and the brightest in the company,” Mr. Bigelow told Judge Kevin Carey.

In March when it editorialized about AIG’s request to give bonuses to executives who oversaw a company that lost $40.5 billion last years , the Chicago Tribune summed up critics’ concerns this way: “Shouldn’t that kind of ‘performance’ require those employees to return some of their salaries, if not be fired altogether?” it wrote. The newspaper however urged that Americans take a rational look at the bonuses, being open to the possibility that some of the money might help retain good executives, while others should be returned from those who failed in their jobs.

(Corrected graph:) The Tribune Co. by comparison was $13 billion in debt because of leveraged buyouts and heavy operating costs.

Attempts Wednesday evening to reach the Tribune Co. for comment about the apparent conflict were unsuccessful.

At the same Tuesday hearing where he approved the Tribune bonuses, Judge Carey refused to approve the severance payments to the Tribune employees who were laid off before the Tribune filed for Chapter 11 protection in December.

While the judge said he “sympathized” with the plight of the unemployed journalists, he cited legal constraints. Two employees who had been laid off before the bankruptcy were granted approval for the payments, however.

To add to the complications, the Tribune Co. is also facing an Internal Revenue Service audit of $1.8 billion in income tax write-offs that the company claimed after it was bought in 2007 by real estate mogul Sam Zell. Under particular scrutiny is a $250 million purchase of Tribune shares by an employee stock-ownership plan.

The federal agency plans to “determine if the transaction was for the benefit of employees,” according to an IRS declaration.

The Tribune’s woes are but one troubling vignette on a large stage. Last year alone, almost 6,000 journalists lost their jobs, according to an industry count. The trend troubles top management.

According to a survey of 351 editors and publishers released Wednesday by the Associated Press Managing Editors, 71 percent of those executives said shrinking news staffs undercut their ability to inform the public. Still, 72 percent also said they are staying in the industry because they believe in “the mission of journalism.”

To cope with the hard times, 65 percent said they have laid off workers in the past year while 30 percent said they have lowered wages. Nearly 68 percent cited staffing shortages as the chief impediment to change; 57 percent said they didn’t have enough money to “innovate.”

• Jennifer Harper can be reached at jharper@washingtontimes.com.

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