Is This The Unacceptable Face of Newspaper Capitalism -- Dow Jones Continues Implementing Costs Savings, Recently Dropping 97 Jobs, And Yet It Hands Out Huge Bonuses To Its Senior Managers?

We all know the arguments to support the bonuses. The company wants to attract and keep the best talent possible, (so how come some of that bonus went to an executive who had left the company?), and therefore a company needs to keep its compensation competitive.

But there just seems to be something very wrong when a company, still in a cost-saving mode and not showing itself shy of still getting rid of bodies, rewards executives for taking actions that bring so much misery to others. If costs have to be cut and that means bodies going, such is business and, sure, shareholder value is increased – but in that environment is it really right socially to reward extra those people for doing that – something doesn’t quite click.

No doubt there are written contracts that provide for the awards if certain criteria are met but the question still remains – in the type of environment that Dow Jones continues to be in – are those bonuses the right thing for the esprit de corps of the entire organization? Seriously doubt the staff is down at the local watering hole drinking to the CEO’s health and toasting, “Good for you, Richard!”

ftm background

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Americans Like To Talk About the “Big Mo” – Momentum – Although Seldom Heard In The Same Breath As “Print Media,” But It Looks Like The New Dow Jones Management Is On The Right Track
You can almost feel the earth move. The print and the online operations at Dow Jones are merging. That’s not just the editorial operations but perhaps even more important the sales operations. The emphasis now is ensuring that all channels of information distribution are utilized to their utmost – editorially and also in making sure none of those elusive advertising dollars are left on the table.

The New York Times, The Wall Street Journal, and the Financial Times Prove That If You Have a Niche News Product It Can Be Sold for Good Profit On the Internet
When the New York Times announced last year it would start charging non-subscribers to the print edition to read its best columnists online most people thought the plan would fall flat on its face. Well, it hasn’t!

Dow Jones Dumps Its Wall Street Journal Publisher and Kicks Her Husband, the Company’s CEO, Upstairs Temporarily to Chairman, Wall Street Rejoices With A One-Day 10% Share Price Increase And With Knight-Ridder For Sale, Traders May Finally Be Seeing Some Results They Like From US Newspapers
Tony Ridder didn’t have much choice. His three largest shareholders said they wanted to see Knight-Ridder sold to achieve shareholder value and there wasn’t much he could do about it and the sales process is in full swing. But Dow Jones is another matter.

Online Revenues Shine While Print Revenues Fade as Two Large US Media Groups Prove Their Internet Investments Were the Right Thing to Do
The New York Times and Dow Jones both made large Internet investments this year, and already they are successfully impacting the bottom line, with online ad revenue increasing for each company in excess of 25%, according to the Q2 earnings reports. Print, on the other hand, showed a low single digit increase at the Times and a decline for Dow Jones.

The awards represent the capitalistic system under which we live and thrive, yet even that arch conservative British Prime Minister Ted Heath had a term for excesses in the system – “The Unacceptable Face of Capitalism”.

In Dow Jones case, the board of directors issued rights to some 22,800 shares to CEO Richard Zannino. They’re worth around $900,000 and the award can be taken in cash, instead. Is that kind of payment really necessary when the company is still trying to reduce the overall cost of running the business? Publisher Gordon Crovitz got rights worth close to $500,000, former publisher Karen Elliott House got some $460,000 – she left last February – and Managing Editor Paul Steiger got some $322,000.

What is a really fascinating read on all of this is how the three major news agencies – Reuters, AP and Bloomberg – wrote about this story. Agency reporters, unlike ftm, have to keep to the straight and narrow and report just the facts, rather than be opinionated as ftm is, but we all know there are ways of writing straight news stories that leave little doubt in the reader’ minds what the writer believes.

Reuters gave the straight facts about the bonuses and then threw in two paragraphs of background. “Dow Jones said earlier this month it would cut dozens of jobs in its enterprise media group. It also said it would cut more costs with a redesign of the Journal, including the debut this month of narrower paper.

“The Journal also cut several jobs as part of its decision to shut down its Canadian operation, though Steiger has told Reuters the paper plans no more foreign bureau closings.”

Now what has all that to do with executives getting bonuses unless the writer was trying to make a point?

Bloomberg described the bonuses and then wrote, “The bonuses were awarded after cutbacks at Dow Jones, which eliminated jobs in 2006 as the Journal’s circulation declined. The company began this month by shrinking the size of the flagship newspaper to save an estimated $18 million in printing costs this year. Earlier this month, the company cut jobs in its news archive and financial wire service.”

The AP explained the bonuses and the formula used to work them out and then added, “Dow Jones has been cutting costs recently, moving to a narrower format for its flagship paper that is expected to save $18 million a year in newsprint and eliminating nearly 100 jobs as it restructures a unit focused on providing news to businesses.”

Of course there’s no law that those awarded the bonuses have to accept them or can’t put them to the general good of the staff as a whole. Think back to September last year when New York Times Company chairman Arthur Ochs Sulzberger, and his cousin and vice-chairman Michael Golden said they would forgo stock compensation they should receive in 2006 and 2007 and instead they were creating a bonus pool to reward employees for “exceptional performance” who otherwise would not have received bonuses.

First distribution of an approximate $2 million pool is due in February with a similar distribution in February 2008.

The Times has also been firing staff, it’s going to narrow its newsprint width – basically going through all of the cost-cutting motions that Dow Jones is going through. And while no one can cry for Sulzberger or Golden that they’re going be to hard up because they’re giving up the two million, the same could basically be said for Zannino and his cohorts if they put that bonus money to better staff use.

One could really say that while Dow Jones is showing that ugly unacceptable face of capitalism, at the New York Times they’re showing some concern and telling employees that they know times are tough and thanks for your understanding.

Former ITV CEO Got £4.2 Million Payoff - March 28, 2007

Charles Allen, the former CEO of the UK’s largest commercial broadcaster, ITV, received a £4.2 million payoff when he left the company last year, according to the broadcaster’s just published 2006 report.

Allen stepped down as ITV went through a huge loss of advertising revenue and historically low ratings for which he was blamed by spending too much time cutting costs and not spending enough money on programming. He was replaced by former BBC chairman Michael Grade.

Even For Dow Jones That $173,441 Driving CEO Rich Zannino To And From Work is a bit much! - March 19, 2007

According to SEC filings, Dow Jones provided a car and driver for CEO Rich Zannino to get to his Manhattan office from his home in Connecticut in 2006 at a cost of $173,441.

To the Independent Association of Publisher’s Employees (IAPE) that represents the journalists at Dow Jones and is fighting a tripling of health premiums, eliminating cost of living increases, and looking for more than a 2% salary increase that’s a bit much. And it seems even the Dow Jones Board thinks the same – it is now going to give Zannino $35,000 a year in lieu of the car and driver. That should buy a first class train ticket, if not his own private train carriage!

Other SEC filings show the big and mighty at media companies continue to do very well even though the share price of their company tumbles and cost cutting reigns supreme.

At The New York Times Company, for instance, quoting the New York Post, “Although the board acknowledged in filings that the media company lost $3.76 per share in 2006, directors revised its bottom-line bonus formula to exclude embarrassing write-downs, converting millions in losses into instant profits of $1.58 per share. As a result, the revisions triggered a payday clause to unleash 75% of the cash bonuses targeted for top executives and family members that otherwise would have been lost, filings said.”

Those changes meant that CEO Janet Robinson got an 11% pay rise including various stock awards to $4.4 million even though the company’s stock lost 12% of its value in 2006. Chairman Arthur Sulzberger failed to meet original targets, but the board (his family) allowed him to collect $3.4 million in bonus and stock awards by using more optimistic cash flows. Sulzberger, fine fellow that he is, turned all of that down and accepted instead just a $560,521 cash bonus and diverted another $2 million of bonuses for low ranking employees who don’t get bonuses.

The New York Times is under a lot of shareholder pressure for its dual share system in which the family dominates the Board. The newspaper says that under such a system freedom of the press is protected and profits are not necessarily the prime concern of the board. Of course, it also means the family can decide to move the goal posts at will to reward its family, eh management, and if the original targets don’t do it for some reason, well just change them at the end of the year to something that does work. That’s some bonus plan!

And at E.W.Scripps Co., chief executive Kenneth W. Lowe pulled in more than $8 million what with all the bonuses, targets, salary and the like. That paid for a performance in which the company’s shares fell 9% during the year. Its newspaper business did poorly while its cable TV business did well. Profits rose 42% which sounds like a good reason to pay out so much, but according to Wall Street analysts they were expecting a 52% increase on the strength of the cable operations, so they were not pleased with his performance.

The State of the Print Media in the World