I'm of two minds regarding the controversy surrounding New York Times' (NYSE: NYT ) dual-class share structure, and the Ochs-Sulzberger family's virtual lock on the company's operations and direction.
That controversy reached a crescendo Tuesday, when the company held its 2007 annual meeting. Shareholders -- seizing perhaps their only tool to express their dissatisfaction -- withheld as much as 42% of their votes for Times' slate of directors, up from the 30% of votes that were withheld a year ago.
The shareholders' primary grievance is that Times' Class B shareholders (mostly Ochs-Sulzberger clan members) have far greater voting power than holders of freely traded Class shares. In just one example of the resulting disparity, Class B shareholders control nine of the company's 13 board seats. Leading the charge against the structure, as an increasing thorn in management's side, is Morgan Stanley's (NYSE: MS ) London-based portfolio manager Hassan Elmasry, whose fund owns about 7% of Times' outstanding shares -- Class A, of course.
In addressing attendees at Tuesday's meeting, Times Chairman Arthur Sulzberger Jr. noted that the dual-class structure has previously produced strong stock prices. He also pointed out that more than 300 companies, including other major journalistic enterprises such as Dow Jones (NYSE: DJ ) and Washington Post (NYSE: WPO ) operate under dual-class structures.
I have extreme difficulty justifying two classes of shares, at least in theory, but I also recognize that Times is a newspaper company when all is said and done. I begin each day by reading at least part of one of the company's regional products.
However, to shareholders miffed about the company's sliding share price or its steady stream of job cuts, I will repeat more loudly: "This is a newspaper publisher." With more people retreating from daily newspaper readership like proverbial rats from a sinking ship, buying shares of Times -- or Tribune (NYSE: TRB ) , or Gannett (NYSE: GCI ) , or McClatchy (NYSE: MNI ) -- only to be dismayed by the company's poor earnings trends seems a lot like investing in a buggy whip manufacturer, then awaiting increasing corporate sales and higher share prices.
Here's hoping that Foolish investors are not inclined toward such silliness.
For related Foolishness:
Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments.