Monday, October 24th, 2011
18

Who Got Rich From Strangling Newspapers?

"Gannett is not the only big media enterprise where the consequences of bad decisions land on everyone except those who made them. The Tribune Company, a chain of newspapers and television stations run into the ground by Sam Zell after he bought it in 2007, is paying out tens of millions of dollars in bonuses as part of a deal in which it would exit bankruptcy. Over 4,000 people in the company lost their jobs, and the journalistic missions of formerly robust newspapers it operates — including The Los Angeles Times, The Chicago Tribune and The Baltimore Sun — have been curtailed. And even though Randy Michaels and some of his corporate fraternity brothers who operated the company into bankruptcy are gone, more than 600 managers who were there while the company cratered remain. Not only do they have jobs while so many others were sent packing, but the remaining leadership will be eligible for a bonus pool from $26.4 million to $32.4 million under the current plan."

This delicious David Carr column in the Times addresses the obvious: how can news organizations pay big executive compensation while trashing their payroll and their newspapers? Most of them plead the old "talent retention" line, which, sure: who the hell wants to retain talent like those jokers at Tribune and Gannett?

18 Comments / Post A Comment

jfruh (#713)

I think this is a good example of something to bring up if you gripe about "corporate greed" and then get poo-poo'd as a wild-eyed socialists. The problem isn't necessarily that corporations are trying to make money; the problem is that the people running the corporations are rigging the rules so that they get enormous "performance" bonuses while the companies they're supposed to be running go down the drain. They're looting their own institutions, and the people being screwed are the employees, the shareholders (a broad class, now that the burden of retirement has been shifted to 401Ks holding various mutual funds), and a society that relies on various private for-profit institutions (banks, newspapers) running smoothly.

Lockheed Ventura (#5,536)

@jfruh It's actually much worse than that. Sam Zell did not build the Chicago Tribune and reward himself for his hard work in building a successful business. Zell bought the Tribune with massive levels of debt that he imposed on the Tribune. He stripped the assets of the company and used the borrowed money to pay himself and his management team massive bonuses. Zell pockets the cash while the Company is saddled with an untenable debt burden and left with a newspaper that is a shadow of its former self. Suck out as much cash as possible and then declare bankruptcy.

zidaane (#373)

The Tribune did post a picture of a Randy Michaels drunk driving booking photo from last week in their local news mugshot gallery even though it happened in another state.

zidaane (#373)

@zidaane Currently image #45.

Ham Snadwich (#11,842)

@jfruh I've got mixed feelings about the switch from defined benefit pensions to the 401k. Defined benefit plans are great because it doesn't give workers the option of not participating, so everyone gets something when they retire. On the other hand, there's a chance that your company may go bankrupt and you get nothing (see Bethlehem Steel).

SeanP (#4,058)

@Ham_Snadwich Clearly (to me, anyway) the answer is that we need some of each. Some amount of defined benefit to provide some income floor for retired people, and some amount of defined contribution to protect against unexpected costs, etc.

Ham Snadwich (#11,842)

@SeanP Well, there's social security, but that's pretty much subsistence level (average benefit is about $1100/month), so it'd have to be supplemented with something else. Whether that's public or private, I don't know.

Lockheed Ventura (#5,536)

So who engaged in the most self serving and reckless destruction of a Chicago newspaper, Sam Zell or Conrad Black?

boyofdestiny (#1,243)

@Lockheed Ventura I think a bare-knuckle fight to the death between the two is the only logical way to figure this out.

s. (#775)

@Lockheed Ventura Say what you will about him, at least Conrad Black had the decency to go to jail.

Lockheed Ventura (#5,536)

@s. Plus, he has a more villainous, Harry Potterish name.

Flaneur (#998)

@Lockheed Ventura Yes, especially when you use his title: Lord Black of Crossharbour. Clearly a colleague of Voldemort and Belletrix Lestrange.

SeanP (#4,058)

@boyofdestiny maybe an asteroid could be convinced to fall on the venue during the fight to the death.

deepomega (#1,720)

This is why I think the best solution is shareholder rights laws – some way to mandate shareholders having a stake in the way management runs itself.

boyofdestiny (#1,243)

@deepomega Everything I know about shareholders rights I learned from the climactic scene of Mr. Deeds. Are you saying real life is not like this?

jfruh (#713)

@deepomega With the Tribune, though, the whole scam involved Zell and his buddies taking the formerly public corporation private. It may well have been that the (borrowed) money he paid was more than the shareholders could have made in the long run from the company remaining public, which sort of made them unwilling accomplices? It's actually sort of an interesting ethical/legal question as to whether whoever was doing the due diligence on the deal at the Tribune Company end had an obligation to say "Uh, this deal will ruin the company"; if they're representing shareholders interests, those interests are to take the money and run.

NFK (#8,747)

You know what the trouble is, Brucey? We used to make shit in this country, build shit. Now we just put our hand in the next guy's pocket.
— Frank Sobotka

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