Shareholder Interest vs. Public Interest

Loren Steffy of the Houston Chronicle had a thought-provoking column the other day on the two-tiered stock structure at the New York Times, saying that it is not good for investors. The column has been prompted a good deal of discussion, not always favorable, as Steffy notes in his blog.

What makes this whole issue fascinating is that it deals with something we in journalism don't like to talk about, which is that good journalism is not necessarily a good investment, and vice versa.

Yes, it seems the Times was trying to insulate its management from investors. Steffy points out that "If the Times, or any news organization, didn't want to answer to investors, then it shouldn't have sought the public's investment."

Well, he's got a point there. Public companies have an obligation to their shareholders to maximize their return on investment. But that has a nasty way of conflicting with their obligation to provide readers with the best possible newspaper.

To cite an example from my own dreary beginnings in this biz...... I started out in journalism at the Hartford Courant many zillions of years ago. My very first job was cranking out stories of local interest in the town of New London. These were stories that were of no interest to anyone but residents of that town. As I recall, we had exactly 650 daily readers in New London (population 30,000, give or take). At the time, two very good local papers were covering New London.

It was ridiculous. It was bad business. How did it happen? The Harford Courant was a privately held newspaper.

Today, the Courant is part of a publicly held chain, and such nonsense as a reporter cranking out stories on the New London sewer board -- well, it is out of the question! I understand that the entire southeastern Connecticut bureau, which had four reporters and many stringers when I was there, was eventually phased out of existence.

The Courant is a much tougher paper than it was before, much better edited, but labor-intense local news is given far fewer column inches.

So Loren is right. Two-tiered newspaper stocks are not good for investors. But they are, I think good for readers. The solution is for investors who don't like two-tiered stocks to not buy them.

© 2006 Gary Weiss. All rights reserved.

-----------

Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.