Longtime Hartford Courant reporter Thomas D. Williams (pictured) sent a broadside against his former employer to the Securities and Exchange Commission, joining the chorus of outrage over the pending sale of the Tribune Company (parent of both the Courant and the New Haven Advocate.) Following is the text of Williams’ letter.
Dear Sirs and Madams,
I worked as a staff reporter for The Hartford Courant for 39 1/2 years and am retired since November 2005. My starting salary was $100 a week and my ending salary in excess of $70,000 a year. I worked for every penny. The Courant is owned by The Tribune Corp. of Chicago, Ill. I own stock in the Tribune due to inducements created by its management. They gave a 15 percent discount on stock purchases by employees. As a result, the Tribune induced a large slice of its employees in its chain of newspapers, and I am sure, its television stations as well, to buy millions in Tribune stock.
I am very concerned about the ongoing sale of The Tribune to billionaire investor Sam Zell.
Why?
Here is what Julie Johnsson, Chicago Tribune staff reporter, reported April 3, 2007 in the
Tribune:
When Tribune Co. goes private at the end of the year, its five highest-ranking executives stand to reap more than $50 million from their equity holdings alone, filings show.
Presuming the deal with billionaire investor Sam Zell concludes as scheduled, the biggest share of the payday would go to Dennis FitzSimons, Tribune’s chairman, president and chief executive, according to Securities and Exchange Commission filings. FitzSimons, who has worked for Tribune since 1984, controls about 673,000 shares of common stock, which would be worth $22.9 million at the $34-per-share price offered by billionaire Sam Zell.
Like FitzSimons, many Tribune executives have significant stock holdings, the result of long stints at a media giant that granted large numbers of stock options to its top brass for much of the past decade. Scott Smith, president of Tribune Publishing Co., holds stock and options worth at least $10.2 million; Donald Grenesko, senior vice president for finance and administration, controls equity worth $10.8 million, filings show.
Tribune executives will be eligible to cash in their equity, including unvested restricted
stock and options, under a compensation plan established by Tribune that is triggered by a “change in control.”
And this is what the New York Times reported April 3, 2007:
The employees, who will get company shares but who will no longer get 401(k) contributions from Tribune, will have far less control.
In a filing yesterday with the Securities and Exchange Commission, the company also disclosed that top managers of Tribune, which owns leading newspapers like The Los Angeles Times and The Chicago Tribune, would be given “phantom stock” in the new company.
The top managers will be allowed to cash in that stock before ordinary employees will be able to withdraw money from the employee stock ownership plan, or ESOP, that is to control the company.
According to the Times’ reports the employees will not be able to sell their stock in the
company for ten years. And, the executives are reported ready to make $6.8 million for their work in selling the company.
Here is that information from the very same Times’ story:
The company said managers and other “key employees” would be allocated an 8 percent stake in the company, via phantom stock, leaving the ESOP with an effective 52 percent ownership. The managers will also receive $6.8 million in bonuses when the deal is completed, which the company hopes will be this year.
Employees will be allocated shares from the ESOP each year, the filing said, in proportion to their annual pay. But in most cases they will not be able to cash in any of their stake for at least a decade, and then only if they are retired or are over 55 and have worked for Tribune for at least 10 years.
At that point, they will be able to “diversify” part of their investment.
I say this unfair allocation of stock and this unfair agreement is multiplied by what the Tribune executives did after they purchased The Courant. It was then that they induced our employees as well as others in the chain to purchase Tribune stock at the 15 percent discounted rate.
Later, in February 2001, BLOOMBERG NEWS reported: Tribune Co. Chairman John Madigan last month sold company shares for the first time in more than 25 years at the Chicago publisher, joining other news executives who took advantage of a rally in newspaper stocks, regulatory filings show.
The chairmen at Gannett Co., E.W. Scripps Co., New York Times Co. and Knight Ridder Inc. were among executives who together made millions of dollars selling stock since early December, according to filings at the Securities and Exchange Commission. The sales were made as the Standard & Poor’s Newspaper Publishing Index has risen more than 22 percent from an 18-month low on Oct. 17.
Prior to those sales, the Tribune published an editorial saying how incredibly unfair it is
for corporate executives to take advantage of stock options by selling them with much better knowledge of the companies’ conditions than anyone else (presumably that includes employees). A column on that very hypocrisy was written by Paul Bass, then of the New Haven Advocate now of the New Haven Independent. The Advocate was then a part of the Tribune’s chain.
Here is an item explaining Mr. Bass’ change in jobs.
OCTOBER 28, 2005
Former New Haven Advocate Writer on the Tribune Co.
In a profile in the Jewish Ledger, Paul Bass explains why he left the Advocate Weekly chain after 15 years: “I was fed up with corporate journalism. I really liked the people at the Advocate but the Advocate got bought out by one of the largest corporate chains in America … Their whole commitment was not just to the bottom line, which was fine, but to an unrealistic profit margin that meant continuous pressure for budget cuts, which in turn meant abandoning any commitment to quality journalism. More importantly, the corporate atmosphere drained the creativity. I went crazy with all the forms of bureaucracy and group think.”
The Advocate Weekly chain was acquired by the Tribune Co. in 1999. Bass now runs the Web site newhavenindependent.org.
So what we have here is this: Tribune executives will be PAID $6.8 million for their work on this sale to Mr. Zell. But, it was their management which set off the chain of events that ended up in this sale. In part, that management is responsible for events that caused the stock price of the Tribune to plummet. In the meantime, its employees nationwide lost their shirts on this stock that the management originally induced them to buy.
Not only is it unseemly of these executives to now receive $6.8 million for their so called work on this sale; it is a conflict of interest since they made decisions to put millions of dollars from company stock into their own pockets, while stockholders were losing millions of dollars as the stock dropped. It was these same executives who made the financial decisions in part resulting in the need to sell the company as its value continued to drop. Yet they are potentially making millions out of the sale and then being paid an additional $6.8 million for arranging it?! Through this very deal, according to news reports, they can end up selling their stock when they want to and are forcing Tribune stock on employees instead of the 401k contributions and saying the employees cannot sell for at least ten years? What is this? These executives are living in a different world in which they not only are not accountable for their management, but they get rewarded when the management creates a company that is failing to measure up due in part to their management styles.
There are at least two monumental questions here: How can these executives, responsible
for this giant corporation and the well being of its employees and stockholders, create two classes of people: themselves who gain millions in income even when the company they manage is failing to measure up; and employees/stockholders who are lured into stock transactions that continue to threaten their financial well being? And how can corporate executives pay themselves millions for the sale of their own company when that sale requires discretion on who to sell the company to and was forced by their own operations of the company?
I believe the SEC should investigate this situation thoroughly to see whether the sale conditions are appropriate, legal and equitable under federal law. If the SEC feels this is a matter for another federal agency with jurisdiction over questions about the handling of stock and other financial matters, then the SEC should turn it over to the proper federal authorities.
Sincerely,
Thomas D. Williams
Litchfield, Ct.