Group Urges Investors Not To Back Times Co. Board

An independent corporate advisory group is urging shareholders of The New York Times Company to withhold their support for board members to pressure the company over dissatisfaction with its performance and ownership structure.

The recommendation, from Institutional Shareholder Services, raised the possibility that the Times Company could face another rebuke from shareholders at its annual meeting on April 24. At last year’s meeting, investors including Morgan Stanley Investment Management withheld roughly 30 percent of the votes for company directors.

At issue is the dual structure of stock ownership, which gives members of the Ochs-Sulzberger family control of the company. The family, whose patriarch, Adolph S. Ochs, acquired The Times in 1896, holds 89 percent of Class B stock. Class B shareholders elect nine members of the board, while holders of Class A shares — the stock owned by the public and institutional investors like Morgan Stanley — elect the remaining four.

For that reason, withholding votes for directors would be a largely symbolic gesture. However, if the disgruntled shareholders withhold more than last year’s roughly 30 percent, it would be seen as a further admonishment of the company’s management.

The report also criticized the company for combining the roles of chairman and publisher.

“Shareholders are left with few avenues through which to voice their opinion other than by withholding from Class A directors,” the shareholder services report said. “We believe that a strong message to effect change is necessary.”

In a written statement, Catherine J. Mathis, the spokeswoman for the Times Company, said the company was disappointed in the recommendation and noted that the shareholder service report did not advocate removing the four directors elected by Class A shareholders.

Ms. Mathis added that the board members were “valuable contributors to our efforts to improve performance as we manage through a historic transformation in the media business.”

A change to the dual-class structure could occur only with the approval of the Ochs-Sulzberger family trust, which controls the Times Company and which has made clear that it has no plans to change the structure.

Media companies have resisted giving up dual-class structures because of the insulation they provide against outside pressure. Selling a company with a dual-class structure can be much more difficult because both classes of shareholders must approve a sale.

The Tribune Company, which agreed to sell itself this week to the Chicago real estate investor Samuel Zell, has only one class of stock.

But some investors and critics, most prominently Hassan Elmasry, a Morgan Stanley managing director, have said that the dual-class structure makes Times Company directors unaccountable to shareholders. The shareholder services report outlined Mr. Elmasry’s concerns, including “strategic drift” and “poor allocation of capital.”

A spokesman for Morgan Stanley Investment Management declined to comment on the report or to say whether the firm intended to withhold its support for the directors again this year, although it is widely expected to do so. Mr. Elmasry wrote Class A directors in January, raising the possibility that Morgan Stanley could again hold back its votes.

The price of Times Company stock has been essentially flat since last year’s annual meeting. The shares closed down 12 cents yesterday at $23.43.

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