New Challenge To Times Board: Dissidents With Large Stake

Last year, The New York Times Company fended off a major investor who complained of poor decision-making and was bent on shaking up the company. This year, management is facing another challenge from dissident investors with similar criticisms.

At a Times building ceremony, from left, Charles E. Schumer, Michael R. Bloomberg, the architect Renzo Piano, the developer Bruce C. Ratner, Michael Golden and Arthur Sulzberger Jr.

But this one may not be so easy to rebuff.

Since late December, two hedge funds working together, Harbinger Capital Partners and Firebrand Partners, have amassed just over 19 percent of the common shares, giving them much more leverage than the leading dissident investor last year, Morgan Stanley Investment Management, which had 7.2 percent.

Unlike Morgan Stanley, Harbinger and Firebrand do not say that they want to eliminate the two-tier share structure that allows Arthur Sulzberger Jr., the chairman and publisher, and his family to control the company.

But they do want to elect board members who are not hand-picked by, and beholden to, the current management, led by Mr. Sulzberger and Janet L. Robinson, the chief executive. (Mr. Sulzberger and Ms. Robinson declined to be interviewed for this article.)

The funds are challenging the company’s investment decisions, including its commitment to the struggling newspaper industry beyond the flagship New York Times. Like many analysts, they see The Boston Globe and a group of 15 local papers as a drain on the company, which should, they argue, be focused on extracting the greatest possible advantage from the Times brand.

The investors say they want the company to sell assets like those newspapers, a minority stake in the Boston Red Sox and the new corporate headquarters in Midtown Manhattan, using the proceeds to invest more aggressively in Internet companies.

Executives of the hedge funds would not state their criticism for publication, but a person close to them said: “I think it’s safe to say that the whole is less than the sum of its parts. It’s not clear how a newspaper, a baseball team and Midtown real estate add value to one another.”

The nominating committee of the Times Company board has agreed to meet with the hedge funds’ four nominees for directors to be elected by Class A shareholders, raising the possibility of a negotiated deal rather than a proxy fight. At last year’s meeting, dissidents did not nominate a slate of directors, but in a sign of displeasure with the company’s performance, investors withheld votes representing 42 percent of the Class A shares.

If Harbinger, which is part of the Harbert Management Corporation, and Firebrand persuade enough shareholders to vote with them, the Times Company could be faced with the uncomfortable prospect of having directors nominated by dissident shareholders on its board.

But the challenge provokes a larger question: What can the Times Company do to battle the industrywide downturn that has brought sharply reduced budgets, smaller newsrooms and the sale of newspapers across the country?

The company contends it has a strategy that is already paying off: deepen the news Web sites that already draw some of the heaviest traffic and advertising on the Internet, introduce glossy magazines that attract high-end advertisers, and shop judiciously for Internet acquisitions.

One by one, many of the old newspaper families — the Chandlers who controlled Times Mirror, the Ridders of Knight Ridder and, most recently, the Bancroft family of Dow Jones — have given up their companies, either through consolidation or outright sales. That leaves The Times as the largest paper in the country still controlled by a family that sees ownership as a public trust.

The industry endured one of the worst revenue declines on record in 2007, and 2008 is off to an even worse start. The Times Company recently reported that advertising revenue in January fell 9.8 percent from January 2007. The Times newspaper, a longtime holdout against downsizing, recently announced plans to reduce its news department of 1,332 people by 100 positions.

Cuts like that are hardly likely to persuade nervous investors who have watched the company’s share price slide to less than $18 from more than $50 in 2002. Harbinger’s long-term goals are unclear, and representatives of the funds declined to be interviewed.

People briefed on the funds’ plans say that they want to remain involved with the Times Company for several years at least, help change its direction and build up its value. One such person said, “A short-term investor doesn’t run for board seats.”

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