Media Maneuvers: Mommy dearest

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Published November 10, 2006 at 1:43 PM

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It's a fact of modern media life. At some point, a newspaper — or magazine, or Web site, or broadcast, or blog, or whatever — is going to have to cover its corporate parent, and not necessarily for a happy reason. And while it can be a tricky job for any outlet to write about its owner — we should know, The Deal being part of Bruce Wasserstein's growing B2B media empire — it seems to be particularly torturous for the folks over at The New York Times. The paper's Nov. 4 piece on Morgan Stanley's continuing campaign against the New York Times Co.'s dual-class share structure is a case in point.

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To recap, Morgan Stanley Investment Management has been attacking the Times Co. since April for essentially allowing a small percentage of its shareholders — i.e., the controlling Ochs-Sulzberger family — to call the shots. Fed up with the Times Co.'s lackluster stock performance, the Morgan Stanley unit and other large investors withheld their votes for directors at the annual meeting. That development put the Times' rabidly pro-shareholder business pages in an awkward spot. They had spent years arguing that shareholders should always be king (paging Gretchen Morgenson!), but now they had to cover their parent's entrenched, if pro-reporter, point of view. After all, the dual-class structure is designed to ensure editorial independence and shelter journalists from market pressures. So who should be king now?

Despite all that, the Times' first piece on the shareholder revolt in April was straightforward enough, though it did manage to misspell the name Sulzberger (it went with Sulzburger). Oops. But the situation became more tangled in recent weeks as the Times turned its gimlet eye on Morgan Stanley CEO John Mack, fingering him for possibly passing insider trading tips to hedge fund Pequot Capital Management Inc. Though the Securities and Exchange Commission has cleared Mack, the Times has not, though it also hasn't produced evidence against him either. The tenor and volume of the coverage was extreme enough to prompt an editorial in The New York Sun speculating that the Times' anti-Mack jihad was a response to Morgan Stanley's shareholder revolt against the Times Co.

That seemed far-fetched, but as we noted last week, the Sun's complaint that the Times should have disclosed its shareholder feud with Morgan Stanley in its Mack coverage did have merit. We added, however, that at least none of the Mack stories carried the byline of Landon Thomas Jr., who frequently reports on Morgan Stanley. He worked for and was fired from the firm in the 1990s — a tie the Times has never disclosed.

So it was a shock to see Thomas' byline on the paper's Nov. 4 piece on a development in Morgan Stanley's campaign against the Times Co. (The "Sulz burger" story was by Katharine Q. Seelye, who covers newspapers.) The story said that Morgan Stanley Investment Management had sent a report to the Times' board "sharply critical of its governance practices." Examine it closely, and weird Timesean backstories begin to emerge.

For starters, we learn that Morgan Stanley's report was "prepared by Davis Global Advisors, a consulting firm run by Stephen Davis, who writes a column for the Financial Times." True enough. But describing Davis as a guy who writes for the FT is like saying Jack Welch is someone who writes for BusinessWeek. Davis is a bona fide corporate governance guru, just the kind of personage the Times likes to wheel out in its pro-shareholder rants. Last month, no less a governance diva than Gretchen Morgenson quoted Davis twice, identifying him as the editor of Global Proxy Watch, a weekly publication on corporate governance issues.

Could Thomas' ID'ing of Davis as a columnist for the FT be a subtle way of suggesting that since he writes for a rival, his report about the Times' board might be biased? Hmm.

Then we move on to learn that the Times' board, after receiving Morgan's missive, "asked Wachtell Lipton Rosen & Katz, headed by Martin Lipton, the well-known corporate lawyer and adviser to boards, to assess the Times' governance practices." Excuse us? Is this the same Martin Lipton whom Thomas took aim at last year in a rather over-the-top business section front-pager that accused the lawyer of wearing "too many hats" for clients and of giving lousy legal advice? Yes, indeedy. But lest we think that Lipton might be wearing too many hats for the Times, Thomas assures us that, according to a Times spokeswoman, "Mr. Lipton was hired to evaluate the board's governance standards and is not advising the board on how it should respond" to Morgan Stanley. That's a relief. This nonconflicted Lipton, by the way, found the Times Co. "to be employing state of the art corporate governance procedures." Who would expect otherwise?

The Times on Nov. 7 ran a correction to the story, which "misstated the involvement of the fund company's parent" in the shareholder campaign. "Morgan Stanley has not been involved at the corporate level," the correction explained. The story also got wrong the intricacies of the family trust that controls the Times Co., incorrectly reporting that publisher Arthur Sulzberger would have to decide to repeal the dual-class structure. Oops again. Both booboos were attributed to an "editing error," making us marvel that a sensitive story about the paper's parent wasn't vetted a bit more carefully.

By the way, Morgan Stanley on Nov. 8 formally proposed a change to the Times' governance practices. The paper covered this development with copy from the Associated Press.—Yvette Kantrow