• by Erik Sass  @eriksass1, April 6, 2007

The New York Times Company is taking hits for its share structure, which analysts say gives undue power to the Ochs-Sulzberger family, while impeding reform and transparency at the media giant. In addition to the public dispute between Morgan Stanley analyst Hassan Elmasry and the company, which drove the Ochs-Sulzbergers to withdraw personal investments from Morgan Stanley management, it's now under attack from Institutional Shareholder Services, an important shareholder consultancy.

ISS is advising all NYTCO shareholders to withhold votes in the election of four directors at the annual shareholder meeting on April 24 as a protest against the company's share structure, which divides stock into unequal "A" and "B" shares. By holding the "B" shares, the Ochs-Sulzbergers retain the power to elect nine of 13 directors, with "A" shareholders electing the rest. In a note explaining its stance, ISS said withholding the votes might persuade the company to revise the voting structure, so all directors are elected by "A" shares.

In its note to shareholders, ISS wrote: "Shareholders are left with few avenues through which to voice their opinion other than by withholding from Class A directors." However, it added that it did not advocate the removal of any of the Class A directors. Members of the Ochs-Sulzberger family, however, were fair game. ISS pointedly observed that Michael Golden, NYTCO vice-chairman and a family cousin, "is among the most highly compensated executive officers of the company," yet isn't accountable to NYTCO shareholders.

Since 2005, Elmasry, based in London, has also been raising a ruckus over the dual-share structure on behalf of Morgan Stanley, which owns about 7% of the company's "A" shares. In the lead-up to the 2006 shareholder meeting, Elmasry urged the company to revise the system; when it refused, he withheld his votes and urged other shareholders to do the same.

Since then, the dispute has become even more heated, with Elmasry issuing repeated public calls for shareholders to withhold their votes at this year's meeting. He also suggested in a letter to the NYTCO board that the dual-class share structure was being abused "to entrench [Ochs-Sulzberger] family control and employment."

In another letter, Elmasry added: "Our motivating concern is that without independent action by the board and real evidence of sustained accountability, further strategic missteps, capital misallocation, franchise abuse and overly generous compensation are inevitable. We are also concerned that the sharp deterioration at The Boston Globe may well be a preview of what will eventually happen at The New York Times."

In early February of this year, the Ochs-Sulzbergers retaliated by withdrawing their personal assets from Morgan Stanley--a move involving hundreds of millions of dollars.