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Related to the "public trust" argument is one that is sometimes made about long-term management, and might be related to a time-inconsistency issue with regard to the consumer; in the short-term, the consumer may prefer something that directly panders to him, but in the long-term he will lose interest in a paper that does that, or, perhaps, in a paper that has acquired a reputation for doing that. It could well be that a paper that would maximize newsstand sales this month would cause long-term damage to the brand -- a brand based as much as anything on the perception the average consumer wants to maintain of himself -- and that this is what close ownership protects.

Another point I see missing from most conversation about this is what the alternative is likely to be. It always seems to be assumed that, if this ownership structure had not been an option, the families would have simply sold shares to the public with full voting rights. If I think instead in terms of a closely held company deciding whether or not to raise capital by selling a claim on the earnings -- if not, then it will be borrowed or the relevant investments simply won't be made -- it's hard for me to see why they should be prevented from doing this on whatever terms are amenable both to the original private owners and to the investors.


Brings light to the term "insider trading".

Richard Mason

It may be worth noting that Rupert Murdoch has himself experimented with different voting classes of shares. From late 1998 to early 2005, shares of Fox Entertainment Group (FOX) traded on the NYSE, but the Class A shares had only (1/100) of the voting power of Class B shares, which were held by News Corp. News Corp (NWS) retained 82.76% of the equity interest and 97.8% of the voting interest. Murdoch is also interested in seeing his children manage his media empire. So if the Bancrofts did sell the WSJ, one hereditary dynasty would merely be exchanged for another.

[Murdoch eventually bought back the FOX shares on terms which meant that they performed similarly to NWS shares from the November 1998 IPO. I don't know why he did this or why he would not demand a discount when buying back these voting-impaired shares.]


It is the amorphous conept of a so-called "public trust" that undergirds this phenomeneon. Such a vague concept justifies diluted corporate control by family members on the premise that they know what is in the "public interest" and will act to serve same. However, the "public interest" ends up being merely a pretext for their value judgements. This is one of the reasons which has led to the growth of the Internet as a replacement, coupled with a diminuition in the importance of newspapers and other "old media" organs.

Lawrence Indyk, University of Kansas School of Law

It's not necessarily true that family-controlled newspapers must sell their stock at a discount to compensate for a lack of shareholder input. This is especially true if the shareholders themselves derive more utility from the fact that the newspaper maintains a certain "purity" of quality or political bent (at a cost of optimal profitability). This purity is something that would almost certainly not be maintainable in a wide-open public exchange of all voting shares and absent tight individual or family control.

In other words, the price of the stock would only need be discounted if the additional earnings per share of a policy of profit-maximization are greater than the utility-per-share derived from existing shareholders antagonistic to the likely effects of public control. Since this is not necessarily true, neither is the discount - indeed, wouldn't you expect such a die-hard nonvoting shareholder to out-bid a takeover entity if it would mean a dramatic degradation in their favorite paper?

Furthermore, the shareholders of such an enterprise are likely to be self-selective, since they are among a minority of investors likely to be satisfied with both a less-than-maximum return on investment and the newspaper's current leadership and direction. They form a club of like-minded people. These investors become more like college alumni - donating their forsaken dividends for the sake of their favorite news institution.

Also like alumni - these shareholders are probably not really as concerned with forsaken profits as they are with quality and direction - that is, they only really raise a fuss when they believe the values they opted to support (like the success of the basketball team) are being compromised. In the case of a newspaper - one of those values could be the public opinion making (propaganda) potential of the institution, so when readership goes down - so does that potential.

Patrick R. Sullivan

IIRC, the idea of different classes of stock was cooked up by Henry Ford's estate planners to keep control of the company in the family after he died. That is, it was a response to the estate tax of that day.

Richard Rogers

The main reason for this structure relates to the difference between being an "publisher" (or "owner")and a shareholder. There are many benefits to being the publisher beyond the monetary rewards: social status and notoriety, important jobs for family and friends (what will Bob Jr. do if he doesn't work for the paper?); extraordinary fringe benefits (who controls those sideline tickets?), and extraordinary opportunities (let's make Joe a director of the Bank). Being a publisher is central to the family's identity. These benefits are more significant than money because the owners are already rich and they've always been rich. So the owners structure things so they have their cake and eat it too! [The rich are different.]


NEWS FLASH! - Rupert Murdoch makes unsolicited bid for "Wall Street Urinal"! To quote the man, "News-communicating, news and ideas, I guess-is my passion. Giving people alternatives so that they have two papers to read (and) alternative television channels ..." If the paper does sell out to Murdoch - big deal! It will just be trading one family trust for another family trust.

The modern reality is that, these guys buy and sell newspapers and media conglomerates like you and I buy t-shirts and jeans. Not bad for a "somewhat poor" former Australian born Oxford scholar. Or is that American or Turkish? Just remember, "There is no such thing as a non-partisan press". Or is this the beginning of the end of multiple editorial view points as espoused by a multiple publications "free press"?


The reason newspapers serve the public trust is not just that they educate citizens through serendipity -- though this is important, and Posner is right to note that the advent of the Internet destroys serendipity.

Family-owned newspapers also serve the public because of their willingness to invest resources in deep, investigative reporting. Because seasoned reporters assigned to such pieces do not produce articles for months, such reporting is extremely expensive. Only newspaper owners not concerned with the short-term will invest in this sort of reporting.

In fact, some of the best investigations in recent years have been conducted by a non-profit organization: the Center for Public Integrity. The founder, former CBS reporter Charles Lewis, has written that he believes investigative journalism cannot survive in for-profit companies.

Family ownership can be seen as an intermediate step between pure shareholder control (like the Tribune company, whose newspapers are much thinner now and have suffered greatly as a result of job cuts -- see the Los Angeles Times, which won five Pulitzers in 2004 and has won none since) and a non-profit like the Center for Public Integrity.


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