ISS Advises NYT Co. Shareholders to Withhold Votes

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By: E&P Staff

A major shareholder advisory firm, Institutional Shareholder Services, is urging investors to withhold their votes for four directors at The New York Times Co. as a way to push for corporate governance changes.

The ISS report published Wednesday comes amid a campaign from a longtime shareholder, a Morgan Stanley investment fund, to roll back the dual-class share structure which allows the Sulzberger family to maintain control.

ISS recommends separating the chairman and publisher roles, which are both currently held by Arthur Sulzberger Jr., as well as establishing key committees on the board that would be made up solely of directors elected by holders of the company’s publicly traded Class A shares.

The Class B shares, which are controlled by the Sulzberger family, have the right to elect nine of the company’s 13 directors.

“Shareholders are left with few avenues through which to voice their opinion other than by withholding from Class A directors,” ISS said in its report. “While we do not advocate removal of the Class A directors, we believe that a strong message to effect change is necessary.”

The Times said in a statement it was “disappointed” that the ISS had recommended a withhold vote for the four directors elected by Class A shareholders, but said the ISS’s decision not to call for their removal was “recognition of the high quality of our board members.”

The Times’ annual meeting is scheduled for April 24.

Last year the Morgan Stanley fund and two other large shareholders withheld their vote for Class A directors, resulting in a 30 percent withhold rate. The votes are largely symbolic and are intended to signal shareholder dissatisfaction.

The Times declined to included a shareholder proposal from the Morgan Stanley fund that would have called for putting the company’s dual-class share structure to a vote. That structure can only be changed by the Sulzberger family, and they have said they don’t intend to do so.

The Times says that its two-class share structure is needed to protect the editorial integrity of the newspaper. However ISS said in its report that the company hasn’t proved that’s the case and whether it translates into value for shareholders.

ISS also said that neither Sulzberger nor other managers are accountable to the company’s public shareholders “in any meaningful way.”

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