Months of uncertainty involving Tribune Co.’s sale have given way to a new set of concerns for its employees, who are now wrestling with unanswered questions about an unusual arrangement that will give them majority ownership and a good deal of the risk but no control.
Journalists working for Tribune’s newspapers expressed a mixture of wariness and relief Tuesday, a day after the announcement of an esoteric $8.2 billion deal that will make multibillionaire investor Sam Zell chairman and install an employee stock ownership plan.
Like many other Tribune employees, Tim Phelps, Washington bureau chief of Long Island, N.Y.-based Newsday, said he didn’t have enough information about the complex structure to know if the employee ownership model will be effective.
“I don’t know how this is going to work and how much clout the employees will have,” he said.
Even outside experts were still puzzling over Tribune’s ESOP, an arrangement rarely used in the newspaper industry. Corey Rosen, founder and executive director of the nonprofit National Center for Employee Ownership, said the “huge” number of questions about it make it difficult to say whether it’s good or bad for employees.
“If I were an employee, I think I’d be glad it was this situation rather than something else,” Rosen said, “but I prefer to see ESOPs in more stable situations. The newspaper business is a risky business with a lot of debt.”
The deal offers a cloudy mix of potential pros and cons for Tribune’s 20,000 employees.
It resolves the ownership issues that have been hanging over their heads, limits layoffs for the time being, comes with the assurance there are no plans to sell Tribune’s newspapers or TV stations, and brings more money if the company turns a profit.
On the other hand, they now will have an ESOP they didn’t ask for, no promise of a seat on the board of directors and no say on the changes to be made within a company that, like the industry as a whole, is in major transition as readers and advertisers migrate to the Web.
Yet another possible wrinkle surfaced Tuesday. Los Angeles billionaires Eli Broad and Ron Burkle, whose competing bid for Tribune was rejected, were meeting with their advisers and considering their options, according to a person familiar with the matter who was not authorized to speak publicly and requested anonymity. The person would not elaborate
Broad and Burkle, as well as any other bidders, have until shareholders vote on the Zell offer later this year to make a counter offer. The agreement with Zell includes a $25 million fee that would have to be paid to Zell if Tribune made another deal.
No large newspaper chain or metropolitan daily like the nine Tribune is hanging onto has an employee stock ownership plan, according to Rosen. Successful models exist at the Monroe (Mich.) Evening News and Dubuque (Iowa) Telegraph Herald, he said, but how an ESOP will be applied at a company with 20,000 employees at multiple newspapers, TV stations and other businesses is unclear.
“The ultimate question is going to be what kind of culture they establish at this company,” Rosen said. “Employee ownership companies perform better when it is combined with a culture of high involvement and open-book management. When it is not, they perform worse.”
Among companies whose ESOPs have bombed is another large, far-flung one: UAL Corp.’s United Airlines, whose employees saw their retirement savings depleted badly after the company went into bankruptcy in 2002.
“Employee ownership is a lovely term, but its consequences other places haven’t always been so uplifting,” said Chicago Tribune columnist Mary Schmich.
As to whether Tribune employees will have sufficient clout to influence key company decisions, she said, “My motto is ‘Warily hopeful,’ but on this question, I come down more on the side of wariness.”
Bill Salganik, president of the Washington-Baltimore Newspaper Guild and a reporter for the Tribune-owned Baltimore Sun, said employees there were taking a wait-and-see attitude toward the new arrangement but he didn’t sense much relief.
“We’re not sure how the ESOP model is going to work,” he said. “They’ve told us a little, but not much. There’s a lot of detail to be figured out about how they determine the employee shares, and how it is that we, the new employee owners, get to express our ideas and opinions.”
Tribune spokesman Gary Weitman said employees were informed of the change via e-mail, in a town hall-style meeting Monday and on an employee Web site, with further details to come.
Future recruitment at Tribune newspapers and TV stations could be affected by the prospect of retirement funds sinking if the ESOP is a bust, according to John Challenger, chief of Challenger, Gray & Christmas, an employment research firm based in Chicago. “If your income is dependent on the company’s success, or even lack of volatility, then people are going to choose safer and less volatile over volatile.”
Joe Kollin, a columnist and 26-year veteran of Tribune’s South Florida Sun-Sentinel, said the deal is good because it will take Tribune private.
“It won’t have to answer to Wall Street, so it can get more journalism done,” said Kollin, who previously criticized the company for cutting the paper’s staff.
The unexpected involvement of Zell, a colorful 65-year-old newcomer to the newspaper industry, was welcomed by some employees but worries others.
“Although he said during the negotiations that he had no interest in interfering with editorial policy, which is good, he also called himself an ‘opportunist’ whose interest is purely financial,” Los Angeles Times columnist Steve Lopez wrote in the newspaper Tuesday.
“My advice to my co-owner is that if he truly feels that way, he should clam up about it or sell The Times to one of the other local big shots, who might not be perfect either, but would at least have to take good care of the trust or answer for it at cocktail parties.”
Tribune shares fell 13 cents to close at $32.68 on the New York Stock Exchange, up 6.2 percent this year after increasing 2 percent in 2006.