Dow Jones Plan Approved to Let Bancrofts Sell Stock but Retain Control

By: (AP) Shareholders of Dow Jones & Co., which publishes The Wall Street Journal and other financial publications, approved a measure Wednesday that would allow members of the Bancroft family to maintain voting control of the company even if they sell part of their holdings.

Shareholder advocates had objected, saying the proposal would unfairly allow descendants of Jane W.W. Bancroft to reduce their economic stake in the company without giving up voting control. They own a special class of stock that has 10 votes per share, versus 1 vote each for ordinary shares.

The Bancroft family currently has 62 percent voting control, mainly through supervoting shares. The proposal would allow them to sell about half of their supervoting shares while still preserving the two-tier share system.

At the meeting in downtown Manhattan, Mark Boyer, a long-time investor in the company, voiced his objections to the proposal as well as to the "lofty" price of $519.5 million the company agreed to pay late last year to acquire MarketWatch Inc., an online provider of financial news. That takeover was completed on Jan. 21.

"This is not in the spirit of good governance," Boyer said in an interview after the meeting, referring to the Bancroft measure. His investment firm controls 176,000 shares of Dow Jones.

Dow Jones' shares have lagged those of its peers in newspaper publishing over the past five years, and last week the company reported that net profits fell by more than 50 percent in the first quarter of 2005 as advertising volume at the Journal slumped 8 percent. The company's shares fell 35 cents, or 1 percent, to $33.72 in afternoon trading on the New York Stock Exchange.

The head of the union that represents Dow Jones editorial employees, Virgil Hollender, voiced his concerns at the meeting about how cost cuts could be compromising the quality of journalism at Dow Jones.

Long-time Wall Street Journal stock market reporter E.S. Browning also addressed the meeting, saying that despite a new labor contract, "morale in the newsroom has continued to deteriorate." He warned that the company is on a "collision course" with its employees.

The company did not provide a percentage of the votes in favor of the proposal to allow members of the Bancroft family to sell a greater amount of their supervoting shares than previously allowed without triggering a provision that would eliminate the two-tier stock system.

Dow Jones argued in a proxy statement sent to shareholders before the meeting that maintaining the Bancroft family's voting control would help ensure the integrity and independence of the Journal and the company's other publications while allowing family members to sell some of their shares in order to diversify their investments and meet anticipated financial needs.

Other major newspaper publishers, including The New York Times Co. and The Washington Post Co., also have dual-class stock structures that preserve voting control by the companies' long-time family shareholders.

Two major institutional shareholder advisory firms came out against the Bancroft proposal before the meeting.

Greg Lewis, CEO of the San Francisco-based firm Glass, Lewis & Co., said that "if institutional investors have their own economic interests at heart, they will hold the Bancroft family's feet to the fire and make them elect between liquidity and voting control but not get the benefit of both."

Institutional Shareholder Services also recommended a vote against the proposal, saying in a report that the proposal "provides little benefit to shareholders other than the controlling shareholder group."

Patrick McGurn, executive vice president of ISS, said in response to a question via email that the firm had heard "major complaints" from institutional investors regarding the proposal. "The extended Bancroft family wants to have its cake and eat it, too," McGurn said.

The proposal that would allow the family to sell off more of its supervoting shares was bundled with two other proposals that would curtail the family's power over the company.

One proposal would fix the size of the company's board at sixteen, which would prevent controlling shareholders from "packing" the board by adding sympathetic directors, while also preventing a reduction in the board which could squeeze out independent members.

Another proposal would amend the company's bylaws such that no member of management or the Bancroft family would be able to be elected to or appointed a director unless the board would remain majority independent after that director joined.