As an early adapter to new technology, Sulzberger is given credit for understanding before most the implications of the Internet for journalism and for correctly charting the fundamental course the Times must take, which is no small matter. He gets less credit for execution, and is seen by some as slow to reposition the Times to respond to the kinds of changes that he himself predicted. He’s also shown a tendency to loudly tout new ventures, such as the online subscription service TimesSelect and the Discovery Times cable television channel, only to drop them quietly when they failed to meet the outsized expectations that he helped to create.
This perception of zigzagging has helped fuel an argument by some large shareholders that Sulzberger should be forced out as the titular leader of the Times Company and replaced by a more “professional” executive. That was certainly the view of a large block of dissident shareholders who, in 2006 and again in 2007, withheld support for management’s nominees to the Times board to protest what they viewed as mulish resistance by Sulzberger to taking steps necessary to boost profitability. Led by Hassan Elmasry, a fund manager for Morgan Stanley, the dissidents waged a spirited campaign to do away with the dual-class stock structure that has helped preserve family control of the Times Company since 1957. As owners of A shares, outside investors (like Elmasry) have the right to vote on 30 percent of the directors on the board, but the real power at the company is wielded through a small number of B shares, almost all of which are held by a trust controlled by members of the Ochs-Sulzberger clan. After two years of beating his head against a brick wall, Elmasry gave up, liquidating his holdings in the Times Company in late 2007.
But just as Elmasry exited, a new group of heavy hitters appeared: Philip Falcone of Harbinger Capital Partners and Scott Galloway of Firebrand Partners, two hedge-fund managers who specialize in targeting troubled companies (a type of investment vehicle sometimes called a “vulture fund” due to its affinity for circling over wounded prey). With the Times’s stock trading near historic lows, Falcone and Galloway began building a large stake in the company in December of last year. In late January, when their holdings approached 5 percent—the threshold for making a mandatory disclosure to the Securities and Exchange Commission—Galloway wrote a letter to Sulzberger and Janet Robinson outlining the group’s intention to seek four spots on the Times Company’s thirteen-person board. In his letter, Galloway, Firebrand’s founder and chief investment officer, argued that “the current Board, while impressive in stature, has not been effective in inspiring the requisite bold action this media environment demands.” Galloway indicated his intention was to serve as an “honest broker” between the company and shareholders and to explore “a path for transforming The New York Times from a low growth company to a robust one that is both the newspaper of record and the most trusted starting point on the Internet.”
Sulzberger’s reaction to the overture was notably cool, but Galloway and his partners continued accumulating stock until they owned more than 28 million shares, just under 20 percent of the Times. When the newcomers threatened a proxy fight to get their nominees on the board, Sulzberger relented, negotiating a compromise that added two extra seats to the board to accommodate Galloway and a fellow nominee, James Kohlberg. It was the first time in the 112 years the Ochs-Sulzberger family has controlled the Times that outside directors not put forward by the family have elbowed their way on to the board. Perhaps the key factor was that Galloway, unlike Elmasry, promised not to challenge family control. In an e-mail, Galloway declined to elaborate on his plans for the Times Company (“I’m ducking the press right now,” he wrote), but longtime media analyst John Morton doubts Galloway’s influence will be much more substantial on the board than off it. “The board meetings may be a little more of a pain in the ass than they used to be,” says Morton. “But it’s not necessarily bad to listen to outsiders who don’t share their culture and background.”