united states project

Post-Dispatch disparities

While execs at parent company Lee Enterprises get bonuses, newsrooms in St. Louis and elsewhere are "simmering the furniture"
May 1, 2014

PRAIRIE VILLAGE, KS — Scott Bujnak might be the first carpenter to obtain “folk hero” status in a newsroom.

Bujnak, 56, was until recently the head carpenter at the St. Louis Post-Dispatch. He’s not a journalist, but on April 16 he did something plenty of put-upon newspaper hacks have dreamed of: He went into his boss’s office and said he was ready to quit.

For years, as the company had gone through financial difficulties, Bujnak had been asked to economize. “The main word I heard every day was ‘cheap, cheap, cheap,’” he said. Then, earlier this month, he discovered that Mary Junck, CEO of Post-Dispatch parent company Lee Enterprises, had just pocketed a $700,000 bonus.

When Bujnak walked into his boss’s office, he recalls, “I said, ‘If you can justify that to me, I’ll stay.” He left.

Bujnak’s dramatic exit, first reported in the Post-Dispatch itself by longtime columnist Bill McClellan, didn’t come out of the blue. His decision captures the sentiment of journalists and media observers who have watched with mounting frustration in recent years as Junck and other executives collect bonuses while Lee’s papers cope with stagnant salaries and shrinking staffs. It’s an often-angry conversation that’s taken place on media blogs local and national; in earlier columns by McClellan; on social media; and, of course, in the newsroom. “You can always find a bellyacher in every newsroom,” one Post-Dispatch staffer who asked not to be named told me recently, “but I don’t think you can find anyone who still enjoys working here.

[Update: After this story was published, several Post-Dispatch reporters published comments on Twitter objecting to the portrayal of attitudes in the newsroom.]

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One party that’s mostly stayed out of the conversation is Lee itself. Jim Romenesko has been dogging the company for years; this note, on an April 7 post, is typical: “Lee spokesman Dan Hayes has never returned my calls, but I rang him up today anyway and got voicemail.” When I tried to contact Hayes multiple times in the last two weeks by phone and email for this article, I got the same result. I called again April 30 and was told that Hayes is now out of the office for two weeks; I asked if someone else would talk to me and was sent to a voicemail in the finance department. I’ve still received no response.

While management isn’t talking, the story of Lee that emerges from official filings and news accounts is pretty clear: Tight times all around, but when there are spoils to be had, they go to the top. The Post-Dispatch has sustained more than 230 buyouts or layoffs since 2008, according to Paper Cuts, a website tracking newspaper layoffs which is run by former P-D staffer Erica Smith. In those six years, staffers at the company’s flagship publication have seen no raises, they have faced three unpaid weekly furloughs, pensions have been frozen, and retiree health and life insurance have been lost. Layoffs and buyouts have also hit Lee holdings from Montana and Utah to Arizona and upstate New York. For the 2007 fiscal year, the company reported 8,300 full-time equivalent employees; by 2013, that number had plummeted to 4,600. (It has 12 fewer daily publications than it did in 2005, when Lee acquired Pulitzer Inc., parent of the Post-Dispatch.)

In the same period, according to SEC filings, Junck’s base salary has remained steady at between $800,000 and $900,000 per year, and in some of the toughest years—2009 and 2010—that was her total pay. But in other years she has enjoyed millions in bonuses, stock and option awards, and other compensation. In 2012, she made more than $2 million total, including an award of 500,000 shares of stock just a day before the Post-Dispatch announced that 23 employees were being laid off. In late 2013, after a dismal earnings report and smaller layoffs earlier in the year, another round of executive bonuses brought Junck’s compensation to more than $1.5 million. Then there was this spring’s $700,000 bonus, paired with a $400,000 bonus for chief financial officer Carl Schmidt, as a reward for completing a deal to restructure the company’s sizable debt. “At least with this one there were no layoffs,” McClellan, the columnist, told me. (A timeline at the end of this article tracks the firm’s size, Junck’s compensation, and notable Post-Dispatch layoffs since 2007.)

Top management isn’t any more forthcoming with explanations for this trend within the company than it is with outsiders, the Post-Dispatch employee told me. The consequences for morale are predictable: “Nobody expects them to be in the foxhole, but at least let us know that you’re with us and you care.” If employees must do more with less because of the company’s financial difficulties, the staffer said, “at least let us do it in an atmosphere where we believe in the leaders.”

“People see a huge disconnect,” said Shannon Duffy of the United Media Guild, which represents most of the Post-Dispatch employees. “They’re told you have to give up a lot to keep the ship afloat. Then you do better and the bosses pop open the champagne bottles and forget about everybody else.”

The most upbeat appraisal may actually come from McClellan. “This job is still fun—not every day,” he told me. “It’s more fun than working for an insurance company or something.”

‘Simmering the furniture’

While Lee doesn’t often answer questions from the media, it has explained to shareholders the thinking behind bonuses for Junck and other executives. According to the company’s SEC filings, the gift of 500,000 shares to Junck in July 2012 came after the board concluded that her compensation “was substantially below that of her peers in the newspaper industry.” Such reasoning is not uncommon in the corporate-compensation arms race. As Matthew Yglesias has written, “America’s CEOs are paid a lot largely because other American CEOs are also paid a lot.”

The most recent bonuses for Junck and Schmidt had a more tangible rationale: They were a reward from the board for the successful refinancing of the company’s debt, a process that begin with a late 2011 bankruptcy.

“This is a total restructuring of the company—and the industry,” said industry analyst Ken Doctor. “Mary Junck has been smart in navigating Lee through that process,” he said. “From the board’s point of view, they want good leadership.”

Junck seems to have the respect of her peers in the industry. In 2012, she was named chairman of the Associated Press Board of Directors.

Her detractors, however, point out that it was under her leadership that the company took on its challenging debt burden in the first place—largely when it purchased the Post-Dispatch and other Pulitzer holdings in 2005, not long before the economic recession and industry-wide downturn made that debt untenable. In 2004, before that deal, Lee stock traded at $49. It now sits at around $4 a share, an improvement on where it’s been most of the past five years.

To some degree, the sad truth is that Junck and her corporate colleagues are now being rewarded precisely for cutting jobs, freezing wages, and eliminating benefits. But while dramatic cuts may have been necessary, Doctor warns that this “increasing disparity” between management and employees can have a “wearing effect” on company morale—as current and former employees will attest.

After the debt restructuring, Doctor is more bullish than some on the company’s prospects. (So, apparently, is Warren Buffett, whose Berkshire Hathaway has quietly taken a minor equity stake in Lee.) But it’s undeniable, he said, that if Lee hasn’t exactly been “burning the furniture” by slashing newsroom investment, as one pseudonymous analyst put it, it has at least been “slowly simmering the furniture for eight years.”

In St. Louis, P-D staffers say, readers have noticed.

McClellan says readers increasingly complain about mistakes in his column. He attributes the mistakes to staff attrition, noting that not only does the paper now have fewer reporters, “we used to have a bigger copy desk.”

“The copy editors used to catch all sorts of mistakes,” McClellan said. “I make more mistakes than I used to—or I make the same amount but don’t have the same backstop that I used to.” When readers complain, he said, “I tell them, ‘You can’t do more with less. You do less with less.’”

Another staffer told me that, with each employee now “doing the work of three people” because of layoffs, reporters are often pulled away from doing enterprise work to cover more immediate but less important “breaking” stories. Those complaints are hardly unique to Lee publications, of course, and to be sure, Post-Dispatch reporters have continued to produce strong, substantive pieces—although the newly-merged nonprofit St. Louis Public Radio and St. Louis Beacon have garnered more awards buzz lately, especially when it comes to enterprise reporting.

A new beginning?

So now that the company is on firmer financial ground, what are the odds that the furniture will be restored? Can employees—or readers—expect to reap some of the benefits of the restructuring?

“We are pleased that they were able to refinance,” the Guild’s Duffy said. “We root very hard for Lee as a company to be successful. However, their celebratory bonuses are disturbing. We feel if anyone’s going to be rewarded it’s those employees—Guild and non-Guild alike—who put out a paper every day.”

These arguments are sure to come up in the Guild’s next round of negotiations with Lee. Back in 2010, the Guild signed a new contract with the company in which employees made significant concessions—lower pay scale, pension freezes, reduced benefits. In return, layoffs would cease for at least six months. Considering the company’s troubled finances, Guild leadership decided this was the least bad option.

Now that Lee’s debt has been refinanced and the executive team rewarded with bonuses, “we look forward to sitting down with them next year when the contract comes up,” Duffy said pointedly.

The financial restructuring, Doctor said, “provides some ability to invest in the business, and part of that is investing in their staff.”

But, he cautioned, although Lee is at least “within sight of positive revenue growth,” the company is not out of the woods yet.

“They’re still not growing year over year, which is a problem. And”—ominously—“they have got to cut expenses.”

According to Doctor, the best-case scenario for Lee, assuming the economy continues to improve, is probably a return to revenue growth in 2016.*

In the meantime, Paper Cuts’ Erica Smith, who left the P-D in 2012 and now works for local news curator Real Time St. Louis, is rooting for her former colleagues as they look to negotiate a new contract in 2015—but she is not optimistic that they will regain the concessions made in 2010.

“I don’t think Lee’s going to give the milk and cookies back after they took them away the first time,” she said.

McClellan is also not holding his breath. “I shouldn’t assume the worst,” he said, “but I wouldn’t be overly optimistic that things will get better for us.”

And as for Bujnak, the folk-hero carpenter? He says that he and many of his former colleagues worry about the paper’s survival. “A lot of folks my age are just hoping to make retirement,” he says. He is confident he will be able to replace his P-D income (check out his new business card), and he looks back on his tenure at the paper with mixed feelings.

“I tell people I had 10 good years—and eight others,” he said. “That mostly tracks with Lee.”

*This sentence has been corrected.

Timeline: Winners and Losers

2007: Junck’s total compensation for the fiscal year is $3.8 million, including $1.9 million in stock awards, $425,000 in option awards, and $375,000 in bonuses. At the end of the fiscal year in late September, Lee has 8,300 full-time equivalent employees.

2008: In March, the Post-Dispatch announces it will lay off 31 employees in circulation and other non-newsroom departments. In August, the paper lays off 18 employees, including five in the newsroom, due to “economic challenges.” In September, 20 Post-Dispatch employees are laid off as a result of the “national economic slump.” Lee ends the fiscal year with 7,500 full-time employees. Junck’s compensation is $1.1 million, including nearly $54,000 in stock.

2009: In January, 39 Post-Dispatch employees, including 14 from the newsroom, are laid off. In May, another 39 Post-Dispatch employees are laid off as circulation duties are outsourced to another Lee Enterprises paper. In August, the P-D cuts 18 more jobs as publisher Kevin Mowbray hopes “the worst of this economic recession is behind us.” Lee imposes an executive salary freeze, and Junck’s compensation is $882,000. Lee has 6,400 full-time employees across the company.

2010: In March, Post-Dispatch employees approve a new, five-year Guild contract in which they agree to pay cuts and the loss of retiree medical benefits and life insurance in exchange for a six-month freeze on layoffs. Junck’s compensation is $833,000. Lee has 6,098 full-time employees.

2011: In April, three classified advertising employees are laid off. In June, 23 employees are laid off, with five more accepting buyouts. In September, three employees accept a buyout offer, three more are laid off, and two open reporting positions are eliminated. In December, the company files for bankruptcy in an effort to refinance its debt. Junck’s compensation tops $1.1 million, including more than $329,000 in option awards (the executive salary and bonus freeze remains in place this year, but the prohibition on stock and option awards has been lifted after two years). Lee has 5,700 full-time employees company-wide.

2012: In February, one marketing employee and one in IT are laid off from the Post-Dispatch. In March, Junck receives a $500,000 bonus and CFO Carl Schmidt a $250,000 bonus after Lee emerges from bankruptcy. In May, six P-D employees, all in the newsroom, are laid off; in June, an advertising employee is let go. In July, Junck receives 500,000 shares of Lee stock free of charge. A day later, 23 employees, including 13 in the newsroom, are laid off by the Post-Dispatch. Junck’s total compensation for the year is $2.1 million—an 82 percent increase over 2011 as the salary freeze is lifted after three years. CFO Carl Schmidt’s compensation is up 48 percent over the previous year; and three other vice presidents see significant pay increases as well. Lee has 5,200 full-time employees.

2013: In January, two Post-Dispatch employees—a copy editor and an electric workstation operator—are laid off. In November, Junck receives 200,000 shares of Lee stock, and her fellow executives receive substantial equity awards as well. Her compensation for the year tops $1.5 million. Lee has 4,600 full-time employees. In its official filings, the company states, as it has every year: “We consider our relationships with our employees to be good.”

2014: In March, Junck and Schmidt are awarded $700,000 and $400,000 in bonuses, respectively, for the “successful completion” of the company’s debt refinancing. In April, Post-Dispatch head carpenter Scott Bujnak quits in protest over the bonuses.

Sources: Erica Smith, Paper Cuts; Securities and Exchange Commission filings; media reports.

Deron Lee is CJR’s correspondent for Iowa, Missouri, Kansas, and Nebraska. A writer and copy editor who has spent nine years with the National Journal Group, he has also contributed to The Hotline and the Lawrence Journal-World. He lives in the Kansas City area. Follow him on Twitter at @deron_lee.