[MGP-Forum Announce] Sustaining, organizing news organizations of the future

Thu Nov 2 12:44:49 CST 2006

It should be noted that any form of employee ownership carries with it the
problem that employees are increasing their personal financial risk by
investing substantially in a single firm rather than diversifying their
retirement nest egg via mutual funds.  Typically, employees will not be able
to invest in an ESOP on top of their normal 401K investment, but will divert
all or part of their 401K savings into the ESOP.  The risk can be lowered by
placing limits on the percentage of an employee's earnings or assets that
can be tied up in the ESOP, and by funding the ESOP substantially from that
portion of the company's earnings that would normally form the employer
match in a 401K plan.  But these constraints also limit the amount of cash
available for debt service, thereby limiting the price an employee group can
afford to pay.   I don't know how the Omaha ESOP came about, but I think
this explains why there are so few in the newspaper business.  A good
discussion of the risks is here:
http://dept.kent.edu/oeoc/publicationsresearch/Summer1996/PensionPlansSum199
6.html

________________________________________________
Martin C. Langeveld
Publisher, Brattleboro Reformer - www.Reformer.com 
62 Black Mountain Rd., P. O. Box 802, Brattleboro, VT 05302
802-254-2311 Ext. 101; mlangeveld at reformer.com

-----Original Message-----
From: post-bounces at mgp-forum.org [mailto:post-bounces at mgp-forum.org] On
Behalf Of Bill Densmore
Sent: Thursday, November 02, 2006 10:24 AM
To: post at mgp-forum.org
Subject: Re: [MGP-Forum Announce] Sustaining,organizing news organizations
of the future

Chris Mackin, of Ownership Associates in Cambridge, asked that I post to the
MGP Forum his contribution to the thread about ownership and sustaining of
news organzations of the future. Note the last paragraph, which is all the
more relevent given news today that Tribune Company may be entertaining bids
for sale of individual newspapers.

Date: Tue, 31 Oct 2006 15:35:52 -0500
From: Chris Mackin <cm at ownershipassociates.com>
To: 'Bill Densmore' <mediagiraffe at journ.umass.edu>
Subject: RE: [MGP-Forum Announce] Sustaining,
     organizing news organizations of the future

You invited me to speak to your UMASS-Amherst conference this summer about
ownership issues knowing that I had an angle here.  As you know, I am
partial to broad based employee ownership as an ownership structure - and
have been professionally engaged in the field for over 25 years.  My
colleagues at Duff & Phelps and I have spent a fair amount of time since
last winter exploring these ideas on behalf of The Newspaper Guild-CWA. hat
union hired us to explore these ideas around the break up of the Knight
Ridder chain.  We came close to a deal in Philadelphia and there are others
that may still come to pass.

Of the preferred structures you list below, you mention Co-op ownership
which is, of course, a form of employee ownership.  It is the oldest form of
employee ownership in the United States, literally reaching back to two 19th
Century labor organizations, the Knights of Labor and the National Labor
Union, that advocated for cooperatives as an alternative to then emerging
industrial capitalism.  In the last quarter of the 20th century, the
initiative in this field was largely taken over by the work of Senator
Russell Long of Louisiana and his followers who created ESOPs or Employee
Stock Ownership Plans, a more legally complex form of employee ownership
which today involves over 11,000 companies and 10 million workers - see
HYPERLINK "http://www.nceo.org/"www.nceo.org. ESOPs are not perfect - they
are not as immediately and clearly democratic as cooperatives for one but
they are familiar and they are particularly effective as "transitional"
mechanism that enable business owners to sell over time to employees.
Cooperatives, by contrast, are typically used in start-up situations, not
with established companies.

There is a lot more that could be written about this and I have some ideas
of where people could dig further should they so desire but to speak to one
of the more philosophical points your discussion has raised . one of the
reasons I am partial to employee ownership is that one generally finds in a
group of employees - managers and rank and file alike, the kind of natural
distribution of value perspectives on the news and on ideological questions
one would hope to have at a newspaper.  One could argue I suppose that the
population of a typical newspaper will contain more liberal leaning types
than elsewhere but still if the measure we are using is not the values of
one or two people at the top but the employees as a group the shades of
difference that any large group contain will be relevant, useful and in some
rough way representative of the kinds of values that can endure the
occasional "hot spots" and controversies that can roil a community.

By featuring this notion of employee groups as roughly "representative" of
public opinion I also do not mean to suggest that editors at such papers
would be polling employee shareholders regularly before making editorial
decisions - though occasional polling would probably be a good idea.  One
canard that the employee ownership field has fortunately overcome through
over 25 years of hard work is this notion that if a company is employee
owned then it is destined to be inefficient.  The research at HYPERLINK
"http://www.nceo.org/"www.nceo.org and elsewhere is readily available to
demonstrate that is not the case.  Employee owned companies are in fact more
efficient (and profitable and productive) than conventionally owned
companies.  It is possible in other words to imagine a publisher with
freedom to do his or her job and editors able to do the same.  The fact 
that 
they are in some real sense working for the people in the building, the
people who report to them, can be a very good thing for business and for
democracy.

The only paper of any size (roughly 2,300 people) that presently functions
as an employee owned newspaper is the Omaha World Herald. Their editors have
been quoted in some recent stories saying some interesting things about how
they enjoy the independence that comes through employee ownership.  The
Bureau of National Affairs, which is organized by the Newspaper Guild, is
also an employee owned media company that employs about 1,800 people. The
Newspaper Guild-CWA remains a leader in pushing these ideas into the future
of media conversation.  I would suggest that you reach out to Linda Foley,
their President and Bernie Lunzer, their Secretary-Treasurer to talk to them
about these ideas.  They came very close to assisting with a combined
"worker friendly" private equity/employee ownership structure for the
Philadelphia Inquirer and Daily News this past summer.  And there are a lot
more papers that are about to change hands .

Regards,
Chris

Christopher Mackin
Ownership Associates, Inc.
122 Mt. Auburn Street
Cambridge, MA 02138
http://www.ownershipassociates.com