Being clueless does pay after all
Former Tribune chief executive Dennis FitzSimons is set to receive $38 million from a severance package and stock options.
And all he had to do was all but destroy two of the nations proudest newspapers and watch as the Los Angeles Times and Chicago Tribune become mere footnotes in history, while papers like the Washington Post ascend because of their much more forward thinking executives. WPNI has embraced the Web, while Tribune has been Tribune.
To be fair, the slide at Tribune started years before FitzSimons was chief executive, but he certainly didn’t do anything to reverse the companies fortunes. I can’t think of any great products that launched in the past three years, and none of Tribune’s papers are noted for having a strong Web presence.
Allan Mutter puts that large golden parachute in perspective by noting that $38 million is enough to hire more than 500 journalists in a metro market for a year, which is more than the Tribune or LA Times entire editorial staff (that math might be a little fuzzy because full-time reporters start at $60,000 a year plus benefits at the Chicago Tribune). But that’s not the full story. The real story is that Sam Zell has to take on a tremendous amount of dept to purchase Tribune, which means he’ll probably have to cut a lot of staff to help make this purchase work.
The more than $10 billion that Tribune Co. is borrowing to take itself private will be more than eight times its operating profit for the last 12 months, or nearly 2 ½ times the industry’s average debt burden.
That would be a mound of debt for any company in the most robust of industries in the sunniest economic times, which these ain’t. Unless Sam Zell knows something the rest of us don’t, it is not clear how he can meet the quarterly interest obligations on $1 billion in debt without either aggressively increasing sales, sharply reducing expenditures – or both.
It’s too bad that FitzSimons couldn’t come to a figure that was smaller — and more inline with his production as a manager. Tribune’s biggest problem is that it lacks talented and forward thinking managers (full disclosure: I interned for Tribune in 2005 and my brother was a financial analyst for the company until a few months ago). To succeed in these turbulent times, a company will need someone willing to take risks and embrace new technology.
A little bit more disclosure, Tribune is a sinking ship, and all the talented business people are leaving too.