Ever since the chief himself, William Randolph Hearst, ran the media empire, there has always been a very Hearst way of doing things: be conservative, be private, and never acknowledge internal strife. So the announcement on June 18 that Victor Ganzi, only the sixth chief executive officer in Hearst Corp.'s storied history, would be stepping down because of his "irreconcilable differences" with the board of trustees was very un-Hearst-like.
The board, populated by descendants of the founder, grew increasingly frustrated with Ganzi over his strategy to take minority interests in outside companies, particularly technology outfits with large potential upsides, rather than making bigger bets, say company sources. "There was a sense if we continued that, we would end up looking more and more like a holding company," says an executive familiar with the situation. Ganzi, 61, a lawyer who had been at Hearst for 18 years (BusinessWeek.com, 7/8/02), will be succeeded, at least on an interim basis, by his predecessor, 75-year-old Frank Bennack. Currently vice-chairman of Hearst's board of directors, Bennack retired as CEO in 2002 after serving nearly 24 years in that post.
Ganzi and other Hearst executives were not available for comment. A press release cited Ganzi's "irreconcilable policy differences with the Board of Trustees about the future direction of the company" as the reason for his resignation. Usually averse to doing interviews, Ganzi did tell BusinessWeek in 2006, on the occasion of the opening of a new Hearst headquarters (BusinessWeek.com, 6/5/06) in New York, "My biggest surprise as CEO is that it is a lot harder than I expected [to make profits]."
Looking Past the Newspaper Business?
But Hearst's collection of newspapers, magazines, TV stations, cable programming, and real estate holdings under Ganzi hasn't performed too badly. Annual cash flows after dividends are well north of $1.5 billion on revenues exceeding $8 billion, say sources familiar with operations. It may be that the board of trustees felt cash flow needed to be invested more fully in businesses with future promise, rather than, say, newspapers, in which Hearst holds a sizable position.
While newspapers remain well within Hearst's corporate comfort zone—WRH built the empire while helming the San Francisco Examiner—the trustees may also be concerned about how Hearst has increased its exposure to that extremely stressed medium. Last October, Hearst completed a deal to purchase around 30% of the privately held MediaNews Group's newspaper properties that are located outside of the Bay Area, where Hearst publishes the San Francisco Chronicle, and where MediaNews publishes several dailies as well.
At the same time, Hearst's stakes—for the most part in technology companies such as broadband provider Brightcove, digital print company E Ink, and cell-phone video outfit MobiTV—have been timid, often no more than 25%. It could be that stellar records in the past as a passive investor drove that thinking. After all, its investment of $175 million for a 20% stake in ESPN in 1990 is worth more than $4 billion today based on some cable industry analysts' projections of ESPN's value. But it may be the Hearst trustees feel as if too much money has been left on the table based on being too conservative—and that it's time for a change.
Who's On the Short List?
In its press release, Hearst says it will be forming a search committee to find a full-time CEO to replace Ganzi. The company has liked to reward its own and promote from within—currently, the most junior unit heads at the company arrived at Hearst in 1996. Among the leading candidates for the CEO job would be Cathie Black, 64, who came to Hearst a dozen years ago, and who has earned a good reputation overseeing the company's magazines.
Another executive certain to be considered is James Asher, the chief legal and development officer who once worked at Rogers & Wells, the same law firm at which Ganzi once worked advising the company and family members on tax issues. David Barrett, the head of Hearst's TV station group, will most likely be on a short list as well.
Or maybe the board will go really off the Hearst map—and hire somebody from the outside.