Dow Jones Ain't Broke...
Things are looking a bit dicey for Dow Jones Chairman and Chief Executive Peter R. Kann. The 54-year-old former journalist faces a small but vocal group of shareholders who are demanding that he reverse Dow Jones & Co.'s sorry financial performance of the past decade. For years, Dow Jones quietly underperformed the market with little notice. But now, pressure on Kann is mounting. Activist investor Michael Price recently bought a large stake, as has outspoken fund manager James Cramer. Some changes are already under way. Frequently absent Director Carlos Salinas, the former Mexican President, is leaving the board, and less controversial figures, such as American Express Chief Executive Harvey Golub, are coming on. Overall, however, Kann is unapologetic about the performance of the company under his watch. And with the majority of the Bancroft family, which controls the company's voting shares, still backing him, he shows no sign of worry as he anticipates the company's Apr. 16 annual meeting. Kann spoke recently with BUSINESS WEEK Media Editor Elizabeth Lesly about his situation.
Q: Are you [and the rest of Dow Jones's board] committed to going forward with the plan to invest an additional $650 million in Telerate, given Wall Street's dismay over the plan?
A: There has been a lot of misinformation about Telerate [Dow Jones's financial data service]. This has been a very good business. The fact that in the last 18 months or so the business slipped some, stagnated--whatever word you want to use--doesn't change [that] fact. It's a growth business and clearly worth investing in and reinvesting in.
Q: Given the makeup of your board, with several inside directors, two classes of voting stock, and some outside directors who are too busy to attend many meetings, its effectiveness seems questionable. How effective is your board?
A: That this has been, in some sense, an inactive or weak board just is not the case. [If four newly nominated directors are elected at the annual meeting], we'll have a board that includes six active CEOs, and 12 of 15 directors will be nonmanagement. So I think the board does not merit most of this criticism [found in] the tabloid press.
Q: The Bancroft family controls Dow Jones & Co. through a separate class of super-voting stock. Do you think that such an arrangement serves all shareholders equally well? Are separate voting classes defensible?
A: Yes, separate voting classes make a whole lot of sense, particularly in the case of a company like Dow Jones or, indeed, a number of what I call premiere publishing companies. That has served to protect the independence of the company and the editorial independence of extraordinarily important publications like The Wall Street Journal. In that sense, I think the two-class stock is in the interest of all shareholders.
Q: Why is Dow Jones's dividend so high when the company appears to need heavier investment in its core businesses? Given the current circumstances, should Dow Jones be paying out a dividend at all?
A: We can afford the dividend. This has always been, and remains, a very profitable company with very strong cash flow. The dividend as a percentage of cash from operations was 23% in 1996, compared to an average of 30% in our industry.
Q: No one disputes that The Wall Street Journal is a great newspaper. Is Dow Jones a great company?
A: I think that the future of this company is very bright. In my view, brighter than ever. The Wall Street Journal franchise is actively expanding in all kinds of new directions [such as] successful international editions, Internet publishing, and Smart Money magazine. We've got an extraordinary array of unique proprietary content [that] is going to have increasing value in a world in which content, above all, is going to matter.
Q: How do you judge your own performance? Are you the best Chief Executive to lead Dow Jones at this point?
A: Yes. Well. I think in any job like this, you wind up making some large and fairly tough decisions, and sometimes it takes some time for others to fairly judge the wisdom of those decisions. I'm going to leave it to my board to assess my performance. Their assessment is much more relevant than my own would be, and it would be substantially less self-serving.
Q: It has been reported that General Electric Co. would be interested in taking a stake in Dow Jones. How would you view such a relationship? Do you believe that the Journal and your television assets would meld well with NBC's operations?
A: The board and the Bancroft family have made it clear that Dow Jones intends to remain fully independent. I've got a lot of admiration for Jack Welch. I see some nice programming on NBC. But I think we are doing fine on our own in TV at this point.
Q: So you would not welcome any investment from GE or anyone else?
A: I'll just stick to that answer on that question.
Q: Is it unthinkable that The Wall Street Journal would have a change in control or ownership?
A: It is unthinkable that Dow Jones would have a change in control or ownership. Thus, it's unthinkable that The Wall Street Journal would.
Q: How extensively will the Journal cover the turmoil at the company?
A: I think that the turmoil is [confined to] the pages of a couple of tabloid newspapers. I do not think there is turmoil at Dow Jones. I think we have some business issues that we are addressing.
Q: Do you feel that this [interview and other] coverage of the company over the past few months is not a valid story?
A: No, I didn't say it's not a valid story. Any time a pretty high-profile company has a business problem, that's a story. The fact that a couple of people in a family choose to go to the press to criticize the company is, up to a point, a valid story. Their significance has been somewhat exaggerated, if you put them in the context of this larger family. I'm not suggesting that Dow Jones shouldn't be covered as a legitimate business story. [However] there's a level of--again, for lack of a better word--tabloid coverage that can sort of go beyond what's factual. But we're not the first company in the world to complain about that. I've been in journalism long enough to understand that that's how the world works. You know, it's somewhat more fun to cover than be covered.
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