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NEW YORK (AFX) - A Morgan Stanley investment fund is stepping up its confrontation with The New York Times Co. with the submission Wednesday of a shareholder proposal that would urge the company's board to take several steps to "reform" its corporate governance practices.
The proposal, if it is approved at the company's next shareholder meeting, would recommend that the board put to a vote the Times' dual-class share structure, which allows the members of the Ochs-Sulzberger family to control the company through a special class of stock.
The company has defended its corporate governance practices and noted that any change to the Times' share structure can only be made by the Ochs-Sulzberger family, and they have shown no indication they plan to do so.
The proposal would also recommend that the roles of chairman and publisher of the Times' flagship newspaper be separated. Both jobs are currently held by Arthur Sulzberger Jr.
The shareholder proposal was submitted Wednesday by Morgan Stanley Investment Management, which owns about 7 percent of the Times' shares, to be put to a vote at the company's next annual meeting in the spring of 2007.
Even if it passes, the vote would not require any action but merely recommend that the board take the proposed steps.
The proposal marks an escalation of tensions that surfaced this past April when Hassan Elmasry, a fund manager at Morgan Stanley, withheld votes from Times directors to protest the company's dual-class share structure, which he said was fostering "a lack of accountability" to all shareholders.
A spokeswoman for the Times, Catherine Mathis, said that the company would evaluate the proposal.
The proposal also includes a recommendation to adopt a policy of making the chairman an independent director and making a majority of the members of the board's compensation committee independent directors.
The Times is one of several newspaper and media companies that are controlled by families through special classes of shares, including The Washington Post Co., Viacom Inc. and Dow Jones & Co., which publishes The Wall Street Journal.
Under the Times' corporate rules, the holders of publicly traded Class A shares elect 30 percent of its board of directors, while the Sulzbergers, who own most of the Class B shares, elect the rest.
The company put the two-class share structure in place even before its public share offering in 1969 and says the system is intended to ensure the editorial independence and quality of the Times.
However, shareholder advocates are often critical of two-class shareholder structures, saying they take power away from ordinary stakeholders.
In a supporting statement for the proposal, Morgan Stanley Investment Management said it believes that the Times' current governance practices "deviate from what is widely considered to be best practice by corporate governance experts."
Those deviations, it said, "which may have at one time been designed to protect the editorial independence of the news franchise, are now eroding the foundations of the enterprise which they were created to protect."
In a letter to Elmasry last week, the Times' secretary and corporate governance officer, Rhonda Brauer, said that the Times' governance practices "generally meet or exceed best practices," and noted that its independent directors meet without management at least once a year, and that the company has divided the roles of chairman and CEO.
New York Times' publicly traded shares fell 13 cents to $24.03 in midday trading on the New York Stock Exchange. They have traded in an annual range of $21.54 to $29.49. Copyright 2006 Associated Press. All rights reserved. This material may not be
Copyright 2006 AFX News Limited. All Rights Reserved.
