The Journal Register Co., a media corporation hitting the skids because of flagging ad revenues, just hired a new CEO. James W. Hall, 60, inked a one-year deal for a base pay of $650,000 (I know, mere peanuts) with a lovely set of perks.
He replaces Robert Jelenic, acting CEO since June, who is battling cancer.
Mr. Hall’s compensation agreement (oh my gawd, wait’ll you see it) leaves me speechless considering the company’s financial condition. But first, we must eat our spinach and look at the finances of Journal Register. Then you get dessert. (Teaser: He gets a company-owned 2007 Chevy Envoy, which the company will sell him for $1 in November 2010, and up to $5,500 for lodging near the company’s headquarters.)
The Journal Register Co., according to its Web site, “owns 22 daily newspapers, with approximately 559,000 total daily circulation, including the New Haven Register, Connecticut’s second largest daily and Sunday newspaper. The Company also owns 346 non-daily publications, with total distribution of more than 6 million, as well as commercial printing and software development companies.”
It reports annual revenues in excess of $550 million, a small figure compared with larger media corporations but still a nice sum. But it appears to be insufficient for the company’s shareholders. Total revenues for the third quarter, according to a company press release, fell more than 7 percent from a year ago.
The company’s financial condition reflects the troubles of the newspaper industry.
In October 2006, Journal Register’s second-largest shareholder â€” Private Capital Management â€” bailed out. (PCM is the same management fund that forced “the former second-largest U.S. newspaper publisher, Knight Ridder Inc., to sell itself after failing to boost its lagging stock price.”
And the Journal Register’s stock price is tanking. From the AP story: “Shares of Journal Register rose by a penny to $2.01 on Tuesday. The stock has lost 90 percent of its value since closing at $19.33 on Dec. 31, 2004.” [emphasis added]
The company has sought to reduce expenses by cutting jobs and to raise money by selling assets.
For example, in September 2006, Journal Register said it would cut 82 jobs at newspapers in Michigan to save $3.2 million a year.
To raise money, Journal Register said in December 2006 it would sell seven papers in southeastern Massachusetts â€” including the Fall River and Taunton dailies â€” for $70 million to GateHouse Media (a Fortress company that actually makes money). In January, Journal Register said it would sell GateHouse three Rhode Island dailies for $7.6 million.
In November 2006, Journal Register joined a consortium of 176 newspapers to partner with Yahoo to share content, advertising and technology. But the company’s advertising revenues fell more than 9 percent in the third quarter from a year ago. That Yahoo move doesn’t seem to have paid off very well.
Internet to the rescue? Not yet. Although Web ad revenue rose nearly 25 percent in third quarter from a year ago, it represents only about 6 percent of all ad revenue.
Why is this company offering its CEO so much in compensation? Yes, the argument is you gotta pay high to get good talent. But Mr. Hall is existing talent: He has been part of a board of directors guiding the company’s current tumble. We’ll see a year from now what the company’s stock price does with him at the helm.
Here’s what Mr. Hall also gets for compensation:
â€¢ “Hall will get yet-to-be-determined cash bonuses this year and a performance-based bonus as high as $1.35 million in 2008. He also was granted 250,000 stock options and will receive another 250,000 next year.”
â€¢ “He also will be reimbursed for traveling to and from his home in Canada, capped at $6,000 a month or standard airfare rates. The company will also pay reasonable travel expenses for his spouse to attend business functions.”
â€¢ “Hall will get as much as $37,500 a year to defray tax differences between the U.S. and Canada. He also will be reimbursed up to $12,500 a year for tax planning and preparation.”
â€¢ “If Hall leaves the company, he may be hired as a consultant and paid $33,333 a month for the first year and $25,000 monthly for the second year in exchange for up to 15 hours of consulting work a month.”
Mr. Jelenic, the departing CEO, has been a director of the company since 2003. On his watch, the company’s stock price has fallen nearly 90 percent. Here’s what he gets as severance:
â€¢ “Jelenic … was given $4.76 million in severance. Vesting of his 192,500 restricted stock units was accelerated and outstanding vested stock options will remain exercisable until November 2010 or the options’ expiration, whichever is earlier.”
â€¢ “Journal Register will pay for Jelenic’s company car and country club membership until November 2010. The company also will sell the car to Jelenic for $1 after November 2010. Jelenic gets his company computer, printer, fax machine and similar items for $1 each.”
â€¢ “Jelenic keeps secretarial and information technology support until Dec. 31, 2009. He also received lifetime medical benefits.”
Mr. Hall, too, has been a long-time director of Journal Register. How does this pay package act as incentive for him to turn around the company’s stock price freefall? He gets his rising or falling.
The company’s mission statement says: “Our Mission is to be the leading provider of local news, sports and information in the markets we serve, both in print and online.”
It’s failing miserably. So it rewards a director of a faltering company with a massive compensation package.
As I’ve argued repeatedly, improving the product, i.e., better news stories, is the basis for shoring up revenues. Good journalism begets good business, argues Phil Meyer in his book “The Vanishing Newspaper: Saving Journalism In The Information Age.”
If you’re a fresh-out-of-college journalism major, how will you react to the company’s offer for an entry-level reporting position of, say, $26,000, a week’s vacation after a year, health bennies only after six months and nights and weekend duty?
When will newspaper companies learn to invest at the bottom rather than at the top?