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Tuesday, June 20, 2006

Peacemaker in war of words

By Susan Chandler
Published June 20, 2006
Baltimore Sun

It's up to William A. Osborn to be the peacemaker.

As Tribune Co.'s lead independent director, Osborn, chief executive of Northern Trust Corp., must find a way to cool the heated war of words that has erupted between Tribune management and the Chandler family of California, corporate governance experts say.

Osborn also must act as an emissary between the two factions and help craft a compromise that will end the standoff, they add.

"That's one of the jobs of a lead director, certainly," said Paul Hodgson, a senior analyst with the Corporate Library, a corporate governance research organization.

The two sides on Tribune's board appear to be as far apart as Chicago is from California.
Of 11 board members, a majority of six, including Tribune chief executive Dennis FitzSimons, does business in Chicago. They often sit on the same civic committees and rub elbows at the same social events.

There are three representatives of the Chandler family on the board, plus two more members from other parts of the country.

Osborn's position got tougher last week when the Chandlers fired off an 11-page letter lambasting the performance of Tribune management and threatening a proxy fight if the company doesn't offload its broadcast properties before the end of the year.

Tribune's independent directors, led by Osborn, responded to the Chandler attack Thursday, reiterating their support for the buyback and Tribune management.

The public board room clash is unusual because most board members hate to air their differences in public.

Based on his resume, Osborn appears to be the kind of director who would be solidly allied with FitzSimons. After a rough 2 1/2 years at the helm, FitzSimons is fighting to prevent a breakup of the media conglomerate, which owns 26 TV stations and 11 newspapers, including the Chicago Tribune, Los Angeles Times and The Sun.

Like FitzSimons, Osborn heads a conservative Chicago business institution that promotes from within and prides itself on independence. He also sits on the boards of more than a dozen of Chicago's most prominent non-profit institutions.

Osborn, 58, joined Northern Trust in 1970 and basically has spent his entire career at one company.

He declined requests for comment, but his experience at Northern may make him an ideal mediator for the standoff between Tribune management and the super-rich Chandler clan, some large Tribune shareholders believe.

"Bill Osborn is a very thoughtful and seasoned CEO," said Eric McKissack, chief investment officer of Channing Capital Management in Chicago, which owns more than 600,000 Tribune shares. "There might be a perspective he brings from an institution that deals with so many high net worth families that could be helpful in dealing with the Chandler trust interests."

At Northern, Osborn heads a public company with a structure not that different from Tribune's: A large chunk of its shares are still owned by descendents of Byron L. Smith, who started the bank in 1889 with $1 million from leading Chicago businessmen, including Marshall Field and Philip Armour.

The Smiths control 6.2 percent of Northern Trust's outstanding shares, making them the second largest holder after AXA Financial Inc., according to the company's proxy statement.

John Rogers, founder and CEO of Ariel Capital Management in Chicago, one of Tribune's largest non-family stockholders with a 5.2 percent stake, is a fan of Osborn's for another reason. He has worked with him on the board of the Chicago Urban League, a civil rights organization that is going through a difficult leadership transition as its long-serving president prepares to step down this summer.

Rogers praised the way Osborn has transformed Northern Trust, a white-shoe institution that specialized in catering to rich, white people. Osborn has added two African-American directors to Northern's board and recruited a far more racially diverse management team.

"The African-Americans he has hired are not just people of color. They are well-respected. They have stature," Rogers said. "He has created a Northern Trust for the 21st Century. That's why I'm so confident in his leadership of the Tribune board."

Both sides on the Tribune board are angry, but the gap that Osborn has to bridge may not be all that great. Sources close to the Chandlers say the dispute centers on the Chandlers' desire to unwind two Tribune-Chandler partnerships that hold $3.5 billion in real estate and Tribune stock. The Chandlers want to get to the real estate, which includes the buildings that house the Los Angeles Times, The Sun and Newsday.

Tribune balked because it would owe taxes if the deals were unwound, it was not an original party to the partnerships and the Chandlers' share would be tax-free. A source close to the Chandlers says the Tribune's tax bill would amount to between $30 million and $70 million, a relatively small amount given the size of the parties involved.

But FitzSimons is determined not to pay a dollar more in taxes related to Tribune's acquisition of the Chandler family's Times Mirror Co. in 2000 after the company was socked with a $1 billion tax bill late last year that was tied to a pre-merger transaction. The ruling from U.S. Tax Court is on appeal in federal court.

With Osborn's financial expertise from his decades in banking, it should be relatively easy to find a way around the $70 million impasse, his supporters say.

"The same ends seem to be in place for the board and the trusts so it should be an easy job for the lead director," Hodgson said. "In principle, anyway."

Susan Chandler writes for the Chicago Tribune.

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