Monday, June 19, 2006

Tribune board finds itself in the spotlight

June 18, 2006
By Steven R. Strahler and Julie Johnsson
Chicago Business

Control fight heats up seats of local directors

The boardroom brawl at Tribune Co. poses a loyalty test for a group of homegrown directors with deep ties to company management and the Chicago business community.

A majority of Tribune's 11 directors, including CEO Dennis FitzSimons, are drawn from a tight circle of the city's corporate elite. Directors like Northern Trust Corp. CEO William A. Osborn and Abbott Laboratories chief Miles D. White run in the same circles, often serving together on civic and charitable boards.

"Outside relationships — whether they're at a country club or other directorships or private business relationships — could potentially influence the objectivity of a director," says Rob Kellogg, a managing director for research at Rockville, Md.-based proxy adviser Institutional Shareholder Services Inc.

As the fight for control of Tribune unfolds, the six local directors will face increasing tension between their fiduciary duties to shareholders and any affinity they may feel for company management or Tribune itself as an iconic Chicago institution.

Perhaps as soon as this week, they may have to choose between management's plan to revive Tribune's fortunes and more-drastic alternatives that could sweep Mr. FitzSimons out of office and put the city's largest newspaper and two of its leading broadcast outlets in the hands of outsiders.

The Chandler family of Los Angeles, which controls 12.2% of Tribune stock and three board seats, opposes management's proposal to buy back 25% of the company's shares. Last week, they called for a breakup of the company and hinted that they will propose such a transaction soon.

So far the local directors, along with two other out-of-town board members, have backed management. None of the directors would comment for this story, but last week they insisted that the buyback plan is best for all shareholders.

Among the Chicago directors, only former Quaker Oats Co. CEO Robert Morrison has a track record in unloading a company outright. In 2000 he announced the sale of the century-old Chicago company, which, like Tribune, stumbled with a big, ill-fated acquisition.

Corporate Library, a watchdog group in Maine, classifies Mr. Osborn, the Tribune's lead director, as an "outside related" director because of business relationships between Northern Trust and Tribune.

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