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Proxy fight over Media General's board of directors gets ugly

Media General took the proxy fight over seats on its board of directors to a new level Thursday, e-mailing a letter to the company's 7,000 employees with instructions on how they could vote against three directors proposed by the hedge fund Harbinger Capital Partners.

The growing conflict has placed performance of Media General's Tampa outlets such as WFLA-Ch. 8, the Tampa Tribune newspaper and center stage, as Harbinger contends that the company should consider selling those platforms to stabilize its stock value.

Calling the Tampa outlets "one of our crown jewel assets," Media General president and CEO Marshall N. Morton urged employees Thursday to "simply throw out" materials sent to them by Harbinger after reading them and to vote for the company's slate of directors.

Employees receive stock in Media General as the company's contribution to their 401(k) retirement plan.

Media General spokesman Ray Kozakewicz said the letter was an update on recent developments, including Morton's reaction to an investor forum held April 1 featuring presentation from representatives of Harbinger and Media General.

"Employees are also receiving proxy materials from Harbinger," said Kozakewicz. "We're explaining the differences." Stockholders will vote on directors at their annual meeting April 24.

But Charles Elson, director of the University of Delaware's Center for Corporate Governance, called the letter "highly inappropriate" for singling out employees from other stockholders.

"In a proxy fight, all's fair, but suggesting how an employee vote outside their regular process is a little much," he said. "It's like telling employees they should all paint their house a certain color. … It's overreaching."

Both Harbinger, which owns about 18 percent of the Richmond, Va., company, and Media General have proposed their own slates of three directors to sit on the corporation's nine-member board. The family of chairman J. Stewart Bryan III elects the six other board members by controlling the company's "supervoting" Class B stock.

Harbinger's criticisms have struck at the core of Media General's corporate culture, complaining that the company overpaid in its 2006 purchase of four NBC stations for $600-million and that the Florida outlets are dragging down the stock price.

Morton wrote employees Thursday saying "Harbinger clearly hasn't taken the time to understand Media General … it has a very short-term focus." Kozakewicz said Morton unsuccessfully tried to contact Harbinger executives in the past, and has planned no meetings with them before the April 24 vote.

"Employees who own Media General stock in their 401(k) plans have clearly suffered directly from the company's severe stock price decline," countered Joseph Cleverdon, vice president and director of investments at Harbinger in an e-mail to the St. Petersburg Times.

That would seem to reduce chances for a settlement similar to the agreement the New York Times Co. developed with Harbinger in March, in which the company avoided a proxy war by adding two seats to its board and included two directors picked by the hedge fund.

Newspaper industry analyst John Morton said Harbinger may be "sensing some blood in the water" since News Corp. president Rupert Murdoch succeeded in exploiting divisions within the family that owned the Wall Street Journal to buy the newspaper.

"(At Media General) the Bryan family is conservative, used to being unchallenged and, I suspect, views this as somebody trying to stir up trouble," Morton said. "The family controls the company and there's probably nothing that's ever going to change that."

Morton also criticized Harbinger for lambasting Media General over things it cannot control, such as the industrywide depression in media stocks. He also said Harbinger is pushing the company to sell major Florida media outlets when the market is at its worst.

Still, Elson cautioned that Harbinger might succeed.

"The wind is clearly at their back since the New York Times situation," the professor said. "Maybe they can get in that boardroom and convince the family a change is necessary."

Eric Deggans can be reached


Proxy fight over Media General's board of directors gets ugly 04/11/08 [Last modified: Monday, April 14, 2008 5:14pm]
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