A Family’s Benign Neglect at Dow Jones

By JOE NOCERA
Talking Business
The New York Times
August 4, 2007

“The primary reason I was in favor of the deal,” said Elisabeth Goth Chelberg on Wednesday, “is because I did not think that family ownership was ever going to be in the best interest of the company.” She paused for a second, and then offered a small, sad correction. “I mean this family ownership.”

“I just didn’t realize that they were so disorganized,” said Rupert Murdoch on Thursday. He shook his head in wonder. “I thought we would have a rational series of meetings. They didn’t want that.”

Ms. Chelberg is a striking 43-year-old woman who lives half time in Prague, where her husband is an entrepreneur, and half time near Lexington, Ky., where she raises show horses that she rides, with immense success, in competitions all over the world. Rupert Murdoch, of course, is a 76-year-old, Australian-born captain of industry who has spent his adult life single-mindedly building the News Corporation into a dominant global media company.

In other words, it would be hard to find an unlikelier pair of allies. But Ms. Chelberg is also a Bancroft, and over the last three months, as her family flagellated itself over whether to sell its beloved Wall Street Journal to Mr. Murdoch, Ms. Chelberg never wavered. Yes, her family had owned The Journal’s publisher, Dow Jones, for 105 years, and yes, it was a source of immense pride. But her fundamental belief was that her family had long since forfeited the right to own the asset. Benign neglect does not true ownership make.

Ms. Chelberg did not have a vote in the sale to Mr. Murdoch; her 800,000 shares were held in a trust controlled by her uncle, Christopher Bancroft, who fiercely opposed selling to Mr. Murdoch, fearing that he would destroy the paper’s editorial independence. But she played a big role nonetheless. Indeed, it is not too much to say that this all started with her, 10 years ago. And what she started, Mr. Murdoch finished, as enough family members finally agreed to sell to him early this week. As the dust began to settle, I went to see them both.

“I really went to a lot of trouble 10 years ago,” Ms. Chelberg said with a laugh as we sat at her dining room table in Kentucky. She had dug up some papers for me. One was a January 1997 letter to her family, imploring them to “act as the owners we are.” Several were legal bills: $73,000 in January 1997, $94,000 in April. “That went on for two years,” she said with a grimace.

Ms. Chelberg was 33 then, single, a recovering alcoholic whose mother, Bettina Bancroft, had died the year before, leaving her an inheritance. Virtually all of it was in Dow Jones stock, some of which was in trust and some of which she owned outright. Not knowing a thing about the company — not really knowing anything about business — Ms. Chelberg decided she needed to understand this asset she now owned. As she wrote in that same 1997 letter, “I was very disturbed to discover that my investment in what I had been taught to consider an unassailable company had diminished in value — by approximately 40 percent from its 1987 peak to its recent levels.”

Her search to understand what was wrong at Dow Jones caused her to seek out Warren E. Buffett, among others. She learned how other media companies had surpassed Dow Jones. She came up with a list of possible new board members. She even asked to go on the board herself. Her goal was never to see the company sold; rather it was to rouse her family, to make them realize that simply accepting management’s view of the world was not the way to act like owners.

Her attempted wake-up call could have been a turning point for the Bancrofts and the company. In retrospect, she had given her family a 10-year window to grab control of the company, install new management, and give Dow Jones a fighting chance. But instead of being thanked, she and her cousin, William Cox III, who was also talking about management’s failures, were scorned and vilified. She wound up selling the shares she owned outright. The shares in trust, however, she was stuck with.

“We were disenfranchised,” Ms. Chelberg told me; it was years before she and Mr. Cox could even attend family meetings again. Some years later, several other cousins, including Crawford Hill, who would write a 4,000 word e-mail message supporting Mr. Murdoch, tried to raise many of the same issues. The same thing happened. “We all tried to work within the system, but there was no system to work within,” she said.

Last fall, someone representing Mr. Murdoch came to see her and Mr. Cox to discuss the possibility of making a bid for Dow Jones. She didn’t take it all that seriously; over the years, suitors had come and gone. So she was shocked in April when CNBC broke the news that Mr. Murdoch had made his audacious $60-a-share bid for the company.

What didn’t shock her was what stunned the rest of us: the extent to which the family’s dysfunctional nature was placed on vivid and painful display. Christopher Bancroft, who is a board member as well as a trustee, absurdly boycotts a crucial family meeting — and then, even more absurdly, asks Mr. Murdoch to pick up his personal expenses in exchange for abstaining from voting, only to discover that the trust doesn’t allow it. Another family board member, Leslie Hill, decides after meeting him that she doesn’t like Mr. Murdoch, and refuses to take his phone calls after that. The family keeps asking for Mr. Murdoch to up his offer, failing to understand that he has zero incentive to bid against himself. A family matriarch resigns as a trustee the day before the voting. And on, and on.

Watching the family flail these past few months, one couldn’t help agreeing with Ms. Chelberg’s assessment: the Bancrofts simply weren’t capable of owning Dow Jones. They were barely capable of selling it. “We took from this asset, instead of giving to it,” she said, speaking of the hefty dividend that cut into Dow Jones’s earnings. She, meanwhile, had spoken again to Mr. Buffett, who told her that Dow Jones would have trouble competing as an independent company. So did other experts she spoke to.

She acknowledges that Mr. Murdoch could wreck the paper. “But that is a risk you would take with any new owner,” she said. “He has a tremendous opportunity,” she continued, “and I don’t think he’s going to blow it. He’s going to put money in the company, he’ll grow the brand, and he can do things through his distribution channels we never could. TV? We lost that chance 20 years ago.”

Was she happy Dow Jones had been sold? No, she said, but she had made her peace with it. “Ultimately, my love of The Wall Street Journal is what caused me to support the sale.”

WHEN I went to see Mr. Murdoch the next day in New York, he succinctly made the point that Ms. Chelberg had been working toward the previous afternoon. “The first road to freedom,” he said, “is viability.”

What he means, of course, is that a newspaper has a lot better chance of being editorially independent if it makes healthy profits. What he didn’t say is that if the Bancrofts had turned down his deal, Dow Jones’s steady, inexorable decline would likely have continued. But then, he didn’t have to say it. Enough Bancrofts finally understood what their negligence had wrought. That’s why they sold him the paper.

We had breakfast in a small private dining room in the News Corporation’s Manhattan headquarters. Seeing that I had come tieless, Mr. Murdoch quickly doffed his tie and jacket, leaned back in his chair and happily recounted stories from the deal.

Was there ever a time he thought of pulling the offer? I asked. “Yeah,” he replied. “After they sent that letter. It was so insulting.” That was the letter in which the Bancrofts hoped to ensure editorial integrity by giving themselves the right to nominate News Corporation directors as well as a special editorial board for The Wall Street Journal. He swiftly rejected it, and eventually the Dow Jones board took over the negotiations that resulted in the creation of a small oversight board to protect the paper’s editorial independence.

Mr. Murdoch himself seemed unruffled by the need for such an agreement — or even by the accusations that he runs roughshod over the newspapers he owns. “I’m used to it,” he shrugged. He dismissed the idea that he would meddle inappropriately with a quick one-liner: “I won’t meddle any more than Arthur Sulzberger does,” he joked. (Arthur Sulzberger Jr. is the chairman of The New York Times Company.)

My own view is that the chances of Mr. Murdoch wrecking The Journal are lower than you’d think; he needs a credible Journal for his own strategic purposes, and at 76, he surely must be thinking about his legacy. Besides, in The Journal’s cantankerous, provocative, deeply conservative editorial page, he already has the opinion page of his dreams, and one that packs enormous political clout.

Which is not to say he isn’t going to change The Journal. “We have lots of decisions to make,” he said. “How much should we really spend developing the Saturday paper? What should we do digitally? Should we remain subscription-based on the Web, or should we make it free? How much should we spend beefing up political and international coverage? I want it to be more competitive with The New York Times,” he added. “But that will be expensive.”

He suddenly picked up a Wall Street Journal that was lying in front of him, and I could almost see the ink flowing through his veins. “I would like to see real breaking news,” he said. “I like A-heds” — the famous less-than-serious feature that often runs down the middle of the front page, “but I don’t like a whole page of A-heds.”

He scanned the front page up and down. Sometimes his expression suggested deep approval of what he was seeing; but sometimes he frowned, suggesting that he had a different idea of what ought to run on the front page of this great newspaper he would soon own. “I just think The Journal needs a little more urgency,” he said finally.

Myself, I’ll miss the A-heds if Mr. Murdoch decides they should disappear. But I won’t view it as the End of Journalism as We Know It, nor will I view it as evidence that Mr. Murdoch is destroying the editorial integrity of The Wall Street Journal. Rather, I’ll view it as an example of a new boss who has strong views about what people want from a newspaper.

And if the Bancrofts miss the A-heds? They can’t say they weren’t warned.