Chapter 6: The trinity – origins and growth
The goal should be to have media entities controlled by people most interested in using a media entities‟ income to produce high-quality content. C. Edwin Baker, Media Concentration and Democracy, 2007, 36 There is no set formula to induce a newspaper owner to vest the publication in a trust or foundation bound to administer it in the public interest. As we will see, the small number of dailies that have made the transition has each done so in unique circumstances that have depended (in one case quite literally) on the way the wind blew. Each has emerged as a distinctive organisation. So the organisations that form this small band are bound by common purpose rather than by the same legal structure. Nonetheless, the obligations placed on their guardians bear the hallmarks of traditional trusteeship. These guardians are not owners in the ordinary sense, but custodians of enterprises that should endure after them. They have no vested interest beyond ensuring that civil society is the ultimate beneficiary. This chapter and Chapter 7 examine the three largest trust or foundation owned newspapers in the Anglo-American sphere: The Guardian in London, the Irish Times in Dublin, and the St Petersburg Times in Florida. Each of these newspapers enjoys a reputation for high quality principled journalism, and a commitment to use its columns to provide readers with information that contributes to their ability to function as citizens. Each is bound to pursue a form of liberal journalism established by men and women with a driving determination to serve the public interest. There is a strong but necessary emphasis in these chapters on structure and business practice. While this may at first sight, appear to be an oblique approach in a thesis emanating from a Department of Political Studies, it is both deliberate and justified. Schiller maintains that information is central to contemporary capitalism, and is itself conditioned by the social institutions and relations in which it is embedded (Schiller 1988, 41). It follows therefore, that organisation and business systems are central to the political economy of the news, because they influence and help to shape its form and substance. That is no more so than in the trusts and trust-like bodies that administer these three newspapers. Commerce has great difficulty in coping with unorthodox structures that do not fit with established concepts of property and markets. The story of these three newspapers is a tale of trying to fit square pegs into round holes, as will shortly become apparent. I begin by tracing the history of the trinity‘s transition to their present ownership, because this genesis informs the structure under which each operates, before examining the subsequent history of each publication to reveal any weakness in its structure. This detailed examination of the past will show that in each case, the newspaper‘s current governance is as much a reflection of events after the change to trust ownership (that gave interpretative substance to the instruments of ownership and governance) as it is a function of the decision to adopt that form of ownership. Chapter 7 discusses present operations (studied during site visits) to illustrate the influence that the form of ownership exerts on its journalism. In each case there is a brief look into the future to identify potential challenges that each publication may face. The three examples face the common challenge to all newspapers, of ensuring that they have a future. They are exposed to the same audience/advertising shift and economic recession as their contemporaries owned by public listed companies. Their responses however, allow us to examine the effects of different types of ownership on newsgathering, and assess the worth of trustee stewardship as an alternative to ownership of newspapers by publicly listed corporations.The Guardian represents trust ownership based on the gift of a newspaper by its owners; the Irish Times shows that philanthropy is not a prerequisite and a trust can buy a substantial newspaper; and the St Petersburg Times demonstrates that this form of stewardship can exist where there are legal impediments to formal trust ownership. We begin overleaf with the oldest member of this trinity, the Guardian and its owner, the Scott Trust. It is dealt with in greater detail than other examples in this thesis because it is the most highly developed example of trust ownership.
The Guardian has been described as the only newspaper with a ghost for a proprietor (Jenkins 1986, 213). That ghost was C.P. Scott, editor from 1872 to 1929 and owner from 1907 until 1914, when he vested most of the shares in his two sons and his son-in-law. He ruled over the Manchester Guardian until his death in 1932 and his influence continues to be felt in the newspaper, which changed its name to the Guardian in 1959. He was described as one of the great Victorian editors and as an exception among proprietors – willing to sacrifice commercial interests when his conscience demanded (Hampton 2004, 135). It was Scott who was responsible for some of journalism‘s best-known epithets, including ―Comment is free, but facts are sacred‖.213 He established the newspaper as a bastion of liberal journalism, and the principles that he laid down are his ongoing endowment to the newspaper. A single phrase in the articles that govern the Guardian ensure that the principles are a doctrinal reality: ―…on the same lines and in the same spirit as heretofore.‖ C.P. Scott was the nephew of the founder of the Manchester Guardian, John Edward Taylor, and was appointed editor by the founder‘s son (both were named John Edward Taylor) who had inherited the newspaper. Taylor senior was a Manchester journalist who wrote one of the first newspaper accounts of the 1819 Peterloo Massacre in which 11 unarmed protestors were killed, and 560 wounded at an open-air speech by a radical politician. This spurred his determination to begin his own weekly newspaper. The prospectus stated that the newspaper would contribute to ―fixing upon a broader and more impregnable basis the fabric of our liberties‖. The Manchester Guardian became a daily in 1855 after the abolition of stamp duty. Taylor Junior had apparently wished to leave the publication to Scott in his will, but poor execution and the existence of other claimants (whose only interest lay in realising the value of the inheritance) almost took it from Scott‘s grasp when the proprietor died in 1905 (Taylor 1993, 4). The ensuing struggle to raise sufficient capital to secure full ownership shaped his attitude to future proprietorship. In 1971, his grandson Richard Scott, wrote that the experience convinced Scott that the independence of the newspaper would be preserved only if it was owned by members of the family who actually worked on it.214 In 1914, at the age of 68, he transferred the majority of the shares to his sons, John Russell Scott and Edward Taylor Scott, and his son-in-law C.E. Montague. A formal agreement was made to ensure that shares could not be sold to outsiders and there could be no more than five shareholders. These were not however, normal shareholders. The company paid no dividend and none was expected. Montague died in 1928 and his holding was divided between the two brothers who were given control of the newspaper – Edward (Ted) Scott as editor and John Scott as manager, under their father‘s elderly but energetic eye (see Crozier 1934, 327-8). On New Year‘s Day 1932, C.P Scott died and his sons were presented with a demand for heavy death duties payable on his holding in the company, which they inherited. Negotiations with Inland Revenue established that C.P. Scott was a minor shareholder in the business, from which he and his sons had taken only their modest salaries and that death duties were not payable. The ruling was fortuitous, as the company had been enlarged by the acquisition of the Manchester Evening News in 1924. Within four months, Ted Scott was also dead – the victim of a sudden squall that capsized his boat on Lake Windermere. On the car journey to the lake he had discussed the death duties problem with his son, who later recalled: ―I distinctly remember his saying that God knows what would happen to the paper if anything happened to him or his brother‖ (Ayerst 1971, 491). Ironically, the future of the newspaper was being determined (quite literally) by the way the wind blew. John Scott became sole proprietor of Manchester Guardian and Evening News Limited, following the triggering of an informal agreement between the brothers that on the death of one, the other would acquire his shares. The agreement was in the process of being formalised when Ted Scott died. The death of three family shareholders in four years convinced John Scott that the burden of death duties meant the company could not be kept in family ownership should he too, die prematurely. His solution was an extraordinary one – he decided to give away the newspapers. The advice he was given by his legal advisor, Gavin Simonds, resonates with present-day attitudes to ownership: ―You are trying to do something that is very repugnant to the law of England. You are trying to divest yourself of a property right.‖215 John Scott‘s desire to transfer all the shares to a non-commercial entity with no financial interest in the company‘s profits was challenging both legally and to the Exchequer. The Scott Trust was not formally established until 1936 and was to run for 20 years. There is no doubt that the threat of overpowering death duties was the prime motivation. His son Laurence wrote in 1969: ―Although people talk of the Scott Trust ensuring the principles and independence of the papers, as indeed it does, John Scott in fact created it with little more in mind than escaping death duties and so avoiding any danger of loss of independence through a forced sale‖ (Ayerst 1971, 492). Taylor (1993, 4-5) describes Laurence Scott‘s view as ―revisionism‖, and believes that John Scott did, in fact, also have higher motives in establishing the trust. This view is reinforced by the fact that John Scott was not prepared simply to take advantage of prevailing market values, and sell the company to facilitate investments that allowed better estate planning. Scott voluntarily divested himself and his heirs of a group valued at more than £1 million, which included the Manchester Evening News for which Lord Beaverbrook and others were reportedly prepared to pay at least that sum had Scott been prepared to sell it. Schlesinger in the Guardian in 1986 described the establishment of the Scott Trust as ―a remarkable act of public benefaction, and in effect the creation of an institution‖. John Scott did however arrange the Trust in such as way that the family maintained close connections. In addition to himself as chairman, the other six trustees included his son Laurence, and nephew Evelyn Aubrey Montague. The editors of the Manchester Guardian (W.P. Crozier, who had succeeded the late Ted Scott) and the Manchester Evening News (William Haley) and the Guardian‟s London editor (James Bone) were also trustees. The sole ‗independent‘ was a former Lord Mayor of Manchester, Sir Ernest Simon (who later became the 1st Baron Simon of Wythenshawe) but he was also a director of Manchester Guardian and Evening News Limited. The determination to avoid death duties meant the absence of pecuniary interest was absolute. Trustees did not even receive fees, although a number (including John Scott) were salaried employees of Manchester Guardian and Evening News Limited. John Scott retained the right to appoint and dismiss trustees, who were responsible for appointing company executives. He was, in all but a financial sense, still proprietor. A board of directors oversaw the operations of the company from the beginning and, although the Trust was nominally the shareholder, the board operated with a degree of freedom that was almost comparable to the Guardian‟s editorial independence.
Although the newly minted trust included in its ranks the editors of the Guardian and the Manchester Evening News, it did not interfere in any way in the editorial direction of the publications. John Scott passed the editorship of the Manchester Guardian to Crozier when Ted Scott drowned. Crozier had been on the newspaper‘s staff for 28 years when he took the editor‘s chair, and was described as ―a ‗working journalist‘ of
something bordering on genius‖ (Hammond et al.. 1946, 233). He had organised the newspaper‘s network of foreign correspondents, and as editor, was responsible for modernising the publication and broadening its appeal. However, during his 12 years at the helm, he was a careful protector (without the need for prompting) of C.P.Scott‘s vision of the Manchester Guardian as an independent organ of opinion and liberal journalism.
The Scott Family‘s gift is unparalleled in British newspaper history. Our next case, the Irish Times, found its way into trust ownership not through philanthropy, but as a means of protecting the newspaper from hostile takeover while rewarding its owners for their‗generosity‘.
The Irish Times
The Irish Times is Ireland‘s oldest national daily newspaper. Unlike the Guardian, it does not owe its ethos or current structure to an enlightened, socially motivated owner/editor. For most of its existence, its owners were businessmen and its editors were employees – although for the most par they enjoyed editorial independence. The founder was a 22-year-old former army officer, Lawrence Knox, who launched the Irish Times as a tri-weekly in March 1859. Within 14 weeks its frequency was increased and it became Ireland‘s first penny daily. Within two years, Knox had increased the number of columns per page to squeeze in more content, and by 1870 had to buy a new press to double the size of the newspaper to eight pages (Oram 1983, 70- 71). Knox, in a long editorial announcing the first issue, described the Irish Times as a newspaper for ―Irishmen loyal to the British connexion‖, a label that would for a large part of its existence tie it to Protestantism in the eyes of the community (O‘Toole 2009, 7). Under his leadership (although he was never editor), the Irish Times established a reputation for moderation and balance. Knox‘s premature death at the age of 37 in 1873 led to the purchase of the newspaper (for £35,000) by Sir John Arnott, who was also a supporter of British rule. He announced that he would conduct the opposition to disintegrating forces (i.e. the Nationalists) in a fair and straightforward spirit, without the shadow of offence to any person or party in public life (Oram, 76). In 1898, Arnott died and under the terms of his will, his widow and his son, Sir John Alexander Arnott, held the newspaper in trust for two years while a new entity, Irish Times Limited, was formed to take over the newspaper and two other publications. Under the new company‘s articles of association, Arnott was entitled to remain chairman and chief executive until his death or retirement. Three other members of the Anglo-Irish family sat on the board of directors and Arnott and his wife acquired the bulk of the voting shares. Although the structure and voting rights were amended over the years, Arnott retained control (and both positions) until his death in 1940.
The newspaper‘s offices in Lower Abbey Street, Dublin, placed the Irish Times quite literally in the midst of the 1916 Easter Uprising, which it described as ―one of the most deliberate and far reaching crimes in Irish history‖. Its editor, John Healy, was a staunch unionist but the formation of modern Ireland – from the granting of Home Rule in 1914 to the establishment of the Irish Free State in 1921 – occurred on his watch. His pro-British stance throughout was to colour the Irish Times‟ reputation for decades. He died in 1934 and it was for his successor, Robert Smyllie (who later said the Irish Times had been ―the organ of the British Government‖),216 to refashion the newspaper to better reflect the new nation. Smyllie had an often-brittle relationship with Éamon de Valera and the ruling Fianna Fáil party217, and during the Second World War exhibited an openly hostile attitude toward official censors. Arnott died during the war, and his brother Loftus succeeded him as chairman, while his son, Sir Lauriston Arnott, became managing director. A Dublin businessman, Frank Lowe, was co-opted to the board in 1941 and became chairman in 1945 with a brief to modernise the company. Change was necessary. At the end of the 19th century, the newspaper was recording handsome profits in the region of £30,000 (O‘Brien, 30) but in the latter part of Smyllie‘s editorship circulation was falling and profits were low. Lowe introduced a technical modernisation programme218 but was unable to make inroads in the editorial department. He regarded the management of the department, on which Smyllie had placed his own eccentric stamp, as incomprehensible. Shortly after Smyllie‘s death in 1954 (when circulation was 35,000 and on some days as low as 25,000 (Brady 2005, 24)), Lowe and two other Dublin businessmen bought out the majority of the Arnott family‘s holding.219 His co-owners joined him on the board, and Sir Lauriston Arnott relinquished the managing director‘s position. In spite of his failure to fully understand the editorial side of the business, Lowe and his business partners did not interfere with editorial policy.220 In 1962, a former British Army major, Thomas Bleakley McDowell, became chief executive of the Irish Times after buying an interest in the newspaper, an investment that was described as ―hazardous in the extreme‖ (Brady, 25). Lowe and his business partners had invested at a low point in Ireland‘s economy and the newspaper‘s revenue and circulation reflected both the parlous state of affairs and the successive appointment as editor of two men who were ―next in line‖ rather than the most able candidates. Major McDowell (as he was universally known) and Douglas Gageby (who was hired as deputy managing director and who bought a 20 percent interest in the company), became the agents of change. McDowell championed Gageby‘s move from management to the editorship of the newspaper, and he was to serve two terms that totalled 20 years. Under his editorship, the Irish Times was transformed from being the newspaper of the Protestant minority221 to being a truly national newspaper (O‘Brien 165). Circulation had almost doubled to 69,000 by the time Gageby stepped down in 1974 at the end of his first term as editor. The financial fortunes of the company did not however, follow the same ever-upward trajectory. In 1968, profits reached £IR76,834 only to drop to £IR29,575 the following year, before bouncing back to £IR68,028 then falling to £IR10,898 in 1971. These fluctuations were in all likelihood, a reflection of the fact that the company had no capital reserves and limited liquidity (Brady, 28). By this stage, the last of the Arnott family shareholding had been sold to the five directors, who owned the 70,000 ordinary shares in equal proportions. Under the articles, ordinary shares had to be sold to directors or persons approved by the board. The ordinary shares had five times the voting power of the preferential shares that were traded on the stock exchange. In 1972, the directors decided to inject £IR50,000 of new capital into the company, which was converted to ordinary shares that were distributed equally amongst themselves. This gave the directors unchallengeable voting power over the preference shareholders. In that year, the company returned a record profit of £IR242,134 and in 1973 recorded a phenomenal increase to £IR427,511 (O‘Brien, 198-200). The combination of ‗Major McDowell‘ (his usual form of address) and Douglas Gageby appeared to have reversed the newspaper‘s fortunes. Both then played a critical role in changing the structure of the company. The Irish Times Trust was not born out of family tragedy, nor did it display the generosity that saw the Scott family hand over the assets of Manchester Guardian and Evening News Limited without seeking any form of payment. However, like John Scott‘s action in forming the Scott Trust, the formation of the Irish Times Trust was a defensive action. In September 1973, the five directors of the Irish Times Company transferred their ordinary shares into a trust held by a firm of Dublin solicitors. Preferential shares continued to be traded on the Dublin Stock Exchange. Eight months later, they announced that the company itself had become a trust in order to prevent a possible takeover of the Irish Times by interests ―that might not maintain its high editorial standards‖ (O‘Brien, 200). There was in fact, no pending offer or even expression of interest that might precipitate such a move but three of the five directors (the Walker brothers (Ralph and Philip) and George Hetherington), had indicated that they wished to retire and cash up their all-important ordinary shares (ibid., 201-2). This opened the possibility that McDowell and Gageby would be forced to accept new investors with different views on how the company should operate. McDowell devised a plan that would both prevent such a takeover and secure his own control of the business. He sought advice from, among others, the chairman of the Observer Trust Arnold (later Lord) Goodman. The solution was complex but involved four key components:1. He persuaded the Investment Bank of Ireland to invest £IR1,625,000 to purchase,the directors‘ 120,000 ordinary shares.222 2. The directors were offered £IR1 for each preference share (which were in two classes that traded at 45p and 54p, respectively). They received £IR13.50 for each of their ordinary shares or a total of £IR325,000 per director. He persuaded the directors to each leave £IR76,000 in the business to purchase the 380,000 preference shares. These were placed in a new entity, Irish Times Holdings, while the operation of the newspaper remained in a wholly owned subsidiary, Irish Times Limited. This was a necessary distinction to prevent the bank being seen to control the newspaper. 3. The investment by the bank and the directors in Irish Times Holdings was in the form of non-voting redeemable shares and the 100 voting shares would be in the hands of yet another body, the Irish Times Trust Limited – the ultimate controlling entity. The redeemable shares would be progressively bought back from the bank and directors out of profits. In the meantime, the holders were entitled to a 7 percent dividend (O‘Brien 203-4).
4. McDowell would remain chairman of the operating company and the Irish Times Trust Limited board of governors until he decided to resign or retire (as a condition of the bank‘s involvement). In a legal sense, the structure that McDowell created was (as we will see later in this chapter) a precursor to the present status of the Scott Trust. Legally, it was not a trust but a private company limited by guarantee. The element of trusteeship lay in the wording of the memoranda and articles of association in both the Irish Times Trust Limited (for convenience it will be referred to as the Trust) and its operational subsidiary, the Irish Times Limited. The objects of the Trust began with (largely unfulfilled) ambitions223, to become an educational and social endowment body before they addressed its relationship with the Irish Times. The operating company articles were to be amended to ensure that the object of the Irish Times Limited was ―to publish the Irish Times as an independent newspaper primarily concerned with serious issues for the benefit of the community throughout the whole of Ireland free from any form of personal or party political, commercial, religious or other sectional control‖. A prohibition on governors being ministers of religion, politicians (and anyone ―more than a mere member of a political party or group‖), or people with media company connections was designed to protect this position.224 It then set out five ―principal objectives‖ that the editorial policy would promote, and three principles that should be followed in the presentation of editorial content. The prescriptive nature of the objectives and principles stood in stark contrast to the Scott Trust‘s requirement to maintain the Guardian ―…on the same lines and in the same spirit as heretofore‖. The Irish Times editorial objectives were to be: The support of constitutional democracy expressed through governments freely elected. The progressive achievement of social justice between people and the discouragement of discrimination of all kinds. The promotion of a society where the quality of life is enriched by the standards of its education, its arts, its culture, and its recreational facilities, and where the quality of spirit is instinct with Christian values but free from all religious bias and discrimination. The promotion of peace and tolerance and opposition to all forms of violence and hatred so that each man (sic) may live in harmony with his neighbour considerate for his cultural, material and spiritual needs. The promotion of understanding of other nations and peoples and a sympathetic concern for their well-being. The principles governing publication enshrined in the Irish Times many of the institutionalised journalistic values that are identified in Chapter 1. In order to ―enable the readers of the Irish Times to reach informed and independent judgements and to contribute more effectively to the life of the community‖ it required the following: News shall be as accurate and as comprehensive as is practicable and be presented fairly. Comment and opinion shall be informed and responsible, and shall be identifiable from fact. Special consideration shall be given to the reasonable representation of minority interests and divergent views. Gageby stated later that the editorial policy and journalistic principles were in fact, what had been practiced in the newspaper over the preceding decade (Kearney & Moran 1984, 16). Each governor of the Trust was required to declare annually his or her adherence to the objectives and principles (and confirm he or she had not become a minister of religion or active political party member), but it is noteworthy that neither the memorandum nor the articles included a guarantee of the editor‘s independence or freedom from interference by the governors. However, the articles of the operating company, the Irish Times Limited, incorporated a section that stated that the director set editorial policy consistent with the Trust‘s objectives, but that the editor was solely responsible to the board for the content of the newspaper. The articles embedded high-minded journalistic principles but they also embedded Major McDowell. Article 52 guaranteed not only his membership of the Trust for as long as he wished it, but also stated that so long as he was there, he would be chairman. And it was to be thus for a very long time indeed. McDowell‘s shadow was akin to the influence exerted by the creator of the organisation that assumed ownership of the St Petersburg Times, but Nelson Poynter did so from the grave. How he did so is outlined in the following section.
Chapter 1: Introduction
1.1 Approach and method
Chapter 2: Journalism’s crisis
2.1 The flawed model
2.3 Root causes
2.4 Journalism‘s future
Chapter 3: Legal foundations
3.2 Trust types
3.3 Trustee duties and powers
3.4 An exemplar
Chapter 4: Genesis of media trusts
4.3 North America
4.4 Australia and New Zealand
4.5 Lessons from history
Chapter 5: Keeping it in the family
5.1 Family traits
5.2 Ochs-Sulzberger family and the New York Times Company
5.3 Bancroft family and Dow Jones & Co.
5.4 The Graham family and the Washington Post Company
5.5 The Harmsworth family and the Daily Mail & General Trust
5.6 The Murdoch family and News Corporation
Chapter 6: The trinity – origins and growth
6.2 Trusteeship over time
Chapter 7: Current governance in the trinity
7.1 The Scott Trust
7.2 The Irish Times Trust
7.3 St Petersburg Times
Chapter 8: Also in the public interest
8.1 Public Service Broadcasters
8.2 News agencies
8.3 Stand-alone non-profit journalism
8.4 Low profit limited liability companies
Chapter 9: Conclusions – possibilities and realities
9.2 Possibilities and realities
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