Dow Jones’s share price shows it does not=20 practise the economics preached by its own=20 Wall Street Journal, reports Mark Tran in=20 New York
THE Wall Street Journal has waged a=20 relentless campaign for free-market=20 capitalism on its comment pages throughout=20 the years, priding itself for having=20 provided the redoubt for the shock troops=20 of the Reagan revolution.
Robert Bartley, in charge of the editorial=20 pages, furnished an influential platform=20 for writers to preach the gospel of supply- side economics. Bartley fondly remembers=20 the Reagan years in his book, Seven Fat=20 Years. But there have been precious few fat=20 years for shareholders in Dow Jones, the=20 parent company of the Wall Street Journal=20 as well as Barron’s, a financial weekly.
Ironically, Dow Jones, one of the world’s=20 leading purveyors of business and financial=20 information, has become the worst=20 performing stock in the Standard & Poor’s=20 500 publishing index. Ten years ago, Dow=20 Jones and its competitor, Reuters, had the=20 same market capitalisation of around $3,5- billion. Reuters has since left Dow Jones=20 in the dust, and now has a market=20 capitalisation of more than $20-billion,=20 while Dow Jones is stuck at about the same=20 figure as 10 years ago.=20
A string of dubious business decisions has=20 produced dwindling profit margins, a return=20 on equity less than half that of 10 years=20 ago and a stock that has missed out on the=20 greatest bull market in history. For years,=20 the company’s lagging share price attracted=20 little attention. Until now.
Voting control of about 70% of Dow Jones’s=20 shares lies with the heirs to Clarence=20 Barron, who in 1902 bought the company=20 founded 20 years earlier by Charles Dow and=20 Edward Jones. Other newspaper dynasties,=20 like the Sulzbergers of The New York Times=20 and the Graham family of The Washington=20 Post, actively run the shop, but the Dow=20 Jones heirs, worth a collective $1-billion,=20 according to Forbes magazine, have a=20 profile lower than a submarine’s and have=20 shown little interest in their assets.
All that changed with the passing of the=20 shares from one generation to another. Last=20 May, Bettina Bancroft, one of nine great- grandchildren of Clarence Barron and one of=20 four families on the board, died from lung=20 cancer. Her 32-year-old daughter, Lizzie=20 Goth, inherited 700 000 shares of Dow=20 Jones, worth around $23-million, to make=20 her stake the largest of the new=20 generation. She also remains the=20 beneficiary of hundreds of millions of=20 dollars worth of Dow Jones shares, still=20 held in trusts, most of which will not be=20 distributed until the last member of her=20 mother’s generation dies.
Curious about her inheritance, Goth=20 consulted her money manager about her=20 fortune and received the grim news about=20 her holdings. She duly discussed the state=20 of her finances with billionaire investors=20 such as Warren Buffett and Ira Millstein, a=20 corporate governance expert.
Buffett’s advice to Goth and William Cox, a=20 cousin also disgruntled about Dow Jones’s=20 performance, was to act like owners and=20 prod the company, which traditionally=20 appoints journalists as executives, to do=20 something about its dismal share price. Dow=20 Jones’s current chief executive officer is=20 Peter Kann, a Pulitzer-prize winning=20 foreign correspondent who writes an annual=20 letter to readers crowing about the overall=20 performance of the company.
Cox last week resigned from his job as=20 management director of Dow Jones Global=20 Indexes. He said that after 18 years it was=20 time to move on. If he were a portfolio=20 manager, he added, he would have been a=20 fool to have money in Dow Jones.
By washing the family laundry in public,=20 Goth and Cox have split the Barron brood.=20 Some have told her to shut up, while others=20 have had their interest aroused.=20
Dow Jones’s biggest headache is Telerate,=20 which cost the group $1,6-billion. This=20 financial data subsidiary once dominated=20 the field, but neglected to update its=20 technology and has been outstripped by=20 Reuters and Bloomberg, another financial=20 news service, both of whom are rumoured to=20 be interested in buying Dow Jones.=20
Management, now feeling the heat, said that=20 it would spend $650-million to overhaul the=20 service, but the move left markets=20 unconvinced. Some investors believe the=20 group should get rid of this millstone=20 around its neck.
Whatever decision it takes, Dow Jones has=20 been shown up to be paternalistic and=20 uncompetitive, with a passive board, very=20 far from the lean, efficient free-market=20 creature extolled by the Journal’s=20 editorials.=20
In an editorial last week, the Journal duly=20 excoriated President Bill Clinton for=20 Budget duplicity and lack of fiscal=20 responsibility, charges that would resonate=20 more effectively if Dow Jones could manage=20 its own affairs better.
Dow Jones does not practice what the=20 Journal’s editorials preach, and the saga=20 contains much material for the kind of rip- roaring yarn frequently carried in a front=20 feature, but the story has yet to make that=20 prestige slot. Among themselves, however,=20 Journal reporters who loyally bought shares=20 in Dow Jones are urging: “Go, Lizzie, Go.”