For those who claim that Wall Street is destroying journalism, Tony Ridder has turned into a lightning rod. The Philadelphia Inquirer and Miami Herald, the crown jewels of Knight Ridder, have combined for 83 Pulitzer Prize wins. It doesn’t have insider protection, unlike the New York Times, Wall Street Journal, and Washington Post. As a result, disinterested shareholders put pressure on Ridder.
Since 1995, CEO Tony Ridder has concentrated on raising Knight Ridder’s financial results and stock price. Revenues increased from $2.2 billion to $3.2 billion over that time, while profit margins increased from 10% to 20.8% in 2000. The once-dominant Inquirer and Herald also started to resemble lower-tier broadsheets about the same period. When he reduced the company’s workforce by 11% amid the recession this year, criticism increased.
The CEO of Knight Ridder, Tony Ridder, made an effort to strike a balance between the demands of Wall Street and journalism. He reduced expenses to increase profits, but he defied calls for even severe newsroom layoffs. Why didn’t Ridder simply sell the business, several experts questioned. He should have been able to recognise that his activities were having the exact opposite impact.
His top aim was to get the stock price, which had remained stagnant for years, going higher. Ridder was content to let wealthy newspapers spend money, like San Jose’s, but he was harsh with the less successful ones. He mandated a 1996 8% workforce reduction at the Inquirer and Daily News, the two newspapers in Philadelphia. At the Free Press in Detroit, he decreased non-newsroom positions from 2,500 to 1,900.
Over the following few years, Knight Ridder’s net income skyrocketed along with its stock price. Ridder’s editors and authors were more vocal the more he pushed for revenues. As the negative feedback from the staff grew, Ridder appeared upset and made an effort to put himself aside. Former executives claimed that Tony doesn’t want to have blood on his hands.
The reaction was intense when Knight Ridder CEO Tony Harris informed staff that there would need to be layoffs. Ridder received letters from three Mercury News Pulitzer Prize winners appealing with him to change his mind. Following that, Ridder portrayed Harris as a frustrated executive with a martyr mentality. What else will a publisher do when you advise him to increase profit margins in a weak market?
Even with the reductions, Knight Ridder still employs more editorial staff than the industry standard. Wall Street may also want the Times to reduce employees, but there is no mechanism for it to compel the publication to comply with its demands. Merrill Lynch projects a 1.5% reduction in newspaper sector revenue for the following year. Therefore, the only way to boost earnings is by losing more bodies.
MY VIEW.
A CEO who focuses only on boosting earnings by laying off employees is problematic. Wall Street looked at Knight Ridder’s estimated 2001 profit margin of 18.4% and wondered why it could not get its margins up to 25%. Also, Ridder felt news organisations are being selective in their reporting. No company discloses hiring extra newsmen, but when it fires employees, the story is different.
The chief executive of Knight Ridder, Tony Ridder met some of the expectations of the stockholders by concentrating on the company’s financial performance when he became CEO. No firm exists to lose money, but maximising profits at all costs is UNETHICAL. Employees who contribute to a company’s success are entitled to certain rights. In order to avoid massive resignation of employees, he should also look for morally acceptable solutions to resolve conflicts within his team.
