Thursday, March 29, 2012

Why Is This Woman Smiling?

You would, too, if you’d just been granted a half-million dollar bonus from a company that just three months ago was bankrupt.

This woman is Mary Junck, and she’s CEO of Lee Enterprises, the newspaper conglomerate that owns, among other things, the Wisconsin State Journal.  Lee went on a buying binge a few years ago, overpaying for a bunch of daily newspapers scattered around the country.  As a result, Lee racked up a billion dollars in debt (which their cash flow obviously couldn’t serve) and declared bankruptcy.

Why would such a company then turn around and give its CEO a half-million dollar bonus?  (Not to mention the 250-thousand-dollar bonus to the company’s CFO, Carl Schmidt.)

Because these two captains of industry….err, media….re-negotiated the company’s debt.

That’s the way it works on Wall Street…err, I mean in media….today.  It’s not whether your company is fiscally sound; it’s whether you can repackage the crappy debt you put out there, and find some investment banker outfit that will take your paper and charge your company dearly for doing so.

You just keep rolling the unsustainable debt, and collecting huge bonuses.

To make your cash flow support your debt, you slash payroll.  Ironically, as Ms. Junck was collecting her half-million-dollar bonus, Lee Enterprises was busy laying off a bunch of staff at its newspaper in Helena, Montana – the Helena Independent Record.  (By the way….how’d that paywall work out for you at the Independent Record?  Not so good?  Oh, that’s too bad.)

The company’s stock, which was almost de-listed a year ago because it had fallen below a dollar a share, is trading at about $1.21 today.  In 2004, Lee stock was trading at 48 dollars a share.

So, to summarize: Lee Enterprises stock has fallen totally into the toilet; the company has just emerged from bankruptcy; it has a billion dollars in re-financed and unsustainable debt; and it continues to cut staff in an effort to pay back the sharks they owe.

I’d say it’s about time to give the financial whiz kids who run this company a huge bonus, wouldn’t you?


  1. Tim...I agree with your point, but why agonize over it...its a NIMBY issue you or I cannot do anything about..but I think I know where you are coming from...obviously the stockholders/ownership go along with the largesse and will continue to do so...I guess it would not be a good idea to purchase their stock as the fiscal guidance of this company is questionable..we ride!

  2. Part of the story, garyjay, is that so many of the employees of Lee, and that's a lot of people I know in Madison, were counting on Lee stock to have value when they retired. That value has been destroyed by the abominable management, which continues to reward itself while the company sinks. This is the sort of crap that you and I can't do anything about, true; but you'd think the shareholders - many of whom are still Lee employees - would do their best to put an end to this crap.

  3. At the annual meeting on March 21 Lee approved a 5 for 1 reverse stock split. This gambit is routinely employed by failing companies which are desperate to raise the price of their stock in order to maintain their stock exchange listing and to meet the requirements of institutional owners. Hint, mutual funds don't like owning $1 stocks.

    While the stock price will increase by a factor of five, current owners will find themselves holding 80% fewer shares and the really bad news is that reverse stock-splits attract short-sellers like vultures to a rotting carcass, think Mitt Romney. When it is all over, Lee's stock price may well revert back to a buck-and-change valuation. Share holders will feel like they have been skinned alive. That $500K bonus to boss will be a super morale booster then.

    I have watched these reverse stock-split fiascos for thirty years and it almost never ends well. My condolences to Lee Enterprise employees.

  4. FWIW, Tim, actual Conservatives (underline 'actual') do not approve of this crap, either. That's because actual Conservatives hold to actual morals.

    The larger issue, which is the viability of newspapers, remains a problem. To be more nuanced: would forsaking her bonus have raised the value of the stock for the retirees?

    IOW, one can 'cartoon' the decisions and STILL not have solved the problem of share-value.