Chicago Tribune, Bonuses, and AIG

UPDATE, May 21, 2009: Setting the record straight

On May 19, the Washington Times published a correction regarding its claims about the Chicago Tribune and bonuses for executives.

Here is the Washington Times correction:

• Correction: A story in May 14 editions of the Washington Times stated incorrectly that a Chicago Tribune editorial had berated the American International Group for paying huge bonuses to employees. In fact, the editorial said that the public has an economic stake in the survival of AIG, and that if bonuses were paid to employees who are key to the company's future, they can be justified. The Times story also quoted an unnamed blogger as saying: "Using the employees' pension money to pay stockholders and executive bonuses - priceless." In fact, the Tribune is a private company and does not have stockholders. No pension money was used to pay bonuses.

Read the March 17 Tribune editorial on AIG here.

Based on what was the factually incorrect reporting of the Washington Times, I charged the Tribune with hypocrisy. In light of the correction, that charge of hypocrisy on the part of the Tribune when it comes to the AIG bonuses is unwarranted.
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Oh, the hypocrisy!

Jennifer Harper writes: "Bankrupt Tribune gives bonuses after berating AIG"

Two months after denouncing a troubled financial company for doling out hefty management bonuses, a bankrupt news media company is doing the same thing.

"Money for nothing?" blared a Chicago Tribune editorial in mid-March, responding to news that American International Group Inc. planned to give $450 million in bonuses to its top executives during a very public federal bailout.

But this week, the Tribune Co. - which owns the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, the Hartford Courant and other dailies, along with 23 TV stations - received permission from a Delaware bankruptcy judge to pay out $13.3 million in bonuses to some 700 local and corporate managers.

The payouts come as $2.7 million in severance pay to 68 employees who lost their jobs last year remains frozen.

Tribune Chief Financial Officer Chandler Bigelow III explained the rationale for the bonuses during an appearance in U.S. Bankruptcy Court on Tuesday, using an argument reminiscent of that used by AIG.

"We need to motivate and incentivize the key people who will implement change. These are really good people we're talking about. They're the best and the brightest in the company," Mr. Bigelow told Judge Kevin Carey.

The Chicago Tribune didn't see it quite that way in March, when it editorialized about the bonuses to the same company executives responsible for the insurance giant's $40.5 billion in losses last year. "Shouldn't that kind of 'performance' require those employees to return some of their salaries, if not be fired altogether?" it wrote.

The Tribune Co. by comparison was $13 billion in debt because of dwindling advertising revenues and heavy operating costs when it filed for bankruptcy in December.

...At the same Tuesday hearing where he approved the Tribune bonuses, Judge Carey refused to approve the severance payments to the Tribune employees who were laid off before the Tribune filed for Chapter 11 protection in December.

While the judge said he "sympathized" with the plight of the unemployed journalists, he cited legal constraints. Two employees who had been laid off before the bankruptcy were granted approval for the payments, however.

I suspect similar scenarios are playing out all over the country.

Those operations quick to condemn AIG for its bonuses and harsh in their criticism have probably dished out bonuses of their own.

Of course, if John Kerry had it his way, he'd bail out the newspapers.

From Politico:

Last week, Sen. John Kerry (D-Mass.), threatened with the loss of the Boston Globe’s automatic endorsement and generally fawning coverage, held a meeting of his Senate media subcommittee. During the hearings and afterward, Kerry declared newspapers an “endangered species,” argued for something like a bailout and denied that repeal of restrictive media ownership rules would help solve the problem.

Speaking of denial, the Obama administration tried to put the kibosh on rumors that a bailout is in the works. The language it has employed does not inspire confidence. White House spokesman Robert Gibbs told reporters that there was “a certain concern and a certain sadness” that some newspapers are closing but explained that he didn’t “know what, in all honesty, government can do about it.”

...Right now, a variety of proposals for what government can do about it are floating around. These range from direct bailouts to tweaks of existing philanthropy and anticompetitive laws. Government could fund newspapers directly or make it easier for foundations to do so or remove roadblocks to newspapers getting together and making people pay for content.

If the government does anything to prop up the newspapers, they'll need to guard themselves from the likes of Chuck Schumer and Barney Frank if they attempt to give out bonuses.

The recipients may have to beware of the people wielding pitchforks.

Remember what Schumer said during the AIG bonus mess?

"We intend to do everything in our power to prevent those payments from being paid and recoup the money that has already been paid."

Schumer said he wrote a letter to AIG chief Edward Liddy urging him to tell his employees to voluntarily return the bonus money. Otherwise, Schumer said, Congress will pass legislation that would tax the bonus money at such a high rate that the AIG employees will be forced to pay it back through taxes.

"If you don't return it on your own we will do it for you," Schumer said.

..."If Mr. Liddy does nothing we will act and we will take this money back and return it to its rightful owners the taxpayers," Schumer warned. "So for those of you who are getting these bonuses, be forewarned -- you will not be getting to keep them."

Remember what Barney Frank had to say about the AIG bonus recipients?

“We will be asking for the names,” Frank said at the beginning of a hearing at which AIG Chairman Edward Liddy was called to testify. “If Mr. Liddy declines to give us the names, then I will convene the committee to vote a subpoena for the names. So we do intend to use our power to get the names of the people here.”

Be forewarned, newspaper execs. Be careful what you wish for in terms of government assistance.

It's one thing to suffer the slings and arrows of angry people pointing out your blatant hypocrisy. It's another thing to have the government pass legislation to strip you of your bonuses. That really hurts.