Chicago Ties Link Tribune Directors

As a besieged Tribune Co. searches for ways to raise its stock price or figuratively die trying, much of the burden will fall on seven board members who share an unusual number of civic ties with one another and with Tribune Chairman and Chief Executive Dennis J. FitzSimons.

The seven constitute a special committee formed Sept. 21 to oversee FitzSimons and his management team in their efforts to uncover value even if it means a sale or breakup of the 159-year-old company, the Chicago-based parent of the Los Angeles Times, the Chicago Tribune, Chicago’s WGN-TV, KTLA-TV Channel 5, baseball’s Chicago Cubs and other broadcast and newspaper properties. The process is expected to be completed by the end of the year, Tribune said.

The committee members were selected because they were neither Tribune employees, as is FitzSimons, nor part of the dissident board faction representing California’s Chandler family. The Chandlers are Tribune’s largest shareholder group, owning nearly 20% of the stock and three seats on the 11-member board.

But some outside experts question whether, given their close ties, the committee members can be truly objective.

“When people are meeting frequently on corporate boards or charities or in sports clubs, it’s not like they’ll collude to protect each other’s interests, but they’ll tend to share the same outlook,” said Jackie Cook, a senior research associate at Corporate Library, a corporate-governance watchdog firm.

Although it is the nation’s third-largest city, Chicago can seem like a small town from one perspective: There’s seldom more than a degree or two of separation between its business leaders.

According to Corporate Library, Chicago-area boards are the most interconnected in corporate America, and Tribune’s is no exception.

Besides being Tribune directors, five of the seven special committee members are directors, executives -- or both -- of such Chicago-area business powerhouses as McDonald’s Corp., Allstate Corp., Motorola Inc., Abbott Laboratories, Northern Trust Corp. and Aon Corp. Another is a former executive of Chicago-based Kraft Foods Inc., and the seventh heads a broadcasting company that once sold a TV station to Tribune.

Four of the seven are CEOs: William A. Osborn of Northern Trust, the committee’s lead director; Enrique Hernandez Jr. of Pasadena-based Inter-Con Security Systems Inc.; Dudley S. Taft of Cincinnati-based Taft Broadcasting Co.; and Miles D. White of Abbott Laboratories.

Another, Robert S. Morrison, has been chairman and CEO of Kraft and Quaker Oats Co., vice chairman of PepsiCo. Inc. and interim chairman of 3M Co. The remaining member, the only woman on Tribune’s board, is Betsy D. Holden, who held various positions with Kraft, including co-CEO and president of global marketing.

Osborn’s Northern Trust also has a commercial relationship with Tribune, as trustee of the company’s 401(k) retirement plans. Taft Broadcasting sold Tribune a TV station in Philadelphia in 1991. Tribune has said those relationships do not compromise the two directors’ independence.

Osborn and White, through representatives, declined to comment for this article. Other special-committee members did not respond to telephone and e-mail requests for comment.

Corporate Library’s Cook said the web of civic and charitable relationships linking the Tribune board members was more pronounced than the shared geography of their business activities. For example, four of the seven special-committee members serve with FitzSimons on the board of Chicago’s Museum of Science and Industry, three sit with him on the Civic Committee of the Commercial Club of Chicago, and two are fellow trustees of Northwestern University.

Missouri investor Frank Garamella sued Tribune, FitzSimons and the seven other non-Chandler directors in Chicago last month for failing to pursue a sale of the Los Angeles Times or other measures that he contended would boost shareholder value.

The lawsuit was thrown out by a judge who ruled that it belonged in state, not federal, court. In his complaint, Garamella said that the “long-standing personal, social and financial relationships” among the defendants “preconditioned” them to side with Tribune management.

The special-committee members are the same seven directors who signed a letter in June defending FitzSimons and his team against the Chandlers’ allegations of mismanagement.

However, several business and legal experts said that the creation of the special committee and the intense publicity surrounding Tribune’s troubles might make it easier for the committee members to put ties of friendship and commerce aside.

“Now that this has become public, I think the directors will be especially careful to make management prove its case,” said Richard J. Harrington, president and CEO of Canada’s Thomson Corp., which over the last decade has sold its once-sprawling newspaper holdings and transformed itself into a digital-information company.

The mere fact that the committee meets without FitzSimons may also change the dynamic, Harrington said. Although he doesn’t know any of the Tribune directors, he said that from his experience, “when management’s in the room, it’s difficult for people to speak their minds.”

For a chief executive, “it’s very difficult to get rid of stuff you championed the purchase of, but directors have a fiduciary duty to be unemotional about any asset,” said Scott N. Flanders, CEO of Freedom Communications Inc., the Irvine-based parent of the Orange County Register.

Tribune, in its public statements about the special committee, has insisted that FitzSimons and management are leading the search for ways to boost value, while the committee’s role is to oversee the process.

Despite such statements, management no longer controls the company’s fate, said a senior partner of a New York law firm who requested anonymity because he is involved in a corporate dust-up similar to Tribune’s.

The Tribune committee has retained a legal advisor -- the Manhattan firm Skadden, Arps, Slate, Meagher & Flom -- and soon will appoint a financial advisor. Investment bank Morgan Stanley is considered a front-runner for that job.

If the committee wants to change its mandate and take a more active role, it can easily do so, the lawyer said, noting, “They have seven votes.”

thomas.mulligan@latimes.com

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Close-knit circle

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The members of a special board committee studying the future of Tribune Co. have many of the same civic affiliations as Chairman Dennis FitzSimons, who is not on the committee.

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Source: Times research