Equity Private says that dual-class share structures don’t
do what they’re designed to do:
If there ever was a nightmare that Dow Jones’ elaborate dual class structure
was designed to avert, it was certainly Murdoch’s News Corp.
But then again, she also says that WSJ journalists "are among the lowest
paid" in the industry, which I think just means that she has no idea what
they pay over at the FT.
EP does say, quite rightly, that "one cannot decouple the pressures of
financial accountability from the management oversight process and expect no
long-term governance effect". But she also says that such a decoupling
is "the very explicit and stated purposes of most media dual class structures,
including that of Dow Jones," which I think is wrong.
A dual-class structure exists to allow a founding family to continue to control
a company even when they don’t own the majority of the stock. Now if that family
is Sulzbergers or Murdochs, the controlling family actually has day-to-day responsibility
for running the company, and the dual-class structure works likes it’s meant
EP is quite right that Murdoch won his takeover battle largely because of "the
complete lack of cohesiveness of the Bancroft clan" – but I think
that lack of cohesiveness has less to do with the sheer number of Bancrofts,
as EP suggests, than it has to do with the fact that no Bancroft has had an
executive role within Dow Jones in living memory.
EP puts forward a Law of Dynastic Deterioration:
"On a long enough timeline the effectiveness of any dynastic control
mechanism drops to zero."
I think this is a bit like saying "too much X is bad for you" –
it’s basically tautological. On a long enough timeline, anything will
happen. Let me try my own law:
"The effectiveness of any dynastic control mechanism is directly proportional
to the degree of executive involvement of the dynasty in question."
Families can control companies only if they run them. When they give up running
the company, they’ll inevitably lose control sooner or later.