It may be better to let these damaged and discredited names sink ignominiously into the history books as a cautionary lesson to all stakeholders in how not to run a company.
The National Post recently took a look at the pitiable state of Hollinger Inc., and its subsidiary, Sun-Times Media Group, formerly Hollinger International. They call it the “untold story.” We have detailed many of the issues associated with Hollinger’s demise on these pages over the past year, but the most important point seems to have eluded the Post.
There has never been a publicly traded company with as many current and future felons sitting around the boardroom table as there was with the Hollinger group. Perhaps, too, there has been none unluckier in its choice of stewards and top managers. We were the first to point out that Alfred Taubman continued to sit on the board after his conviction on criminal price fixing charges in 2002. Conrad Black, David Radler, Peter Atkinson and Jack Boultbee were convicted on charges of fraud in 2007. Mr. Black was separately convicted of obstruction of justice. Sentencing in the cases is set for December 10th.
Mr. Black held virtually unchecked power in the Hollinger companies. His directors were hand-picked and endlessly obliging. He appointed an unusually high number of management insiders to the Hollinger boards and maintained the top positions for himself. Much of Hollinger’s net profits were funneled into Ravelston, the private holding company run by Mr. Black. Ravelston, like the directors who ran it, is also a convicted felon. There is no evidence that any director at either Hollinger International or its Toronto-based parent, Hollinger Inc., was ever bothered by Ravelston’s relationship with Hollinger, the potential conflicts of interest that were obvious, or the J.P. Morgan-style of corporate governance the companies practiced. There is plenty of evidence that some directors at Hollinger International were not even aware what Ravelston did or why it was being paid.
When I first raised issues about the unhealthy corporate governance structure at Hollinger and the troubling role that Ravelston played in the 1990s (and I believe I was among the first), the press reacted with a large yawn. The Globe and Mail took a pass on an Op-Ed submission I wrote on that subject, claiming no one would be interested -even among its business readers. I suspected at the time that it was more likely because nobody else wanted to take on Conrad Black. This was long before Tweedy Browne, Richard Breeden or any disgruntled shareholder entered the picture. The Financial Post, after Mr. Black took over, ended a relationship with me of more than 25 years during which it ran my Op-Ed columns. It took a very long time before reporters at the Post could bring themselves to say anything unflattering about Conrad Black. Its publishers still seem to have a problem comprehending the magnitude of Mr. Black’s misdeeds, as they continue to run his column. Being a convicted felon still facing punishment is seldom a qualification publishers find desirable in their contributors, but the rules are often applied differently when it comes to Mr. Black and his friends. Somewhere along the way, Tweedy Browne discovered my views on Hollinger and contacted me to discuss their unfolding complaint.
Still, it was years before investors and the media generally began to wake up to the masterpiece of disaster and financial profligacy that was being created by the Black reign. By that time, it was probably too late to avoid the fate that eventually befell these companies.
Why the utterly Neanderthal system of corporate governance Hollinger was practicing was never seen as a gigantic red flag to the press and investors will always be something of a mystery. The Post article didn’t even attempt to find the answer. It should not have cost $20 million in the form of the Richard Breeden investigation to discover there was a serious imbalance between power and accountability under Conrad Black.
When scholars and corporate governance experts look for a definition of the disengaged, ineffectual, unquestioning board, the names Hollinger Inc. and Hollinger International will be prominently displayed. In the post-Black years, the Hollinger companies almost seem to have returned to their origins as a mining enterprise, their directors and lawyers having discovered a gold mine of huge fees gained for the privilege of presiding over a decline in share value to penny stock levels. It is never clear whether one more of the Hollinger group is going into or coming out of bankruptcy proceedings.
Having observed Mr. Black and his companies for some years, and long before their great descent began, I have absolutely no doubt that had Hollinger the benefit of a respectably independent cast of directors who were committed to established principles of sound governance, effective oversight and meaningful accountability -directors who actually read and asked questions- the eventual demise of Hollinger, and perhaps even Conrad Black et al., could have been avoided. That did not happen, and the stewardship, if one can call it that, of the current management group seems only to be compounding the folly and miseries of the past.
The stock of Hollinger Inc. is trading for pennies. It is operating under bankruptcy protection. Its business, apart from creating a lot of it for lawyers, seems unclear. Sun-Time Media Group continues to lose money and is barely holding together. It, too, has become a generator of income for lawyers, having spent more than $100 million related to criminal and civil proceedings involving former officers and directors, including Conrad Black. Its stock regularly threatens to slip below a dollar. The bottom has pretty much fallen out of its corporate reputation as well.
It is worth questioning at this point whether, given its sad history of criminality, directorial blindness and outright incompetence, there is any point in trying to save Hollinger or its subsidiary. Does a company riddled with the consequences of corruption and the ruin of letdowns, failures, felons and self-servers, even deserve to survive? Do shareholders exist solely for the purpose of providing a bottomless source of revenue for lawyers and a few insiders?
When all is said and done, it may be better to let these damaged and discredited companies sink ignominiously, along with their names, into the history books as a cautionary lesson to all stakeholders in how not to run a company.