Blog on the Run: Reloaded

Sunday, March 23, 2014 9:09 pm

America, land of free markets. … Oh. Wait.

It would appear that up to several dozen tech companies have been conspiring to artificially suppress wages for their employees. In other words, they’ve been stealing from their employees, although because they used email instead of a knife or gun no one will go to prison. At first it was just Apple, Google and Intel that we knew of; now, well …:

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

At the link you can also find embedded court documents bearing out the claims.

This is money that went to a very few officers and directors at these companies. It is money that was taken from hard-working employees and will never be returned. And do not kid yourself that tech is the only sector in which this is happening. One reason the government has been so easygoing on monopolies and near-monopolies the past 30 years is that they make this kind of thing easier. In other words, if you’re a CEO, this is a delightfully profitable feature, not a bug.

Worse, this conspiracy to suppress wages likely is going on in every major sector of American private industry. I can’t prove it, but I’m certain of it right now, because if there’s one thing I learned from investigative reporting, it’s that corrupt organizations are almost never just a little bit corrupt. Indeed, I would not be surprised to find that this phenomenon, along with daisy chains of CEOs sitting on each other’s board compensation committees, is a significant driver behind the fact that the overwhelming majority of profits from productivity gains are going to the top 1 or 2 percent of earners in the work force.

The CEOs involved knew that what they were doing was wrong, that it involved the permanent, unlawful taking of the property of others. They should be doing at least as much time as your run-of-the-mill bank robber, in facilities no more luxurious. But they won’t. And that’s why we can’t have nice things.

Sunday, March 4, 2012 10:04 pm

Hitting Rush where it hurts, cont.: local stations, local advertisers

In the past 72 hours, while I’ve struggled with work, school, my kids’ schedules and a migraine, a great exodus has taken place among Rush Limbaugh’s national advertisers after his abuse of law student Sandra Fluke for trying to stand up for basic health-care rights for women. I won’t rehash the merits of the issue, which by now are pretty well settled among those with ears to hear. (I’ve tweeted about it a bit if you want to go look.)

The question now is: What else can we do to put pressure on Rush and his parent corporations? One thing we can do is pressure the local advertisers on the stations that carry his show. Commenter “Jager” at Balloon Juice provides instructions on how to go about this [I’ve added a few clarifications in brackets], and as a former radio guy I can say he’s more or less on the money:

Go after the local advertisers on his show. There are very few local advertising [slots] on Rush’s show and they sell at a premium. Monitor the Rush station, make a list of the local advertisers and do the following:

1. Call the advertiser; be polite.
2. Write a letter to the advertiser; be polite.
3. Copy the station and the Federal Communications Commission with the advertiser letter.
4. Politely call the General Manager of the station, tell the GM what you are doing and why, tell them you have contacted the advertiser and copied the FCC.
5. If the local advertiser uses an agency, contact the agency, as well. Just ask the local business [whether] they use an agency.

[It’s not clear to me why the commenter thinks calling the agency will help, unless you’re also threatening to boycott any of the agency’s other advertisers, or any other stations with which the agency places advertising, or in some other way putting pressure on the agency’s revenue stream. — Lex]

It won’t take many letters and phone calls to get their attention and remind the station that the letters need to be placed in the station’s public file. (the public file is an FCC requirement)

Local stations don’t get many local [advertising slots] in Rush’s show and many [stations] pay a huge fee to Premiere [Radio Networks, the Bain Capital/Clear Channel Communications subsidiary that syndicates the show] to run the show. If they start losing business because of that [expletive], they will raise hell with Premiere.

Although I don’t think there’s any guarantee of that because I think 27% of Americans would be happy if Rush killed infants and ate their entrails live from noon to 3 weekdays, I do think the commenter’s suggestions are about the likeliest approach of any to get results. So if you want to apply financial pressure to Rush to at least start behaving like a civilized member of society, target the local advertisers on your local Rush station. I’ll update this post when I’ve had the time to even figure out who that is in this market — that’s how out of it I’ve been lately.

UPDATE: Well, duh, it’s Rush Radio — WPTI (94.5 FM).

Mailing Address
2-B PAI Park
Greensboro, NC 27409

Phone number – 336-822-2000
Program Director – Angie Vuyst –
Sales Manager – Tom Hennessey –

Wednesday, October 6, 2010 9:42 pm

But the Internet killed newspapers! Really!, or, This, says the former frat boy, is why you don’t want frat boys running things

“Bankrupt culture.” Heh.:

In January 2008, soon after the venerable Tribune Company was sold for $8.2 billion, Randy Michaels, a new top executive, ran into several other senior colleagues at the InterContinental Hotel next to the Tribune Tower in Chicago.

Mr. Michaels, a former radio executive and disc jockey, had been handpicked by Sam Zell, a billionaire who was the new controlling shareholder, to run much of the media company’s vast collection of properties, including The Chicago Tribune, The Los Angeles Times, WGN America and The Chicago Cubs.

After Mr. Michaels arrived, according to two people at the bar that night, he sat down and said, “watch this,” and offered the waitress $100 to show him her breasts. The group sat dumbfounded. …

It was a preview of what would become a rugged ride under the new ownership. Mr. Zell and Mr. Michaels, who was promoted to chief executive of the Tribune Company in December 2009, arrived with much fanfare, suggesting they were going to breathe innovation and reinvention into the conservative company.

By all accounts, the reinvention did not go well. At a time when the media industry has struggled, the debt-ridden Tribune Company has done even worse. Less than a year after Mr. Zell bought the company, it tipped into bankruptcy, listing $7.6 billion in assets against a debt of $13 billion, making it the largest bankruptcy in the history of the American media industry. More than 4,200 people have lost jobs since the purchase, while resources for the Tribune newspapers and television stations have been slashed.

The new management did transform the work culture, however. Based on interviews with more than 20 employees and former employees of Tribune, Mr. Michaels’s and his executives’ use of sexual innuendo, poisonous workplace banter and profane invective shocked and offended people throughout the company. Tribune Tower, the architectural symbol of the staid company, came to resemble a frat house, complete with poker parties, juke boxes and pervasive sex talk.

The company said Mr. Michaels had the support of the board.

Let me ask you a mostly rhetorical question: Can you imagine just how poisonous the workplace banter must have been, how profane the invective must have been, to “shock and offend” people who had spent their careers  in a motherfreakin’ newsroom? Because I’m a pretty imaginative guy — just ask some of the people I’ve cussed out in my life — and I’ve got nothin’.

Media companies are in the business of aggregating eyeballs and delivering various demographically sliced ‘n’ diced segments of those eyeballs to advertisers. We have, in Sam Zell, and the “friends and family” he brought in to run one of the country’s great media companies, a guy who was a massive, flaming failure in both the aggregating part of the business (the so-called content end of the business) and the delivering of those demographically sliced ‘n’ diced segments of aggregation to advertisers (the so-called business end of the business) … if, that is, you define business success as it traditionally has been defined — quality product/service, decent income for employees, decent return for investors.

But I suspect that Zell defined it somewhat differently and that the outcome was pre-ordained. I know of no one, and I include Zell himself in that generalization, who seriously expected this deal to ever attain profitability. Consider:

Mr. Zell’s first innovation was the deal itself. He used debt in combination with an employee stock ownership plan, called an ESOP, to buy the company, while contributing only $315 million of his own money. Under the plan, the company’s discretionary matching contributions to the 401(k) retirement plan for nonunionized Tribune employees were diverted into an ownership stake. The structure of the deal allowed the Tribune to become an S corporation, which pays no federal taxes, making taxpayers essentially silent partners in the deal.

The $8 billion in new loans used to finance the deal left the company with $13.8 billion in debt. But Mr. Zell was convinced that by quickly selling the Chicago Cubs and other assets while improving operating margins, the company could emerge as a valuable property. It was typical Zell: a risky approach to gain control over a large, distressed asset while minimizing his own exposure, something he acknowledged in a company newsletter:

“I’ve said repeatedly that no matter what happens in this transaction, my lifestyle won’t change,” he wrote to his combination employees/shareholders. “Yours, on the other hand, could change dramatically if we get this right.”

Yup. You thought you’d be living your retirement in modest comfort. Instead? Penury.

This deal wasn’t structured to make money for investors. This deal was structured to screw as many non-Zell stockholders, bondholders, employees and other investors as possible. Little personal exposure? Check? Borrow out the wazoo? Check. Jeopardize employees’ retirement savings while bullshitting them to their faces? Check. Screw the taxpayers in the process? Check. The bugs weren’t bugs, they were features. This was a classic RICO enterprise:

More than the Tribune’s creditors took a haircut: the shares that about 10,000 nonunion employees received in the ESOP deal are now worthless as a result of the bankruptcy, although at the beginning of this year, the company replaced the ESOP plan with a cash incentive contribution. But if and when the Tribune exits bankruptcy, the value of the company will be worth substantially less than when Mr. Zell bought a controlling interest. Under a proposed settlement filed recently with the court, senior lenders, including the Angelo Gordon hedge fund and Oaktree Capital Management, would receive $5.5 billion, while other lenders with less priority would receive far less. The case is in mediation.

“How can anybody say that they have done a good job?” said Henry Weinstein, a former Los Angeles Times reporter who filed a lawsuit, still pending, that contends that the use of employee pensions to finance the deal was illegal.

“Anybody can make money when you are not servicing the debt and cutting people. Zell and the people he brought in had no idea what they were doing.”

And Mr. Zell? On Aug. 13, his lawyers suggested that if other junior creditors were paid, he should get his money back as well.

Of course he should.

Despite the company’s problems, the managers have been rewarded handsomely. From May 2009 to February 2010, a total of $57.3 million in bonuses were paid to the current management with the approval of the judge overseeing the bankruptcy. In 2009, the top 10 managers received $5.9 million at a time when cash flow was plummeting. …

Other proposed bonuses on the table for 2010 could bring the figure for management pay enhancements to more than $100 million, and those bonuses are heavily weighted to top management.

Why milk the company so badly (I mean, other than the obvious reason, “Because I can!”?) Because Zell didn’t just want to make money, he wanted to make money by personally screwing a bunch of people he obviously held in contempt out of their retirement savings. For him, that was icing on the cake.

And how do we know that he held them in contempt? Consider this:

Mr. Michaels remade Tribune’s management, installing in major positions more than 20 former associates from the radio business — people he knew from his time running Jacor and Clear Channel — a practice that came to be known as “friends and family” at the company.

One of their first priorities was rewriting the employee handbook.

“Working at Tribune means accepting that you might hear a word that you, personally, might not use,” the new handbook warned. “You might experience an attitude you don’t share. You might hear a joke that you don’t consider funny. That is because a loose, fun, nonlinear atmosphere is important to the creative process.” It then added, “This should be understood, should not be a surprise and not considered harassment.”

Shorter handbook: We’re going to act like total flaming jackasses, and there’s not a damn thing you can do about it.

Some perspective here: I spent some time in the music bidness and some time in the radio bidness. The music bidness is notoriously sexist and always has been (cf. Liz Phair’s “Exile in Guyville”); what’s more, it also has been an excuse for people to act like overentitled jackasses because that’s rock ‘n’ roll/punk rock/gangsta, or something. Now, your average radio executive will never be mistaken for Prince or Jay-Z in either looks or talent, but execs at chains the size of Jacor and Clear Channel make enough money to overcome an awful lot of ugly, such that the average 21-year-old pneumatically torsoed airhead can’t tell the difference and will service him in his convertible while he’s hauling ass down the 101.

Only here’s the problem: Employment law applies even to rock ‘n’ roll. And if I worked for Tribune HR and read that handbook, I’d be getting the company lawyers on the phone or getting my butt out of Dodge. Because while the executives wouldn’t care if this stuff got made public — in certain circles, it would even enhance their cred — anyone else I might ever work for in the HR field would consider me an abject failure.

Oh, but they’re not done yet:

According to the company’s monthly statements, cash flow is on the rise and the company has $1.6 billion in cash on hand, about half of it from the sale of the Cubs, which Mr. Zell eventually managed to sell. “We are just getting started,” he said in the announcement.

And management still is confident that the new thinking has Tribune on the right track. The company recently announced the creation of a new local news format in which there would be no on-air anchors and few live reports. The newscasts will rely on narration over a stream of clips, a Web-centric approach that has the added benefit of requiring fewer bodies to produce.

“The TV revolution is upon us — and the new Tribune Company is leading the resistance,” the announcement read. And judging from the job posting for “anti-establishment producer/editors,” the company has some very strong ideas about who those revolutionaries should be: “Don’t sell us on your solid newsroom experience. We don’t care. Or your exclusive, breaking news coverage. We’ll pass.”

As with Howard Kurtz moving from The Washington Post to the Daily Beast, we’re supposed to believe that people who, in decades of work, have yet to produce so much as a fragment of a single anti-establishment, revolutionary, creative idea are now going to be the revolutionaries. It could happen. Stranger things have. But I have done enough hiring to know that the best predictor of future performance is past performance. And past performance shows that as both content producers and business people — indeed, as fiduciaries of any type whatsoever — Sam Zell and his frat-boy buddies make excellent Visigoths.

So if you’re wondering about the causes of the fall of American journalism, stop.

It didn’t fall. It was pushed.

UPDATE: I’ve read a number of pieces responding to this article and have a couple of additional thoughts.

  1. Although Tribune Co. owns what were once some very good papers, the Tribune itself was never all that good. Not a huge detail for the purposes of this post, but if you’re in the business, it matters.
  2. American’s ability to be fascinated by shiny objects has them primarily talking about the boobies ‘n’ cigars ‘n’ bad language. And, honestly, I’m sure Sam Zell is perfectly happy to have bloggers and “real” journalists and everybody else talking about the boobies and cigars and bad language. Why? Because if they’re talking about the boobies and cigars and bad language, then they’re not talking about the fraud or the breaches of fiduciary responsibility or the RICO Act violations.

UPDATE: The next time some half-wit tells you government should be run more like a business, ask if Tribune Co. is the business he means.

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