Several readers question if I was fair in comparing Craig Dubow’s leadership of Gannett Co. with Steve Jobs’s leadership of Apple Inc.
Apples and oranges? Lots of folks have written to say the comparison is silly. I’m about to argue that it isn’t, but it was fatuous of me to compare the two just because of timing (one died and one quit in the same week) and some frivolous coincidences: Both were chief executive officers of companies where they each had spent most of their careers; they were the same age; both took medical leaves of absence before resigning this year, et cetera.
As I see it, Apple is a technology company that is becoming a new media company, while Gannett is an old media company that is becoming, well, an even older media company. Both companies faced profound transitions in the past decade.
I’m not sure when I first heard the word “convergence,” but very clearly I remember arguing in 1985 that The New York Times in the year 2000 would be delivered on computer screens. Surely, one would think, Gannett has been thinking about this coming transition for more than 20 years. But Gannett (along with most of its journalism peers) was so bloated with profits from its 20th century business model that it pooh-poohed the tsunami heading its way.
Apple started as a PC company and nearly went bankrupt in 1996; it took a loan (or “investment”) from Microsoft to stay afloat. Steve Jobs, banished for the previous 10 years, returned as interim CEO in 1997 and began to steer Apple on a course to the post-PC era. Jobs understood “convergence” and envisioned how it would transform both media companies and technology companies. Jobs guided Apple through this transition masterfully. The company still makes computers, but most of the company’s revenue now comes from non-Macintosh products introduced in this post-PC era.
Somewhere along the way, Apple realized that it was a media company. My former FORTUNE colleague Fred Vogelstein, writing last year in Wired, put it this way:
Apple, Google, Facebook and Amazon are becoming more than just dominant technology companies. They are well on their way to becoming the news, entertainment and communications networks of the 21st Century. Five years from now they will touch and profit from almost everything we see, hear, read or buy — like giant media conglomerates. They will control most of the distribution and access to the largest audiences.
Who was responsible for guiding these companies through this transition? The chief executive officers. And here’s the point: Jobs and Dubow represent the two extremes of stewardship.
The prime directive of any business is to be profitable. If you aren’t profitable, you go out of business. But Dubow and Jobs had two very different ways of seeking profitability, Jobs through growth, Dubow through shrinkage. Jobs obsessed over delivering superior products to consumers, always pushing to delight them in new ways. He demanded that Apple produce the best products and that it stay ahead of the technology curve. Dubow sought profits by deliberately making Gannett’s products worse, always pushing to reduce costs and news resources. He starved the company of innovation.
As Gannett’s revenues fell, Dubow degraded the product ever more deeply, firing 20,000 employees, requiring pay cuts (in the form of unpaid furloughs) for many of those who remained, and cutting news budgets beyond the bone. Gannett’s share price, $72 when Dubow became CEO in 2006, closed today at $10.78. It’s not just because the entire media industry is in a slump; even by Gannett’s own analysis it has underperformed industry peers during Dubow’s leadership.
So, earlier this year, right before laying off 700 news employees and forcing unpaid furloughs on thousands more, even as revenue continued to decline, and with prospects of more declines ahead, Gannett’s top executives rewarded themselves with pay raises, cash bonuses, and other emoluments. According to Jim Hopkins of Gannett Blog:
- CEO Dubow’s pay was doubled in 2010 to $9.4 million, including a $1.75 million cash bonus. Under terms of his contract, he’ll get $37.1 million for leaving the company.
- Chief operating officer Gracia Martore was paid $8.2 million, double her 2009 pay, with a cash bonus of $1.25 million.
- U.S. newspapers president Bob Dickey got a raise to $3.4 million, including a $600,000 cash bonus, up from his 2009 pay of $1.9 million.
- Chief Financial Officer Paul Saleh pulled down $2.9 million, and got a $225,000 bonus. He joined the company last November.
- Broadcasting President Dave Lougee’s pay went to $2.2 million, including a $450,000 bonus, up from $1.3 million the previous year.
Why were they being rewarded? For firing people and cutting budgets? Yes, as a matter of fact. And where did the additional money for the executive pay raises, added benefits, cash bonuses and golden parachutes come from?
Like, say, by forcing 17,000 newspaper employees to take a week of unpaid leave.
Ballpark: $1,000 per employee per week. That’s $17 million saved last year.
And how much did it cost to double the pay and perks of the top handful of Gannett news execs last year? Just a guess: Does $17 million sound about right?
Bottom line: In times of declining revenues, layoffs, forced furloughs, a falling stock price, deteriorating product quality, and company financial performance that lags the competition even in a struggling industry, it is indefensible — repeat, indefensible — for management to award itself multimillion-dollars raises and bonuses. Shame on them.