New York Times Company DEF 14A 2008
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SCHEDULE 14A INFORMATION
Statement Pursuant to Section 14(a) of
The New York Times
Notice of 2008
Invitation to 2008 Annual Meeting of Stockholders
DATE: Tuesday, April 22, 2008
March 25, 2008
Dear Fellow Stockholder:
Please join me at our Annual Meeting on April 22, 2008, where we will ask you to vote on the election of our Board of Directors and the ratification of the selection of our auditors. This year, we are pleased to hold our meeting in TheTimesCenter in our new headquarters building, which opened last year.
We are delighted to add four new nominees for election by our stockholders this year, Robert Denham, Dawn Lepore, Scott Galloway and James A. Kohlberg. Mr. Denham is a partner in the law firm of Munger, Tolles & Olson LLP, having previously served as Managing Partner, and from 1992-1998 he served as the Chairman and CEO of Salomon Inc, where he brought great discipline, integrity and credibility to his role as that investment firm was rebuilding. Ms. Lepore serves as the Chairman, President and CEO of drugstore.com, inc., a public company that is an online source for more than 30,000 health, beauty and wellness products. She is highly respected with deep experience in the digital world and relationships in both Silicon Valley and the Seattle technology community. Mr. Galloway is the Founder and Chief Investment Officer of Firebrand Partners LLC, an investment firm with extensive domain expertise in retail operations and brand management. He is also a founder of RedEnvelope Inc., an Internet-based branded consumer gift retailer, and Clinical Associate Professor at New York University's Stern School of Business, where he teaches brand strategy. Mr. Kohlberg is Chairman of Kohlberg & Company, a leading middle market private equity firm which he co-founded in 1987, and a director of Kohlberg Capital Corporation. He currently serves as Chairman of the Helium Group LLC (d/b/a HalogenGuides.com) and ClearEdge Power.
Two of our directors will not be standing for re-election at this year's Annual Meeting. We will be bidding good-bye to Brenda Barnes and James Kilts, who have served since 1998 and 2005, respectively. They have both provided invaluable advice while serving on our Compensation, Finance, Audit and Nominating & Governance Committees. We are immensely grateful for Ms. Barnes's and Mr. Kilts's many contributions to the success of the Company and we wish them both well.
In addition to the formal items of business at our Annual Meeting, my colleagues and I will review the major Company developments over the past year and share with you our plans for the future. You will have an opportunity to ask questions and express your views to the senior management of The New York Times Company. Members of the Board of Directors will also be present.
Whether or not you are able to attend the Annual Meeting in person, it is important that your shares be represented. You can vote your shares using the Internet or a toll-free telephone number, or by completing and returning the enclosed proxy card by mail. Instructions on each of these voting methods are outlined in the enclosed Proxy Statement. Please vote as soon as possible.
I hope to see you on April 22nd.
ARTHUR SULZBERGER, JR.
Notice of Annual Meeting of Stockholders
To the Holders of Class A and Class B
The Annual Meeting of Stockholders of The New York Times Company will be held at 10:00 a.m., local time, on Tuesday, April 22, 2008, at TheTimesCenter, 242 West 41st Street, New York, NY 10018, for the following purposes:
Holders of the Class A and Class B common stock as of the close of business on February 22, 2008, are entitled to notice of and to attend this meeting as set forth in the Proxy Statement. Class A stockholders are entitled to vote for the election of five of the 15 directors. Class A and Class B stockholders, voting together as a single class, are entitled to vote on the proposal to ratify the selection of Ernst & Young LLP as auditors for the 2008 fiscal year. Class B stockholders are entitled to vote for the election of 10 of the 15 directors and on all other matters presented to the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE AS PROMPTLY AS POSSIBLE BY TELEPHONE, ON THE INTERNET OR BY COMPLETING AND RETURNING THE ENCLOSED PROXY CARD. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE MEETING.
New York, NY
By Order of the Board of Directors
RHONDA L. BRAUER
Table of Contents
Voting On Matters Before The Annual Meeting
Whichever method you use, each valid proxy received in time will be voted at the Annual Meeting in accordance with your instructions. To ensure that your proxy is voted, it should be received by the close of business on April 21, 2008.
If you submit a proxy card without giving instructions, your shares will be voted as recommended by the Board of Directors.
Georgeson Inc. has been engaged as the independent inspector of election to tabulate stockholder votes at the Annual Meeting.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the "beneficial owner" of shares held in street name (also called a "street name" holder). The proxy materials should be forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial holder, you have the right to direct your broker, bank or nominee how to vote and are also invited to attend the annual meeting. However, since you are not a stockholder of record, you may not vote these shares in person at the Annual Meeting unless you bring with you a legal proxy from the stockholder of record. A legal proxy may be obtained from your broker or nominee. Your broker or nominee has enclosed a voting instruction card for you to use in directing the broker, bank or other nominee how to vote your shares.
The Audit Committee of the Board recommends voting:
If a broker which is the record holder of shares indicates on a proxy form that it does not have discretionary authority to vote those shares on a Proposal, or if shares are voted in other circumstances in which proxy authority is defective or has been withheld on such Proposal, those non-voted shares ("broker non-votes") will be counted as present for quorum purposes but as not voting on the Proposal. This will have no effect on Proposal 1 and will have the same effect as a negative vote on Proposal 2.
We have been advised by our legal counsel that the procedures that have been put in place are consistent with the requirements of applicable state law. Please remember that if your stock is held through a broker or bank, you will receive voting instructions from your bank or broker describing the available processes for voting your stock.
Documents Filed with the Securities and Exchange Commission ("SEC")
There are a number of other sources for additional information on The New York Times Company:
Corporate Governance Principles
Board Committee Charters:
Code of Ethics for the Chairman, Chief Executive Officer, Vice Chairman and Senior Financial Officers
Code of Ethics for Directors
Business Ethics Policy
Policy on Transactions with Related Persons
Copies of the foregoing are available in print at no charge to any stockholder. To obtain documents from us, please direct requests in writing or by telephone to:
New York Times Company
Please note that information contained on our Web site does not constitute part of this Proxy Statement.
This Proxy Statement is dated March 25, 2008. You should not assume that the information contained in this Proxy Statement is accurate as of any date other than such date, and the mailing of this Proxy Statement to stockholders shall not create any implication to the contrary.
The 1997 Trust
Since the purchase of The New York Times newspaper by Adolph S. Ochs in 1896, control of The New York Times and related properties has rested with his family. Family members have taken an active role in the stewardship and management of The New York Times Company. The title of Publisher of The New York Times has been held by various family members, from Adolph S. Ochs to the current Publisher, Arthur Sulzberger, Jr., who also serves as the current Chairman of the Board.
In February 1990, on the death of Adolph S. Ochs's daughter, Iphigene Ochs Sulzberger ("Mrs. Sulzberger"), control passed to her four children through the automatic termination of a trust established by Mr. Ochs. That trust held 83.7% of the Class B stock of the Company, which is not publicly traded and the holders of which have the right to elect approximately 70% of the Board of Directors. Mrs. Sulzberger's four children are: Marian S. Heiskell, Ruth S. Holmberg, Judith P. Sulzberger and Arthur Ochs Sulzberger (the "grantors").
In 1997, the grantors executed an indenture (the "Trust Indenture") creating a trust (the "1997 Trust") for the benefit of each of the grantors and his or her family. The grantors transferred to the 1997 Trust all shares of Class B stock previously held by the trust established by Adolph S. Ochs, together with a number of shares of Class A stock. The 1997 Trust currently holds 738,810 shares of Class B stock and 1,400,000 shares of Class A stock. The primary objective of the 1997 Trust is to maintain the editorial independence and the integrity of The New York Times and to continue it as an independent newspaper, entirely fearless, free of ulterior influence and unselfishly devoted to the public welfare ("the primary objective of the 1997 Trust").
The current trustees of the 1997 Trust are Daniel H. Cohen, James M. Cohen, Lynn G. Dolnick, Susan W. Dryfoos, Michael Golden, Carolyn Greenspon, Eric M. A. Lax and Arthur Sulzberger, Jr. (the "Trustees").
The 1997 Trust will continue in existence until the expiration of 21 years after the death of the last remaining survivor of all descendants of Mrs. Sulzberger living on December 14, 2000. The Trust Indenture is subject to the terms and provisions of a 1986 shareholders agreement (the "Shareholders Agreement") among the grantors, their children and the Company, which restricts the transfer of Class B stock that is held by the trust by requiring, prior to any sale or transfer, the offering of those shares among the other family stockholders and then to the Company at the Class A stock market price then prevailing (or if the Company is the purchaser, at the option of the selling stockholder, in exchange for Class A stock on a share-for-share basis). The Shareholders Agreement provides for the conversion of such shares into Class A stock if the purchase rights are not exercised by the family stockholders or the Company and such shares of Class A stock are to be transferred to a person or persons other than family stockholders or the Company. There are certain exceptions for gifts and other transfers within the family of Adolph S. Ochs provided that the recipients become parties to the Shareholders Agreement.
In addition, the Shareholders Agreement provides that if the Company is a party to a merger (other than a merger solely to change the Company's jurisdiction of incorporation), consolidation or plan of liquidation in which such Class B stock is exchanged for cash, stock, securities or any other property of the Company or of any other corporation or entity, each signing stockholder will convert his or her shares of such Class B stock into Class A stock prior to the effective date of such transaction so that a holder of such shares will receive the same cash, stock or other consideration that a holder of Class A stock would receive in such a transaction. Except for the foregoing, each signing stockholder has agreed not to convert any shares of such Class B stock received from a trust created under the will of Adolph S. Ochs into Class A stock. The Shareholders Agreement will terminate upon the expiration of 21 years after the death of the last remaining survivor of all descendants of Mrs. Sulzberger living on August 5, 1986.
The Trustees, subject to the limited exceptions described below, are directed to retain the Class B stock held in the 1997 Trust and not to sell, distribute or convert such shares into Class A stock and to vote such Class B stock against any merger, sale of assets or other transaction pursuant to which control of The New York Times passes from the Trustees, unless they determine that the primary objective of the 1997 Trust can be achieved better by the sale, distribution or conversion of such stock or by the implementation of such transaction. If upon such determination any Class B stock is distributed to the beneficiaries of the 1997 Trust, it must be distributed only to descendants of Mrs. Sulzberger, subject to the provisions of the Shareholders Agreement (if it is still in effect). Similarly, any sale by the 1997 Trust of Class B stock upon such determination can be made only in compliance with the Shareholders Agreement.
The Trustees are granted various powers and rights, including among others: (i) to vote all of the shares of Class A and Class B stock held by the 1997 Trust; (ii) to nominate the successor trustees who may also serve on the Company's Board of Directors; and (iii) to amend certain provisions of the Trust Indenture, but not the provisions relating to retaining the Class B stock or the manner in which such shares may be distributed, sold or converted. The Trustees act by the affirmative vote of six of the eight Trustees. Generally, a Trustee may be removed by the agreement of six of the remaining seven Trustees. In general, four of the trustees will be appointed by all eight trustees; the remaining four trustees will be elected by the beneficiaries of the 1997 Trust.
Upon the termination of the 1997 Trust at the end of the stated term thereof, the shares of Class A and Class B stock held by such trust will be distributed to the descendants of Mrs. Sulzberger then living.
The Trustees also control, through a limited liability company, an additional 4,300,197 shares of Class A stock that are held in various family limited partnerships.
We have been informed by representatives of the Ochs-Sulzberger family that the aggregate holdings of the 1997 Trust and the descendants of Mrs. Sulzberger represent approximately 19% of the Company's total equity (i.e., Class A and Class B common stock of the Company).
The following table sets forth the only persons who, to the knowledge of management, owned beneficially on February 22, 2008, more than 5% of the outstanding shares of either Class A or Class B stock:
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Security Ownership of Management and Directors
The following table shows the beneficial ownership, reported to the Company as of February 22, 2008, of Class A and Class B stock, including shares as to which a right to acquire ownership exists (by the exercise of stock options or the conversion of Class B stock into Class A stock) within the meaning of Rule 13d-3(d)(1) under the Exchange Act of each Director and nominee named in this Proxy Statement, the chief executive officer, the chief financial officer and the three other most highly compensated executive officers of the Company during 2007 and all Directors and executive officers of the Company, as a group. A portion of the shares reported below are held by the 1997 Trust, whose Trustees share voting and, in some cases, investment power with respect thereto. See "The 1997 Trust." The table also shows the amount of Class A stock units credited to the account of non-employee Directors under the Company's Non-Employee Directors Deferral Plan. Distribution in cash is made subsequent to retirement.
(Footnotes appear on following page)
Note: Each individual Director and executive officer has beneficial ownership of less than 1%, other than in those instances noted.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company's Directors and executive officers and the beneficial holders of more than 10% of the Class A stock are required to file reports with the SEC of changes in their ownership of Company stock. Based on its review of such reports, the Company believes that all such filing requirements were met during 2007.
Fifteen Directors will be elected to the Board of The New York Times Company at the 2008 Annual Meeting. Nominees proposed for election as Directors are listed below. Directors will hold office until the next Annual Meeting and until their successors are elected and qualified. Each of the nominees, except for Messrs. Denham, Galloway and Kohlberg and Ms. Lepore, is now a member of the Board of Directors and was elected at the 2007 Annual Meeting for which proxies were solicited.
The Certificate of Incorporation of the Company provides that Class A stockholders have the right to elect 30% of the Board of Directors (or the nearest larger whole number). Accordingly, Class A stockholders will elect five of the 15 Directors; Class B stockholders will elect 10. Directors are elected by a plurality of the votes cast. Although approximately 30% of the Directors are elected by the holders of the Company's Class A common stock and the remaining Directors by the holders of the Company's Class B common stock, once elected, our Directors have no ongoing status as "Class A" or "Class B" Directors and have the same duties and responsibilities to all stockholders. Our Board serves as one Board with fiduciary responsibilities to all stockholders of the Company.
If any of the nominees become unavailable for election, all uninstructed proxies will be voted for such other person or persons designated by the Board. The Board has no reason to anticipate that this will occur.
The enclosed proxy cards will be used to vote for the election of the nominees named above unless you withhold the authority to do so when you send in your proxy. Each person nominated for election has consented to being named in this Proxy Statement and has agreed to serve if elected.
Notes on Nominees:
Information Regarding Agreement with HCP Investors
On January 25, 2008, affiliates of Harbinger NY delivered to us a Notice of Nomination of Candidates for Election to the Board of Directors (the "HCP Nomination Letter"). The HCP Nomination Letter indicated that Harbinger NY, together with certain of its affiliates and Firebrand (collectively, the "HCP Investors"), planned to seek representation on our Board by nominating a slate of four candidates (Scott Galloway, James A. Kohlberg, Allen L. Morgan and Gregory Shove) for election as directors at the Annual Meeting and to solicit proxies on behalf of such nominees (the "HCP Nomination").
On January 28, 2008, Harbinger NY filed with the SEC soliciting materials that included a statement of their intention to make a preliminary filing of a proxy statement and a copy of a letter from Scott Galloway, dated January 27, 2008, addressed to two of our executive officers, confirming the HCP Investors' nominations and proposing an informal meeting.
On February 21, 2008, we filed with the SEC a preliminary proxy statement related to the Annual Meeting, and on February 29, 2008, Harbinger NY filed with the SEC a preliminary proxy statement related to the matters set forth in the HCP Nomination Letter.
During this period, members of our management and our Nominating & Governance Committee held meetings with each of the four HCP nominees for the purpose of considering and evaluating such nominees. Between March 7, 2008 and March 14, 2008, William Kennard, the Chair of our Nominating & Governance Committee, and Janet
Robinson, our Chief Executive Officer, had a number of conversations with Philip Falcone, Senior Managing Director of Harbinger Capital Partners, to explore a possible agreement to terminate the contest for the election of directors that the HCP Investors had initiated. On March 17, 2008, we and the HCP Investors entered into an agreement (the "Agreement") terminating the pending proxy contest with respect to the election of directors at our Annual Meeting. Pursuant to the Agreement, we have agreed, among other things:
Pursuant to the Agreement, the HCP Investors agreed:
In addition, pursuant to the Agreement, if, during the Restricted Period, any HCP Investor Nominee refuses to serve, or is unable to serve, as a director then the HCP Investors will be entitled to designate either Allen L. Morgan or Gregory Shove as a replacement or, if neither Mr. Morgan nor Mr. Shove is willing or available, to select another replacement with our consent, which consent shall not be unreasonably withheld.
Arrangements among the Harbinger Capital Partners Group and the HCP Investor Nominees
The Master Fund and the Special Fund (together, the "HCP Funds") are the Class A-1 Members of Harbinger NY and Firebrand is the Class B-1 Member of Harbinger NY. Scott Galloway is the sole member and manager of Firebrand with the exclusive right of every kind to control and bind Firebrand. Firebrand has agreed to transfer five percent of the Class B-1 Membership interests in Harbinger NY to Mr. Kohlberg.
The HCP Funds have the right to consult with Firebrand and Scott Galloway with respect to the investment of their capital contributions to Harbinger NY, and Firebrand and Scott Galloway have agreed to provide such consulting services. With respect to particular investments, the quarterly consulting compensation payable to Firebrand by the HCP Funds will be the lesser of $25,000 and 0.125 percent of the average fair market value of such investment made by Harbinger NY with capital contributions from the Class A-1 Members.
With respect to the distribution of investment proceeds, amounts apportioned to the Class B-1 Members are distributed to such Class B-1 Members. Amounts apportioned to the Class A-1 Members are distributed to such Class A-1 Members and Class B-1 Members as follows: first to the Class A-1 Members, up to the amount of their respective capital contributions (less previous distributions), then to the Class B-1 Members (in such proportion as may be specified by Firebrand with the consent of the Master Fund) until the cumulative past and present distributions made to the Class B-1 Members are equal to 10 percent of the net profits realized by the HCP Funds (and/or any of their affiliates) and Harbinger NY, and then the remainder to the Class A-1 Members.
Profiles of Nominees for the Board of Directors
The following information was provided by the nominees:
Class A Nominees
Interests of Directors in Certain Transactions of the Company
1. In the ordinary course of business, the Company and its subsidiaries from time to time engage in transactions with other corporations whose officers or directors are also Directors or Director nominees of the Company. These include the Company's purchase of products and services from Verizon Communications, Inc. and the running of advertising in Company properties for the products and services of Citigroup Inc., Ford Motor Company, Pfizer, Inc. and Verizon Communications, Inc., as well as other Director-affiliated companies. All of these arrangements are conducted on an arm's-length basis. The relevant outside Director does not participate in these business relationships nor profit directly from them. Due to the nature of these transactions, they may not even come to the attention of the Company's Board or the relevant Director or Director nominee.
2. During 2007, Arthur Sulzberger, Jr. was employed as Chairman of the Company and Publisher of The New York Times, and Michael Golden was employed as Vice Chairman of the Company and Publisher of the International Herald Tribune. See "Compensation of Executive Officers" for a description of Mr. Sulzberger, Jr.'s and Mr. Golden's compensation. In 2007, James Dryfoos was employed as Senior Systems Analyst, The New York Times newspaper, and Manager, The New York Times Company (Enterprise Services), and was paid a total of $145,040. In 2007, Michael Greenspon was employed as Sales & Operations Director, The Boston Globe (Retail Sales, Inc.), and Project Director, The New York Times newspaper (Strategic Planning), and was paid a total of $217,039, which amount included reimbursement of significant one-time relocation expenses and related taxes. Messrs. Dryfoos and Greenspon are each the son of a cousin of Messrs. Sulzberger, Jr., and Golden, Daniel H. Cohen and Lynn G. Dolnick. Mr. Sulzberger, Jr. is a cousin of Mr. Cohen and of Ms. Dolnick and Mr. Golden, who are also siblings.
3. See "Policy on Transactions with Related Persons" on page 21 for a description of the Company's policy in connection with any transaction between the Company and a "related person."
4. See "Proposal Number 1Election of DirectorsNotes on Nominees" on page 11 for a description of the Agreement entered into by the Company and the HCP Investors.
The Board of Directors is responsible for overseeing the direction, affairs and management of the Company. The Board recognizes its fiduciary duty to both Class A and Class B stockholders.
What's New This Year?
Majority Voting for Directors
On February 21, 2008, the Board of Directors, upon the recommendation of our Nominating & Governance Committee, amended our Corporate Governance Principles to provide that each nominee for election to the Board must agree to resign upon the request of the Board if, in an uncontested election, he or she is elected to the Board but fails to receive a majority of the votes cast. In determining whether to require the Director to resign, the Board, with such person not participating, will consider all relevant facts and circumstances. The Board must make the request within 60 days and the Company must disclose the Board's decision within 65 days.
Director Nominee Rotation. On April 3, 2007, the Board of Directors, upon the recommendation of our Nominating & Governance Committee, amended our Corporate Governance Principles to provide that it is the policy of the Company to have an annual rotation of the nominees for election to the Board by holders of the publicly traded, Class A common stock. It is intended that each of the independent directors be nominated for election by the Class A stockholders at least once every three years and that each year, the slate of Class A nominees include at least one member of each of the Audit, Compensation and Nominating & Governance Committees.
This policy reinforces the principle that, once elected, our directors have no ongoing status as "Class A" or "Class B" directors. They all owe fiduciary duties and responsibilities to all of our stockholders.
New Independent Director Nominees. We will add four new Director nominees for election by our stockholders this year, Messrs. Denham, Galloway and Kohlberg and Ms. Lepore. Assuming they are elected, Messrs. Denham, Galloway and Kohlberg and Ms. Lepore will be independent Directors.
Director Compensation. On the recommendation of our Nominating & Governance Committee, our Board approved modifications to the compensation for non-employee Directors, which took effect on April 1, 2007. We discontinued our practice of paying meeting fees in recognition of the fact that meeting attendance is the most basic expectation of a director. Instead we now have a higher annual Board retainer and Committee retainer. See "Directors' CompensationDirector Compensation" for a description of the compensation paid to our non-employee Directors.
Independent Compensation Consultant. In 2007, the Compensation Committee directly engaged an independent compensation consultant, Exequity, LLP. Exequity reported on its review of data from nationally recognized compensation surveys. The review analyzed salary, annual and long-term cash incentive bonuses and equity compensation, as well as total compensation, for comparable executive positions at a cross-industry selection of U.S. companies with revenues comparable to ours and, for operating unit positions, at other comparable media companies. Exequity also provided general advice on executive compensation trends and programs and makes compensation recommendations for our Chairman and Chief Executive Officer. See "Compensation Discussion & Analysis" for a description of the Compensation Committee's engagement of Exequity.
The following highlights other key corporate governance practices applicable to the Board:
Corporate Governance Principles. The New York Stock Exchange ("NYSE") rules require listed companies to adopt corporate governance principles. The current version of the Company's Corporate Governance Principles, most recently amended on February 21, 2008, reflecting the following and other provisions, is included in this Proxy Statement as Appendix I. A printable copy of our corporate governance principles is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4.
Corporate Governance Officer. The Company has a Corporate Governance Officer to promote best practices and help the Company remain in the forefront of good corporate governance. The Corporate Governance Officer periodically reviews the Company's corporate governance principles and practices to assure that they continue to reflect high standards and makes recommendations to the Nominating & Governance Committee in connection with the Company's governance practices.
Director Election. All Directors stand for election annually. Voting is not cumulative. Under our Certificate of Incorporation, approximately 30% of the Directors are elected by the holders of the Company's Class A common stock and the remaining Directors by the holders of the Company's Class B common stock. Under the New York Business Corporation Law and our Corporate Governance Principles, once elected, our Directors have no ongoing status as "Class A" or "Class B" Directors and have the same duties and responsibilities to all stockholders. Our Board serves as one Board with fiduciary responsibilities to the Company and all of our stockholders.
Director Attendance at Annual Meetings. All Directors are expected to attend the Company's annual meeting of stockholders. All Directors attended the Company's 2007 annual meeting of stockholders in person, except for Thomas Middelhoff, who could not attend due to a conflicting business schedule.
Director Retirement Age. None of our Directors will stand for re-election after his or her 70th birthday, unless the Board determines otherwise.
Directors as Stockholders. All Directors are expected to own stock in the Company equal in value to at least three times the annual Board cash retainer as set from time to time by the Board. Each Director is expected to accumulate this stock over a reasonable period of time. Stock units held by a Director under any deferral plan are included in calculating the value of ownership to determine whether this minimum ownership has been accumulated. All Directors currently satisfy this minimum stock ownership level.
Director Orientation. The Company has a comprehensive orientation program for all new non-management Directors with respect to their role as directors and as members of the particular Board committees on which they will serve. It includes one-on-one meetings with senior management and top New York Times editors, a plant visit and extensive written materials on each of the Company's different business units. The senior management meetings cover a corporate overview, the Company's strategic plans, its significant financial, accounting and risk management issues, its compliance programs, and its business conduct policies. All other Directors are also invited to attend each orientation program.
Ongoing Director Education. From time to time, the Company will provide Directors with additional educational materials and presentations from Company and/or third-party experts on subjects that would enable them to perform better their duties and to recognize and deal appropriately with issues that arise. In addition, the Company will pay all reasonable expenses for any Director who wishes to attend a director continuing education program.
"Controlled Company" Exception to NYSE Rules. The Company's Board of Directors has determined not to take advantage of an available exception from certain of the NYSE rules. A company of which more than 50% of the voting power is held by a single entity, a "controlled company," need not comply with the requirements for a majority of independent directors or for independent compensation and nominating/corporate governance committees. As a result of the 1997 Trust's holdings of Class B stock, the Company would qualify as a controlled company and could elect not to comply with these independence requirements. However, the Company's Board of Directors has determined to comply in all respects with the NYSE rules.
Independent Directors. The NYSE rules require listed companies to have a board of directors with at least a majority of independent directors. The Company has now, and has had for many years, a majority of independent Directors.
The Board has determined that each of Ms. Barnes, Messrs. Cesan, Kennard and Kilts, Dr. Liddle, Ms. Marram, Dr. Middelhoff and Ms. Toben are independent, and that, assuming they are elected, Messrs. Denham, Galloway and Kohlberg and Ms. Lepore will be independent. Of the remaining Directors, Messrs. Sulzberger, Jr. and Golden and Ms. Robinson are executive officers of the Company, Ms. Dolnick is a cousin of Mr. Sulzberger, Jr. and a sister of Mr. Golden and Mr. Cohen is a cousin of Messrs. Sulzberger, Jr. and Golden. Due to their family relation to Messrs. Sulzberger, Jr. and Golden, Ms. Dolnick and Mr. Cohen, who are cousins, are not considered independent.
The NYSE rules specify five categories of relationships between an individual and a listed company that render the individual ineligible to be independent. The Board has determined that none of the Company's independent Directors has a relationship with the Company that falls within these categories.
Under the NYSE rules, a Director qualifies as "independent" so long as he or she has none of these impermissible relationships with the Company and upon the Board affirmatively determining that he or she has no other material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).
The NYSE rules permit the adoption of, and the Board of the Company has adopted, categorical standards defining "material relationships" for the purpose of determining independence. Under these standards, the Board has determined that the following relationshipsprovided they are not required to be disclosed in the Company's public filings by SEC rulesare immaterial to the Company for this purpose:
The Board has determined that each of the Company's independent Directors has only immaterial relationships with the Company under these categorical standards.
Board Committees. Both the Sarbanes-Oxley Act of 2002 and the NYSE rules require the Company to have an audit committee comprised solely of independent directors, and the NYSE rules also require the Company to have independent compensation and nominating/corporate governance committees. The Company is in compliance with these requirements.
Under the Sarbanes-Oxley Act, members of an audit committee must have no affiliation with the issuer, other than the Board seat, and receive no compensation in a capacity other than as a director/committee member. Each member of our Audit Committee meets this independence standard.
Audit Committee Financial Experts. Rules promulgated by the SEC under the Sarbanes-Oxley Act require the Company to disclose annually whether our Audit Committee has one or more "audit committee financial experts," as defined by the SEC. The Board has determined that a majority of the Audit Committee members, including the Chair of the Committee, Mr. Cesan, qualify as "audit committee financial experts."
Codes of Ethics. The Company has adopted a Business Ethics Policy, applicable to all employees, a code of ethics that applies not only to the Company's CEO and senior financial officers, as required by the SEC, but also to its Chairman and Vice Chairman, and a code of ethics for Directors. A printable version of each of these documents is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4.
Non-Management Directors. The NYSE rules require that the non-management directors of a listed company meet periodically in executive sessions. The Company's non-management Directors meet separately at the end of each regular meeting of the Board. Additionally, at least once a year the independent Directors meet in executive session. Ms. Dolnick and Mr. Cohen are non-management Directors who, due to their family relation to Messrs. Sulzberger, Jr. and Golden, are not considered independent.
Presiding Director. Ms. Marram currently serves as our Presiding Director. In addition to chairing all executive sessions of our non-management and independent Directors, our Presiding Director:
Interested parties may express their concerns to the Company's non-management Directors or the independent Directors by contacting the Presiding Director, care of the Corporate Secretary, The New York Times Company, 620 Eighth Avenue, New York, NY 10018. The Corporate Secretary will relay all such correspondence to the Presiding Director.
Communications with the Board. Stockholders may communicate with the Board of Directors care of the Corporate Secretary, The New York Times Company, 620 Eighth Avenue, New York, NY 10018. The Corporate Secretary will relay all such correspondence to the entire Board of Directors.
Board and Committee Evaluations. Our Board has a Board and Committee evaluation process to examine and discuss how our Board and Committees function as groups and with senior management of our Company. We believe that our stockholders' interests can be best protected by acknowledging the separate responsibilities of management and our Board and its Committees and by ensuring an open environment for Board and management discussions and actions.
No Interlocking Directorships. The Chairman of the Board, as Publisher of The New York Times newspaper, does not sit on any other company board. Although other members of senior management without editorial responsibilities are not so precluded, none sit on the boards of directors of any company at which one of our Directors is the chief executive officer or chief operating officer.
Succession Planning. Recognizing the critical importance of executive leadership to the success of the Company, the Board works with senior management to ensure that effective plans are in place for both short-term and long-term executive succession at The New York Times Company.
Senior Management Evaluation. In consultation with all non-management Directors, the Compensation Committee annually evaluates the performance of our Chairman, President and CEO and Vice Chairman.
Corporate Financial Ethics Hotline. The Company has established a corporate financial ethics hotline to allow an employee to lodge a complaint, confidentially and anonymously, about any accounting, internal control or auditing matter that is of concern.
Executive Stock Ownership Guidelines. Those executive officers named in the "Summary Compensation Table" are subject to stock ownership guidelines. The Chairman is required to own shares of Class A stock equal to three times his base salary. The President and CEO, the Vice Chairman and the Chief Financial
Officer are required to hold an amount equal in value to two times his or her base salary in Company stock. All other named executive officers are required to hold an amount equal in value to their base salary in Company stock. Restricted stock and restricted stock units are counted in calculating ownership. An affected executive officer has five years to attain the holding requirements.
Board Policy on Recoupment of Bonuses Upon Restatement Due to Fraud or Misconduct. In the event of a restatement of the Company's financial statements due to fraud or intentional misconduct, the Board will review performance-based bonuses to executive officers whose fraud or intentional misconduct caused the restatement, and the Company will seek to recoup bonuses paid for performance during the period or periods that are the subject of the restatement.
Policy on Transactions with Related Persons. The Board of Directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof).
Any transaction with the Company in which a Director, executive officer or beneficial holder of more than 5% of the outstanding shares of either Class A or Class B stock, or any immediate family member of the foregoing (each, a "related person") has a direct or indirect material interest, and where the amount involved exceeds $120,000, must be specifically disclosed by the Company in its public filings.
Any such transaction would be subject to the Company's written policy respecting the review, approval or ratification of related person transactions.
Under this policy:
If the transaction involves a related person who is a Director or an immediate family member of a Director, that Director may not participate in the deliberations or vote. In approving or ratifying a transaction under this policy, the Board of Directors, the committee or Director considering the matter must determine that the transaction is fair and reasonable to the Company.
For 2007, there were no transactions between the Company and a related person requiring approval under this policy.
A printable version of this written policy is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4.
Our Code of Ethics applicable to Directors discourages Directors from engaging in transactions that present a conflict of interest or the appearance of one. Our Business Ethics Policy applicable to employees, including executive officers and others who may be "related persons" similarly discourages transactions where there is or could be an appearance of a conflict of interest. In addition, that policy requires specific approval by designated members of management of transactions involving the Company and in which employees have an interest. Specifically, an employee's retention for the provision of goods or services to the Company of any business in which he or she has an interest must be approved by the employee's supervisors, and an employee's direct or indirect financial interest in a business enterprise that does business with the Company must be approved by or on behalf of the President/CEO of that employee's operating unit. There are exceptions for small holdings in public companies. These provisions of the Code of Ethics applicable to Directors and the Company's Business Ethics Policies are intended to operate in addition to, and independently of, the policy on transactions with related persons described above.
Board Meetings and Attendance
Board Meetings in 2007: Nine
Board Committees: Five Standing Committees: Audit, Compensation, Finance, Foundation, and Nominating & Governance. See "Board Committees" for Committee descriptions and membership.
Total Committee Meetings in 2007: 23
2007 Attendance: All Directors attended 75% or more of the total Board and Committee meetings.
Nominating & Governance Committee
Our Nominating & Governance Committee consists of three non-employee, Directors, William E. Kennard, Chair, Brenda C. Barnes, and Ellen R. Marram. Our Board has determined that each Committee member is "independent" under the corporate governance listing standards of the NYSE.
The Committee operates under a written charter adopted by the Board of Directors. The principal functions of the Committee include making recommendations to the Board regarding the composition of the Board and its Committees, including size and qualifications for membership, to recommend nominees to the Board for election and to advise the Board on corporate governance matters. The chart set forth in "Board Committees" describes the principal functions of the Committee under its charter. A printable version of the charter is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4.
The Committee will consider Director candidates recommended by stockholders. Stockholders wishing to recommend Director candidates for consideration by the Committee may do so by writing to the Corporate Secretary, giving the recommended nominee's name, biographical data and qualifications, accompanied by the written consent of the recommended nominee.
Consistent with the Company's Corporate Governance Principles, the Committee considers various criteria in Board candidates, including, among others, independence, diversity, character, judgment and business experience, as well as their appreciation of the Company's core purpose, core values and journalistic mission, and whether they have time available to devote to Board activities. The Committee also considers whether a potential nominee would satisfy:
Whenever a vacancy exists on the Board due to expansion of the Board's size or the resignation or retirement of an existing Director, the Committee begins its process of identifying and evaluating potential Director nominees. The Committee considers recommendations of management, stockholders and others. The Committee has sole authority to retain and terminate any search firm to be used to identify Director candidates, including approving its fees and other retention terms. In this regard, from time to time the Committee has retained a global executive recruiting firm, whose function is to bring specific Director candidates to the attention of the Committee. As discussed elsewhere in this Proxy Statement, the 1997 Trust, as holder of a majority of our Class B stock, has the right to elect 70% of our Board. The Committee considers, among other potential nominees, recommendations of the trustees of the 1997 Trust for nominees to be elected by the holders of the Class B stock.
Director candidates are evaluated using the criteria described above and in light of the then-existing composition of the Board, including its overall size, structure, backgrounds and areas of expertise of existing Directors and the relative mix of independent and management Directors. The Committee also considers the specific needs of the various Board committees. The Committee recommends potential Director nominees to the full Board, and final approval of a candidate is determined by the full Board. This evaluation process is the same for Director nominees who are recommended by our stockholders.
Mr. Denham was first brought to the attention of senior management and the Committee by a retired independent director of the Company. Ms. Lepore was first brought to the attention of senior management and the Committee by the global executive recruiting firm retained by the Company. After Mr. Denham and Ms. Lepore met with members of the Committee, including the Chair, and other members of the Board, the Chair of the Committee recommended that the Committee recommend to the full Board that Mr. Denham and Ms. Lepore be Director nominees at the 2008 Annual Meeting.
For a description of the process by which Messrs. Galloway and Kohlberg became Director nominees at the 2008 Annual Meeting, see "Proposal Number 1Election of DirectorsNotes on Nominees" on page 11.
Compensation Committee Procedures
Our Board of Directors has established a Compensation Committee and charged it with the responsibility to review and either act on behalf of the Board or make recommendations to the Board concerning executive compensation and employee benefits. The Compensation Committee consists of the following individuals:
E. Liddle, Chair
The Committee consists solely of non-employee Directors of the Company. Our Board has determined that each Committee member is "independent" under the corporate governance listing standards of the NYSE.
The Committee operates under a written charter adopted by the Board of Directors. It was most recently reviewed and revised in December 2006. A printable version of the charter is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4. The chart set forth in "Board Committees" describes the principal functions of the Committee under its charter, as well as the number of its meetings in 2007.
Together with the other non-employee members of the Board, the Committee evaluates the performance of our Chairman, President and Chief Executive Officer, and Vice Chairman and together with the other independent Directors approves their compensation. In addition, the Committee approves all compensation for our other executive officers. Compensation for other members of senior management is reviewed and established pursuant to salary "bands," with compensation reflecting levels of responsibility and the market value of the relevant positions. In addition, the Committee discusses with management in general terms the compensation of non-executive employees.
In the past, the Committee has delegated, and may in the future on an annual basis delegate, the authority to make option and other equity grants in limited circumstances, such as to newly hired or recently promoted employees, to a three-member management committee authorized to grant a limited number of options and other equity awards under specified parameters. To ensure compliance with its longstanding procedures, the Committee has adopted a written grant policy.
Under its charter, the Committee has sole authority to retain and terminate a consulting firm to assist in its evaluation of executive compensation. In accordance with this authority, in 2007, it directly engaged an independent compensation consultant, Exequity. Exequity reported on its review of data from nationally recognized compensation surveys. The review analyzed salary, annual and long-term cash incentive bonuses and equity compensation, as well as total compensation, for comparable executive positions at a cross-industry selection of U.S. companies with revenues comparable to ours and, for operating unit positions, at other comparable media companies. Exequity also provided general advice on executive compensation trends and programs and makes compensation recommendations for our Chairman and Chief Executive Officer. In the course of advising the Committee, Exequity occasionally is asked to provide guidance and support to management in connection with matters that are reviewed by the Committee. These matters may pertain to, among other things, competitive analysis, program design recommendations, technical support and cost modeling.
The Committee generally consults with management regarding executive compensation matters, and our Chief Executive Officer makes compensation recommendations for executive officers, excluding herself and our Chairman. The Company's Human Resources Department supports the Committee in its work.
Each December and February, the Committee meets to discuss executive compensation. At these meetings, the Committee generally takes the following actions:
In February of each year, the Committee meets to certify the achievement of performance goals for the recently completed year and long-term cycles and approve the payment of the annual bonuses and long-term performance awards. Other meetings are scheduled throughout the year as the Committee deems appropriate.
The Committee has reviewed and discussed with Company management the section of this Proxy Statement titled "Compensation Discussion and Analysis," and its report to stockholders stating that it has recommended the inclusion of such discussion and analysis appears below under "Compensation of Executive Officers" on page 30.
No member of the Committee is now, or was during 2007 or any time prior thereto, an officer or employee of the Company. No member of the Committee had any relationship with the Company during 2007 pursuant to which disclosure would be required under applicable SEC rules pertaining to the disclosure of transactions with related persons. None of our executive officers currently serves or ever has served as a member of the board of directors, the compensation committee, or any similar body, of any entity one of whose executive officers serves or served on our Board or the Committee.
Audit Committee Report
To the Stockholders of the New York Times Company:
The Audit Committee consists of four non-employee Directors, Raul E. Cesan, Chair, James M. Kilts, David E. Liddle and Doreen A. Toben. The Board of Directors has determined that:
The Committee operates under a written charter adopted by the Board of Directors. A printable version of the charter is available on our Web site and is also available in print to any stockholder requesting it. Such request can be submitted in writing or by telephone as described on page 4.
Management has the primary responsibility for the financial statements and the financial reporting process, including the system of internal control over financial reporting. The Company's independent registered public accounting firm is responsible for performing an independent integrated audit of (i) the Company's consolidated financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) and (ii) management's assessment of, and the effectiveness of, the Company's internal control over financial reporting, and for issuing the reports thereon. The Committee is responsible for assisting the Board in monitoring:
In addition, the Committee has established procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by Company employees of concerns regarding accounting or auditing matters.
During 2007, the Committee met seven times and held separate discussions with management, the Company's internal auditors and the Company's independent registered public accounting firm, Ernst & Young LLP ("Ernst & Young"). The Committee's Chair, as representative of the Committee, discussed the Company's interim financial information contained in each quarterly earnings announcement with the Company's Chief Financial Officer and/or Controller and Ernst & Young prior to public release. Each other member of the Committee also generally participated in this discussion. The full Committee reviews the Company's quarterly financial statements with management and Ernst & Young. In addition, the Committee reviewed and discussed the Company's compliance with Section 404 of the Sarbanes-Oxley Act.
Management has represented to the Committee that the Company's 2007 annual consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Committee reviewed and discussed with management and Ernst & Young the Company's 2007 annual consolidated financial statements and Ernst & Young's audit report thereon, management's annual report on the Company's internal control over financial reporting and Ernst & Young's audit report on the effectiveness of the Company's internal control over financial reporting. The Committee has also discussed the following with Ernst & Young:
treatments of financial information within accounting principles generally accepted in the United States of America that Ernst & Young discussed with management, the ramifications of using such alternative treatments, and the treatment preferred by Ernst & Young; and
In addition, the Committee has received and reviewed the written disclosures and the letter from Ernst & Young required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with Ernst & Young that firm's independence from the Company and management, including all relationships between the firm and the Company. As part of its role of monitoring Ernst & Young's independence, the Committee has adopted a "Policy on Auditor Independence and Non-Audit Services" (which, among other things, requires management and the Committee to consider whether Ernst & Young's provision of any non-audit services would impair Ernst & Young's independence) and a "Policy on Hiring Current or Former Employees of Independent Auditors." Both of these policies are available at http://www.nytco.com.
In addition, the Committee obtains and reviews annually a report by Ernst & Young describing:
The Committee discussed with the Company's internal auditors, Ernst & Young and management the overall scope and plans for their respective audits. The Committee met with the internal auditors and Ernst & Young, with and without management present, to discuss the results of their respective audits, the evaluations of the Company's internal control over financial reporting, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 30, 2007, for filing with the SEC.
The Committee also has recommended, subject to stockholder ratification, the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 28, 2008.
E. Cesan, Chair
2007 Compensation of Non-Employee Directors
Compensation for our non-employee Directors for 2007 was comprised of: cash compensation, consisting of an annual retainer, meeting fees, and fees for Committee Chairs and the Presiding Director; and equity compensation, consisting of a grant of phantom Class A stock units and options to purchase Class A stock.
Our goal in setting compensation for our non-employee Directors is to remain competitive in attracting and retaining high quality Directors. We also recognize that over the past few years, there has been an increase in board responsibilities and potential liability.
Our Nominating & Governance Committee annually reviews and makes recommendations to the Board with respect to the compensation for non-employee Directors. Each year, management reports to the Nominating & Governance Committee on non-employee Director compensation at comparable companies and makes recommendations with respect to the amount and form of compensation for non-employee Directors.
Based on available information, we believe our non-employee Director compensation package generally falls in the mid-range of director compensation at comparable companies.
Each of the current components of our non-employee Director compensation is described in more detail below.
On the recommendation of our Nominating & Governance Committee, our Board approved the following modifications to the compensation for non-employee Directors, which took effect on April 1, 2007. We discontinued our practice of paying meeting fees in recognition of the fact that meeting attendance is the most basic expectation of a director. Instead we now have a higher annual Board retainer and Committee retainers as follows:
Director Compensation in Effect through March 31, 2007:
Through March 31, 2007, our annual Board retainer, Committee Chair retainers and meeting fees were as follows:
Annual Presiding Director Retainer:
The Presiding Director receives a $10,000 annual retainer.
Non-Employee Directors Deferral Plan: Our Non-Employee Directors Deferral Plan, referred to as the Deferral Plan, allows our non-employee Directors to defer the receipt of a portion of their cash compensation. We credit deferred amounts to a cash account or a phantom Class A stock unit account, as elected by the Director. Amounts deferred as phantom Class A stock are initially held as cash and are converted to phantom stock units as of the date of our next succeeding Annual Meeting. Cash accounts are credited with interest at a market rate. Phantom Class A stock unit accounts are credited with dividend equivalents. Subsequent to a non-employee Director's retirement, we pay him or her the cash value of amounts accumulated in his or her account.
Phantom Stock Units: Under the Deferral Plan, a discretionary grant of phantom stock units worth $35,000 was credited to each non-employee Director's account under our Deferral Plan on the date of the 2007 Annual Meeting. The number of phantom stock units credited was based on the average closing price of a share of Class A stock for the 30 trading days prior to the date of the 2007 Annual Meeting. It is anticipated that a similar grant will be made on the date of the 2008 Annual Meeting.
Stock Options: Our Board's longstanding practice is to award stock options annually to our non-employee Directors, on the date of the Annual Meeting under our Non-Employee Directors' Stock Incentive Plan, referred to as the Directors' Plan. The option exercise price for those awards is set at the average of the high and low stock prices as quoted on the NYSE on the date of the Annual Meeting. Options vest on the date of the next succeeding Annual Meeting and have a term of 10 years from the date of grant.
In 2007, options to purchase 4,000 shares of our Class A stock were granted to non-employee Directors under the Directors' Plan. It is anticipated that a similar grant will be made on the date of the 2008 Annual Meeting.
Matching Gifts Program: In 2007, we matched 150% of charitable contributions made by Directors to colleges, schools, cultural, journalism or environmental organizations, up to a maximum Company contribution of $4,500 per person per year. Beginning in 2008, we will match 100% of charitable contributions made by Directors to colleges, schools, cultural, journalism or environmental organizations, up to a maximum Company contribution of $3,000 per person per year. We also match charitable contributions of retired Directors. A Director is considered "retired" if such Director has served at least five years on the Board and is at least age 60 at the time he or she leaves our Board.
Life Insurance: We previously maintained insurance of $100,000 on the life of each non-employee Director. The Board determined to discontinue this insurance effective April 1, 2006. We maintain life insurance of $25,000 on the life of each non-employee Director who retired on or before April 18, 2006.
Expenses: We reimburse reasonable expenses incurred for attendance at Board and Committee meetings.
Non-Employee Director Compensation Table
The total 2007 compensation of our non-employee Directors is shown in the following table. Daniel H. Cohen was elected to the Board on April 24, 2007. The table includes Mr. Cohen's compensation from that date through December 31, 2007. Cathy J. Sulzberger retired from the Board effective April 24, 2007. The table includes Ms. Sulzberger's compensation for the period through that date.
Directors' and Officers' Liability Insurance
The Company maintains directors' and officers' liability insurance effective March 1, 2007, with an expiration date of May 1, 2008. This is part of our combined coverage, which was purchased at an annual cost of $2,690,245. The aggregate limit for claims under the directors' and officers' policy, together with claims under policies providing employment practices, fiduciary and crime liability coverage, is $100 million. If the $100 million combined limit is exhausted, there is a separate $50 million side limit available solely for directors' and officers' liability. The insurance companies providing directors' and officers' liability insurance are Ace American Insurance Company, Allied World Assurance Co. Ltd., Endurance Specialty Insurance Ltd., Great American Insurance Company, Liberty Mutual Insurance Company, RLI Insurance Company, Starr Excess Liability Insurance International Ltd., St. Paul Mercury Insurance Company and Westchester Fire Insurance Company.
Compensation of Executive Officers
Compensation Committee Report
The Compensation Committee has reviewed and discussed with Company management the "Compensation Discussion and Analysis" appearing below, and based on such review and discussions, the Committee has recommended to the Board that such Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company's 2007 Annual Report on Form 10-K.
E. Liddle, Chair
Compensation Discussion and Analysis
We believe that our executive officers are critical to our success and to the creation of long-term stockholder value. We structure compensation for our executive officers based on the following objectives:
The following discussion analyzes executive compensation for 2007, as well as the 2008 objectives, for those executive officers identified in the Summary Compensation Table, who we refer to as our named executive officers.
Our named executive officers are determined based on total compensation, which is calculated under SEC regulations. For 2007, these include:
Mr. Ainsley is included as a named executive officer because he became retirement-eligible in 2007 as a result of turning 55. This triggered the accelerated recognition of unamortized expense for most of his outstanding equity awards, an amount that is included in his total compensation under SEC regulations.
In 2007 and 2008, the following actions were taken with respect to the Company's executive compensation program.
Role of Board, Compensation Committee and Executive Officers
The Committee is primarily responsible for overseeing compensation for our executive officers, including the named executive officers. The Committee, which consists solely of independent directors, acts on behalf of the Board or makes recommendations on executive compensation to the Board.
The Committee approves annually the compensation for the Company's executive officers other than the Chairman, Chief Executive Officer and Vice Chairman. This includes approval of base salaries, annual and long-term performance awards and equity awards. With respect to the compensation of our Chairman, Chief Executive Officer and Vice Chairman, the Committee makes recommendations to the independent members of our Board of Directors, who set these officers' compensation. The independent directors consult with the other non-management Directors, but the final decision is theirs.
The Committee generally consults with management regarding employee compensation matters, and our Chief Executive Officer reports on the performance of, and makes compensation recommendations for, executive officers other than herself and our Chairman. In developing recommendations, the Chief Executive Officer consults with the Chairman and the head of the human resources department. In addition, our human resources, legal, controllers and treasury departments support the Committee in its work and help administer our compensation programs.
The Committee's independent compensation consultant, Exequity, LLP, advises on executive compensation matters and provides compensation recommendations for our Chairman and Chief Executive Officer. In addition, the members of the Compensation Committee familiarize themselves with compensation trends and competitive conditions through periodic consultations with compensation experts, including Exequity.
The table below summarizes our compensation recommendation and approval process:
Exequity, the Committee's independent compensation consultant, provides guidance and information to the Committee. A discussion of the composition and procedures of the Committee, including the role of Exequity, is set forth above under "Compensation CommitteeCompensation Committee Procedures."
Components of Compensation
To achieve our compensation objectives, we rely on the following compensation components, each of which is discussed in more detail below:
Key Factors in Setting Compensation
In setting or recommending the amounts of each component of an executive's compensation and considering his or her overall compensation package, the Committee considers each of the following four factors:
In setting compensation for 2007, the Committee reviewed tally sheets prepared by Hewitt Associates, detailing the total compensation of the named executive officers. These tally sheets identified all components of compensation for these executives, including the compensation such executives would be eligible to receive under different termination scenarios. At the conclusion of this review, the Committee determined that the amounts of compensation to be currently paid, in aggregate, and the amounts that would be paid upon retirement or other termination of employment, in aggregate, were appropriate and reasonable in light of the factors discussed above.
In setting financial performance targets, the Committee reviews our operating budget for the fiscal year and the annually prepared three-year plan, and sets specific incentive targets that are directly linked to short- or long-term financial performance objectives. Annual operating budgets and three-year plans are developed and submitted to the Board by management annually based on an assessment of the state of the business, the industry and expectations regarding annual and
long-term performance. The annual budgets and three-year plans set financial performance objectives that management believes are aggressive but achievable based on the underlying strategic and operating assumptions regarding revenue and cost control initiatives. Typically, the Committee will set a target performance level for a 100% payout at the same level as the relevant objective. While future results cannot be predicted, the Committee believes that these performance targets are set at levels such that achievement of the target levels would require significant effort on the part of the executive officers and that payment of the maximum amounts would reflect results substantially in excess of internal and market expectations.
Operating budgets and three-year plans are created independent of, and therefore the financial and operating performance targets generally exclude, the effect of specified non-recurring or non-operational events, such as acquisitions and dispositions, changes in accounting rules, the cost of employee buyouts not reflected in our budget and non-cash impairment charges. The Committee also reserves the right from time to time consider appropriate adjustments at the end of the measurement period to exclude the effect of specific one-time events that were not foreseen at the time the performance targets were set. The Committee makes these adjustments to provide for a better evaluation of operating performance, motivate management to pursue investments or acquisitions that are strategically and financially beneficial over the long term but may negatively affect performance metrics during the measured period, and otherwise ensure that employees do not benefit and are not penalized as a result of reasonably unanticipated and uncontrollable events that positively or negatively affect performance against target.
We discuss below the specific performance targets and actual results for the annual 2007 performance period. However, because future performance targets for the named executive officers are based on management's strategic and operating plans, we believe they reflect confidential commercial and business information. The disclosure of these specific financial targets for future periods would put us at a competitive disadvantage, and so we do not provide this information.
Salaries for executive officers are reviewed annually and designed to provide competitive compensation to each executive based on position, scope of responsibility, business and leadership experience and performance. In 2007, as in prior years, we set and paid salaries on a calendar-year basis, with any increases based on the four factors discussed above. The 2007 salaries for the named executive officers other than for Mr. Follo, who joined the Company in January 2007, remained at the same level as in 2006. The Committee determined to increase the "at risk" annual cash bonus potential rather than increase salaries to strengthen the link between pay and performance.
In 2007, the Compensation Committee determined that, beginning in 2008, it would set salaries effective March 1 to better enable it to evaluate performance during the most recently completed fiscal year. For 2008, the salaries for all named executive officers remained at the same levels as in 2007. In lieu of salary increases, the Committee approved one time discretionary bonuses for Mr. Sulzberger, Jr. ($38,045), Ms. Robinson ($35,000), Mr. Golden ($21,945), and Mr. Follo ($21,600). These bonus payments had no incremental effect on the recipients' annual performance-based bonus potential, long-term performance award potential or welfare benefit levels.
In February 2007, the Committee set 2007 annual bonus targets for all executives, including the named executive officers, as a percentage of salary based on the four factors discussed above. Generally, the more responsible the executive officer's position is, the higher the percentage. For the named executive officers, target amounts ranged from 55% to 100% of base salary, an increase from 50% to 90% from 2006 target amounts. The Committee decided to increase the "at risk" annual cash bonus potential for 2007 rather than increase salaries to strengthen the link between pay and performance. Depending on the achievement of the Company, operating unit and individual goals discussed below, the potential payout for each executive ranged from zero to 200% of the target amount.
The objective of the annual bonus element of compensation is to align the interest of executives with our operating goals for the year and also to encourage and reward the achievement of individual goals designed to advance our strategy. Thus, the Committee structured 2007 annual bonuses to depend 75% on the achievement of annual Companywide and, where applicable, operating unit financial targets designed to advance our strategy, and 25% on the achievement of individual goals. For corporate executives, including Mr. Sulzberger, Jr., Ms. Robinson, and Messrs. Golden and Follo, the financial portion depended solely on the achievement of Companywide financial targets. For operating unit executives, including Mr. Ainsley, 35% of the annual bonus depended on the Companywide targets and 40% depended on operating unit performance targets.
Before 2007, the Committee based the financial portion of the annual bonus on earnings per share, or EPS, and, where applicable, operating unit results. For the 2007 awards, the Committee replaced EPS and operating unit profit performance targets with targets based on EBITDA excluding certain items. For this purpose, EBITDA is computed as operating profit plus depreciation and amortization, minus net income from joint ventures, plus minority interest in net loss of subsidiaries, adjusted to exclude the effect of acquisitions and dispositions, changes in accounting rules, the cost of employee buy-outs not reflected in our budget and non-cash impairment charges. The Committee concluded that EBITDA, as so adjusted, would be a useful measure of our performance for compensation purposes because it facilitates comparisons of our historical operating performance on a more consistent basis than EPS. EPS can often be volatile due to non-operating factors. In addition, EBITDA is a measure often used by investors, analysts and others and serves to align the interests of our executives and our stockholders.
In setting EBITDA targets, the Committee considered our Companywide strategic and operating plans and, where applicable, those of the executive's operating unit. Our 2007 budget and, as a result, the performance targets, took into account a projected challenging print advertising and circulation revenue environment. The target performance level for a 100% payout was set at the operating budget objectives. The Committee set the threshold and maximum payout amounts to increase at a higher rate for performance above target than the rate of decrease for performance below targetreflecting industry expectations of a decline in print advertising and circulation revenues. The Company met its targets, resulting in a payout of 100% of that portion of the named executive officers' annual bonuses based on the Companywide targets. The following table reflects the target, the actual achievement level and the actual payout percentage for 2007:
The following table shows the computation of adjusted EBITDA, as described above, for purposes of the 2007 annual bonuses.
As noted above, bonuses depended 25% upon the officer's achievement of individual goals. For the named executive officers, the Committee evaluated individual performance against individual goals related to strategic initiatives and organizational effectiveness, such as accelerated innovation, expanding content verticals and building sales capability. Performance relative to target achievement with regard to individual measures was assessed as follows:
The Committee also retained the discretion to increase or decrease the total bonus paid to each executive by up to 10% based on the continuing development of a diverse work force, including the inclusion of diverse candidates in hiring processes and the demonstration of personal commitment to diversity through participation in diversity-related activities, such as mentoring and sponsorship of affinity groups. For 2007, the Committee approved a 10% increase in Mr. Ainsley's annual bonus under these criteria. No increase or decrease was made to the annual bonus of any other named executive officer.
The following table illustrates the 2007 annual bonus program as discussed above. For each named executive officer, the table below sets out the target (100%), maximum (200%) and actual bonus amount both in dollars and as a percentage of 2007 base salary.
In February 2008, the Committee determined to structure 2008 annual cash bonuses for corporate executives based on a similar allocation of 75% for Companywide performance and 25% for individual goals. For operating unit executives, 35% of the annual bonus will depend on the Companywide performance targets and 65% will depend on individual goals. Companywide performance will again be measured against achievement of targeted adjusted EBITDA amounts based on the annual operating budget. Individual goals are based on the executive's contribution to revenue growth and cost management for the Company and/or the executive's operating unit, customer satisfaction, Company culture and innovation. The Committee retains the discretion to increase or decrease the portion of the bonus dependent upon individual goals by up to 10% based on the level of achievement of goals regarding the continuing development of a diverse workforce. For our named executive officers, the target amounts
for the annual 2008 bonuses were set at the same levels as for 2007. Individual targets and maximums are set out below, with awards interpolated for performance between threshold and target and between target and maximum.
The Committee has set the specific amounts for each named executive officer based upon four factors discussed above. The grants are designed to result in payouts at the stated target amounts if the Company achieves its 2008 goals.
Long-Term Incentive Compensation
The Committee awards long-term compensation through long-term performance-based cash awards and equity incentives (in the form of options and restricted stock units). The allocation and size of these components is based on the four factors identified above.
Long-Term Performance Awards
Long-term performance awards, which are paid in cash, are designed to align the interests of the executives with our longer-term strategic objectives and to reward them in relation to the achievement of these objectives. As a result of the Company's previous shift from 5-year to 3-year cycles, no long-term performance cycle ended in 2007, and, accordingly, no payments were made.
For the long-term performance awards granted in 2008 for the three-year period 20082010, amounts that may potentially be paid will depend on two performance measures:
We define ROIC as the quotient of:
In setting the ROIC targets, the Committee determined that the effects of significant acquisition and dispositions (i.e., those above $10 million), changes in accounting rules, the cost of employee buy-outs not reflected in our budget and non-cash impairment charges for assets held for more than three years would be excluded. The Committee determined to exclude such non-cash impairment charges because a write-down can materially adversely affect the computation of ROIC for the measurement period, and the Committee determined that it would be inequitable to penalize executives for the impairment of assets acquired more than three years ago. With respect to assets acquired within three years, however, because the decision to acquire such assets would have been based in part upon the current executives' operating strategies, the Committee determined that any impairment charge should be taken into account in measuring the long-term performance award ultimately payable to such executives.
Achievement with respect to each element of the award is independent of the other. The actual amount that will be paid will depend on the two performance measures and will range from zero to 175% of the target amounts, depending on performance.
For our named executive officers, the target amounts for the long-term performance awards granted in 2008 for the three-year period 20082010 range from $2,000,000 to $300,000, with awards interpolated for performance between threshold and target and between target and maximum.
The Committee has set the specific amounts for each named executive officer based upon four factors discussed above. The grants are designed to result in payouts at the stated target amounts if the Company achieves its goals for the three-year period 20082010.
Stock Options/Restricted Stock Units
Stock-based compensation for eligible employees, including the named executive officers, consists of stock options and restricted stock units. Including an equity component in executive compensation closely aligns the interests of the executives and our stockholders and rewards executives in line with stockholder gains.
Stock options produce value for executives only if our Class A stock price increases over the exercise price, which is set at the market price on the date of grant, calculated as the average of high and low stock prices on the date of grant. Also, through vesting and forfeiture provisions, they create incentives for executive officers to remain with us. Stock options granted to executive officers, including the named executive officers, vest in equal increments over four years and expire after ten years.
Restricted stock units create incentives for executives to increase the value of our Class A stock and to remain with us. Restricted stock units granted to executive officers, including the named executive officers, represent a right to receive shares of our Class A stock after a specified vesting period. During this vesting period, the units are generally forfeited if the holder leaves our employ but vest in the event of death, disability or retirement. Upon vesting, shares of Class A stock equal to the number of outstanding units are delivered free and clear of restriction. Restricted stock unit holders are entitled to receive payments equivalent to dividends paid on Class A stock. In 2007, our named executive officers received dividends or dividend equivalents on restricted stock or restricted stock units in the following amounts: Mr. Sulzberger, Jr.: $104,665; Ms. Robinson: $146,618; Mr. Golden: $19,506; Mr. Ainsley: $16,770; and Mr. Follo: $4,758.
Our Committee makes annual equity grants to key employees, including executives, at a regularly scheduled meeting. Historically, these grants were made in December. However, in 2007, the Compensation Committee elected to make annual equity awards in February of each year, beginning in February 2008, to better enable it to evaluate performance during the most recently completed fiscal year. As a result, in 2007, there were no restricted stock units or option grants to any of the named executive officers, other than to Mr. Follo, who received grants in connection with joining the Company.
In February 2008, our named executive officers received the following grants:
These grants were determined by the Committee based upon the four factors discussed above and informed by the evolving nature of executive compensation practices. In determining equity grants for named executive officers, the Committee also considered the number and value of shares underlying the options and restricted stock units being granted and the related effect on dilution to other stockholders and took into account the number of shares that remain available for grant under our executive stock incentive plan.
Restricted stock units granted in 2008 have a three-year vesting period, a decrease from the five-year vesting period of prior grants. The Committee determined, based in part on the advice of Korn/Ferry and Exequity, that a three-year vesting period was more consistent with comparable programs at other companies.
In light of the challenging period of transition that we and our industry are in and to demonstrate the commitment of the Ochs/Sulzberger family to the Company, Messrs. Sulzberger, Jr. and Golden requested
that the Board not grant them stock-based compensation for February 2008, significantly reducing their compensation. The Board concluded that it would honor the request. Management created a bonus pool of $2 million, the approximate value of Messrs. Sulzberger, Jr. and Golden's stock-based compensation in 2005, the last year they received equity awards, to reward exceptional performance by employees who do not participate in our annual bonus plan.
It has long been our policy to not grant "in-the-money options" in any manner, including granting an option with an exercise price set at the market price as of a date preceding the grant date. Awards made other than pursuant to the annual equity grantfor example, to newly hired or recently promoted employeestypically take place shortly after issuance of our quarterly earnings releases, and grants to new employees occur only after employment has commenced. In the past, the Committee has delegated, and may in the future on an annual basis delegate, the authority to make option and other equity grants in limited circumstances, such as for newly hired or recently promoted employees, to a three-member management committee authorized to grant a limited number of options and other equity awards under specified parameters. To ensure compliance with its long-standing procedures, the Committee has adopted a written grant policy.
Other Elements of Executive Compensation
Our executive officers, including the named executive officers, participate in a supplemental executive retirement plan, which is a non-qualified plan designed to provide benefits to a select group of executives that, when added to retirement income provided under other Company plans, will ensure payment of a competitive level of retirement income to these individuals. As a result, the plan serves as an important retention tool.
Participation in the supplemental executive retirement plan is reviewed annually by our Chairman and Chief Executive Officer, who have the discretion to designate executive officers and other members of management for participation. All named executive officers currently participate in this plan. For a further discussion of the supplemental executive retirement plan, see "Post-Employment CompensationSupplemental Executive Retirement Plan" below.
We provide certain limited perquisites to our executive officers. Our approach to compensation does not include significant perquisites. Perquisites provided in 2007 consisted primarily of financial planning services in connection with the stock ownership guidelines described below as well as, for Mr. Golden, benefits provided in connection with his overseas assignment as Publisher of the International Herald Tribune and, for Mr. Ainsley, benefits provided in connection with his appointment as Publisher of The Boston Globe in September 2006 and related relocation to Boston from Tampa, Florida. Our Committee believes that these perquisites are relatively modest compared to those provided to executives at other public companies. For our executive officers, including our named executive officers, we also pay Medicare taxes and related tax reimbursements owed on supplemental executive retirement plan benefits and restricted stock units outstanding when those officers become eligible for retirement.
Stock Ownership Guidelines
Since 2004, we have maintained minimum stock ownership guidelines for those executive officers named in the "Summary Compensation Table." The Chairman is required to own shares of the Company's Class A stock equal in value to three times current annual base salary, and the other named executive officers are required to own shares equal in value to one or two times current annual base salary. Restricted stock and restricted stock units are counted in calculating ownership, but stock options are not. Each affected executive officer has five years from becoming subject to the guidelines to attain the full holding requirements. The Committee is advised annually of the holdings of each affected officer. All of our named executive officers are in compliance with the guidelines.
The Internal Revenue Code imposes certain limitations on the deductibility of compensation paid to those executive officers named in the "Summary Compensation Table." Certain compensation, including performance-based compensation meeting specified requirements, is exempt from this deduction limit. To the extent consistent with corporate performance objectives, we have structured, and intend to continue to structure, performance-based compensation, including stock option grants, annual bonuses and long-term performance awards, to executive officers who may be subject to these limitations in a manner that maximizes the available deduction. However, we have awarded non-deductible compensation in the past, and we expect to do so in the future when we deem that it is necessary to further the objectives of executive compensation.
The principal components of non-deductible compensation include the individual and diversity components of the executive officers' annual bonus, restricted stock and restricted stock unit awards and perquisites. The Committee believes that retaining the discretion to award annual bonuses based in part on individual goals and diversity furthers the interests of the Company notwithstanding the increased cost of awarding non-deductible compensation. Similarly, the Committee believes that the benefit of including time-vested restricted stock units as a component of overall compensation outweighs the cost of the lost deduction. The Committee continues to evaluate these items on an annual basis.
The table below summarizes the total compensation earned by each named executive officer for the fiscal year ended December 30, 2007. We have not entered into any employment agreements with any of the named executive officers.
Beginning in 2008, the Compensation Committee elected to make its annual equity awards in February of each year, when annual and long-term cash bonuses are approved for the most recently completed performance cycle. As a result, there were no restricted stock unit or stock option awards to any of the named executive officers in 2007, other than to Mr. Follo, who received grants in connection with joining the Company. Ms. Robinson and Messrs. Ainsley and Follo received equity grants in February 2008. At their request and as with the prior annual equity grant, Messrs. Sulzberger, Jr. and Golden received no restricted stock unit or stock option awards in 2008, significantly reducing their compensation. See "Compensation Discussion and Analysis" for further information on our 2008 equity grants.
In the "Stock Awards" and "Option Awards" columns, SEC regulations require us to disclose the amount of compensation expense recognized in the relevant fiscal year for restricted stock, restricted stock units and stock option awards, whether such grants were made in that year or in prior years, in accordance with FAS 123-R. For 2007, the amounts included in the "Stock Awards" and "Option Awards" columns for the named executive officers, other than Mr. Follo, are the amounts of compensation expense recognized in fiscal 2007 related to restricted stock, restricted stock units and/or stock option awards made in prior years. Mr. Follo's amounts reflect compensation expense recognized in fiscal 2007 related to restricted stock unit and stock option awards granted in 2007.
Our named executive officers are determined based on total compensation, which is calculated under SEC regulations. Mr. Ainsley, publisher of The Boston Globe, is included as a named executive officer because he became retirement-eligible in 2007 as a result of turning 55. This triggered the accelerated recognition of unamortized expense for most of his outstanding equity awards, an amount that is included in his total compensation under SEC regulations.
Grants of Plan-Based Awards
Beginning in 2008, the Compensation Committee elected to make annual and long-term performance awards and annual equity awards in February of each year, when annual and long-term bonuses are approved for the most recently completed performance cycle. As a result, the bonus potentials and targets for 2008 annual awards and 20082010 long-term performance awards were set in February 2008 and are not reflected in the table below. Likewise, in 2007, there were no restricted stock unit or stock option awards to any of the named executive officers, other than to Mr. Follo, who received grants in connection with joining the Company in 2007.
In 2008, we granted annual and long-term performance-based awards:
The amount of the target that will actually be paid at the end of 2008 will depend 75% on our achievement of designated targets for EBITDA, and 25% upon the named executive officer's achievement of individual goals related to strategic development and organizational effectiveness. The total may be increased or decreased by up to 10% based on the level of achievement of diversity goals.
Further information about these awards is included in "Compensation Discussion and Analysis."
In 2008, we granted annual stock-based compensation to eligible employees, including executive officers, consisting of stock options and restricted stock units.
Ms. Robinson and Messrs. Ainsley and Follo received equity grants in February 2008. At their request, there were no restricted stock unit or stock option awards granted to Messrs. Sulzberger, Jr. or Golden in 2008.
Outstanding Equity Awards at Fiscal Year-End
The following table shows outstanding stock options, restricted stock and restricted stock units as of December 30, 2007.
stock and restricted stock units awarded in 2003 through 2007 vest 100% on the fifth anniversary of grant. The grant and vesting dates of the restricted stock and restricted stock units awards are as follows.
Option Exercises and Stock Vested
The following table shows amounts received upon the exercise of stock options or vesting of restricted stock or restricted stock units during 2007.
The following table shows the number of years of credited service and actuarial present value of accumulated benefit under the Pension Plan and SERP as of December 30, 2007, the measurement date for each plan. The present value amounts are estimates only and do not necessarily reflect the actual amounts that will be paid to the named executive officers.
The Pension Plan is a defined benefit pension plan that is intended to qualify for favorable tax treatment under Section 401(a) of the Internal Revenue Code. It is designed to provide retirement income to eligible employees and their beneficiaries. All of our employees who are at least 21 years old and are not covered by a collective bargaining agreement are eligible to participate in the Pension Plan after completing one year of service, during which they completed at least 1,000 hours of service. All of the named executive officers are participants.
Pension Plan Benefits
Pension Plan benefits are based on a participant's years of credited service with the Company and final average earnings. Final average earnings are computed by:
For this purpose, earnings include the participant's total:
Earnings do not include long-term performance award payments or payments under any of our other compensation plans. The Internal Revenue Code limits the amount of annual earnings that can be taken into account when computing benefits under a tax-qualified plan, like the Pension Plan. For 2007, the maximum amount of earnings that can be taken into account when computing Pension Plan benefits was $225,000.
The annual retirement benefit payable at normal retirement age (age 65) is equal to:
A participant who retires between the ages of 55 and 65 with five or more years of credited service will receive an early retirement benefit based on the same factors of service and final average earnings. This benefit, however, will be reduced to account for early commencement as follows. If the participant has:
As of December 30, 2007, the last day of our fiscal year, each of our named executive officers, other than Mr. Follo, was eligible for early retirement.
A participant who works past normal retirement age will receive a retirement benefit based on the participant's service (up to 40 years maximum) and final average earnings at the delayed retirement date.
The Internal Revenue Code imposes limits on the amount of annual retirement benefits that we can provide under a tax-qualified plan, like the Pension Plan. For 2007, the maximum annual retirement benefit that can be provided under the Pension Plan was $180,000.
Pension Plan Distributions
Generally, a retired participant can elect to begin receiving retirement benefits as of the first day of any month after his or her retirement date. The Internal Revenue Code, however, requires that a retired participant begin receiving retirement benefits no later than April 1 of the year after the year in which the participant reaches age 701/2.
The normal form of retirement benefit for an unmarried participant is a straight life annuity. For a married participant, the normal form is a subsidized joint and 50% spouse's annuity. This type of annuity provides a reduced pension for the participant's life with 50% of the reduced pension continuing to the participant's spouse after the participant's death. Because it is subsidized, the value of the joint and 50% spouse's annuity is more than the actuarial equivalent of a straight life annuity. In lieu of the normal form of benefit, unmarried participants, and married participants whose spouses consent, may elect to receive payment of their retirement benefits in any of the following optional forms:
participant's life with either 50%, 75% or 100% of the reduced pension continuing to the participant's beneficiary (which does not need to be the spouse) after the participant's death.
A participant may not elect to receive retirement benefits in a single lump sum payment.
Supplemental Executive Retirement Plan ("SERP")
The SERP is a non-qualified defined benefit pension plan. It is designed to provide participants with a competitive amount of total retirement income when added to the retirement income from the Pension Plan. Only key senior Company executives designated by the SERP Committee, a Company management committee, can participate in the SERP. All of the named executive officers are participants.
Like the Pension Plan, SERP retirement benefits are based on a participant's years of service with the Company and final average earnings. Final average earnings for purposes of the SERP are computed the same way as under the Pension Plan, except that there is no annual limit on the amount of earnings that can be taken into account when computing SERP benefits. All participants are subject to non-competition restrictions for the duration of the period during which the participant is receiving benefits under the SERP. Under these non-competition restrictions, the SERP Committee has the discretion to discontinue, suspend or limit benefit payments to any participant in pay status who engages in any business or practice or is employed in any position that the SERP Committee deems to be in competition with the Company or any of its businesses or interests.
The annual SERP retirement benefit payable at normal retirement age (age 65) is equal to:
A SERP participant who retires between the ages of 60 and 65 with 10 or more years of service will receive a benefit based on the participant's service and final average earnings at retirement. This benefit will not be reduced because of early commencement. However, the benefit of a SERP participant who retires with 10 or more years of service between ages 55 and 60 will be reduced by one-third of one percent for each month benefits commence prior to age 60. A SERP participant who retires between ages 55 and 60 must also obtain the SERP Committee's consent prior to retiring. A participant is not entitled to a SERP benefit if the participant either:
As of December 30, 2007, the last day of our fiscal year, each of our named executive officers, other than Mr. Follo, was eligible for early retirement with SERP Committee consent.
A participant who works past normal retirement age will receive a SERP benefit based on the participant's service and final average earnings at age 65.
SERP Age and Service Credits
The service credit that is used for calculating SERP retirement benefits can be more than a participant's actual service in specified situations authorized by the SERP Committee. In the past, the SERP Committee has authorized additional service credit in connection with individual voluntary severance arrangements. Also, a participant's service and age used for calculating SERP benefits and determining retirement dates can include additional service and age credit the participant received under a voluntary buyout plan or agreement. None of the named executive officers has received additional age or service credits under the SERP.
During 2007, SERP benefits were paid at the same time and in the same annuity form as Pension Plan benefits. Executives cannot elect to receive a lump sum payment of their SERP benefits. For 2008, SERP benefits will continue to be paid at the same time and in the same annuity form as Pension Plan benefits pursuant to an Internal Revenue Code Section 409A transition rule that had been scheduled to expire on December 31, 2007, but was extended in 2007 through December 31, 2008. It is expected that the distribution provisions of the SERP will be revised in 2008, effective January 1, 2009, to comply with the new distribution requirements of Internal Revenue Code Section 409A.
Nonqualified Deferred Compensation
The following table shows contributions, earnings and balances under our DEC.
Deferred Executive Compensation Plan
All of the named executive officers, other than Mr. Follo, participate in our Deferred Executive Compensation Plan, referred to as the DEC.
Under the DEC, participants are currently allowed to defer up to:
Also, any participant who is a "covered employee" as defined in Internal Revenue Code Section 162(m) may defer 100% of any bonus if the bonus would cause the participant's compensation to exceed the deductible amount under Internal Revenue Code Section 162(m).
Earnings on Deferrals
DEC deferrals are credited with earnings. Earnings are based on the rates of return earned by various third-party mutual funds offered under the DEC from time to time.
When a participant makes a deferral, the participant elects which of the available mutual funds will be used to measure earnings on the deferral. A participant can change his or her earnings election at any time through our third-party administrator. There are no restrictions on the frequency of changes, and any election changes are applied prospectively only. Currently, we offer participants the choice of the following nine funds to measure earnings under the DEC (listed with rate of return for the 2007 fiscal year):
If a participant does not make a fund election, the participant's earnings are measured based on the rate of return of the Vanguard Short-Term Federal Fund.
Distribution of Deferrals
When a participant elects to make a deferral, the participant must also elect the duration of the deferral period. The deferral period can be no less than two years and no more than 15 years. (A participant may subsequently elect to extend the deferral period for a minimum of five and a maximum of 15 additional years if they continue to be employed and if requirements specified in the DEC are met.) At the same time, a participant must also elect the form in which the deferral will be paid. The choices are a single lump sum payment or five, 10 or 15 substantially equal annual installments. Regardless of any deferral and payment elections a participant has in effect, the executive's entire DEC account balance will be paid to the participant in a single lump sum upon a change of control of the Company.
Potential Payments Upon Termination or Change-In-Control
We have no employment agreements with any of our named executive officers, and we have not agreed to any plans or arrangements that would entitle them to any benefit upon a change in control or upon resignation, severance, retirement or other termination that is not generally available to salaried employees, other than as described under "Post-Employment CompensationSupplemental Executive Retirement Plan" and as set forth above.
Certain elements of compensation are, however, treated differently upon various termination of employment scenarios, as described below. The following describes how certain elements of compensation are handled under these scenarios for the named executive officers, assuming termination as of the last day of the fiscal year.
The following table and footnotes quantify the payments and benefits that each named executive officer would be required to be paid under the Company's compensation programs upon various scenarios for termination of employment or a change-in-control of the Company.
Payment Upon Termination or Change-in-Control Table
The Audit Committee has selected the firm of Ernst & Young LLP ("Ernst & Young"), an independent registered public accounting firm, as our auditors for the fiscal year ending December 28, 2008, subject to ratification of such selection by our Class A and Class B stockholders voting together as one class.
We have been informed by Ernst & Young that their firm has no direct financial interest nor any material indirect financial interest in us or any of our affiliated companies. Ernst & Young has not had any connection during the past three years with us or any of our affiliated companies in the capacity of promoter, underwriter, voting trustee, director, officer or employee.
A representative of Ernst & Young will be present at the Annual Meeting and will be afforded the opportunity to make a statement if he or she decides to do so. The representative will also be available to respond to appropriate questions from stockholders at the Annual Meeting.
Audit Committee's Pre-Approval Policies and Procedures
Our Audit Committee Charter, among other things, requires the Audit Committee to pre-approve the rendering by our independent registered public accounting firm of all auditing services, internal control-related services and permitted non-audit services. The Chair of the Audit Committee may pre-approve the rendering of such services (other than internal control-related services) on behalf of the Committee, provided the matter is then presented to the full Committee at the next scheduled meeting.
Audit and Other Fees
The following table presents the aggregate fees incurred for audit and other services rendered by Ernst & Young during fiscal year 2007 and Deloitte & Touche LLP ("Deloitte") during fiscal year 2006:
Audit Fees ($3,215,046; $3,601,000). This category includes the aggregate fees billed by Ernst & Young and Deloitte, respectively, for professional services rendered for the audit of the Company's annual financial statements, the reviews of the financial statements included in the Company's quarterly reports on Form 10-Q, comfort letters to underwriters and services normally provided by the independent auditor in connection with statutory and regulatory filings. Audit fees also include fees for professional services rendered for the audits of (i) management's assessment of the effectiveness of internal control over financial reporting and (ii) the effectiveness of internal control over financial reporting. Audit fees decreased in 2007 compared to 2006 due to a lower volume of work and lower fees.
Audit-Related Fees. No audit-related fees were paid in either 2007 or 2006.
Tax Fees ($174,000; $223,000). This category includes the aggregate fees billed by Ernst & Young and Deloitte, respectively, for tax services. Fees for assistance in the preparation of tax returns, claims for refunds and tax payment planning, including support during income tax audits or inquiries, were $57,000 in 2007 and $200,000 in 2006. The remaining $117,000 in 2007 and $23,000 in 2006 was for tax advice, planning and consulting.
All Other Fees ($; $10,000). This category includes aggregate fees billed by Deloitte in 2006 for audit committee education.
Recommendation and Vote Required
The Audit Committee of the Board of Directors recommends a vote FOR the following resolution, which will be presented to the meeting:
RESOLVED, that the selection, by the Audit Committee of the Board of Directors, of Ernst & Young LLP, an independent registered public accounting firm, as auditors of The New York Times Company for the fiscal year ending December 28, 2008, is hereby ratified, confirmed and approved.
The affirmative vote of the holders of a majority of the shares of Class A and Class B stock represented at the Annual Meeting, in person or by proxy, voting together as one class, is required for approval of this resolution. As a result, abstentions and broker non-votes will have the same effect as a vote against the proposal.
Change in Accounting Firm in 2006
As disclosed in the Proxy Statement respecting our 2007 Annual Meeting of the Stockholders and as required by applicable SEC rules, we include the following information regarding the change in our accounting firm in 2006.
As part of our continuing efforts to enhance our corporate governance practices, the Audit Committee periodically undertakes a thorough process to review
the selection of the Company's independent registered public accounting firm to assess the suitability of its incumbent independent auditors, taking into account all relevant facts and circumstances, including the possible consideration of the qualifications of other accounting firms. Based on the results of that process, on December 14, 2006, the Audit Committee notified Deloitte that it had determined to dismiss them as the Company's independent registered public accounting firm, effective as of the date of the completion of the audit services for the fiscal year ending December 31, 2006. The dismissal of Deloitte became effective on March 13, 2007.
The Audit Committee selected Ernst & Young as our auditors for the fiscal year ended December 30, 2007, and this selection was ratified by our Class A and Class B stockholders, voting as one class, at our 2007 Annual Meeting.
During the Company's two fiscal years ended December 31, 2006, and through March 1, 2007, the date of Deloitte's audit report in respect of the 2006 financial statements, there were no disagreements between the Company and Deloitte on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure that, if not resolved to Deloitte's satisfaction, would have caused it to make reference to the matter in conjunction with its report on the Company's consolidated financial statements for the relevant year; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
Deloitte's audit reports on the Company's consolidated financial statements and on the effectiveness of the Company's internal control over financial reporting and management's assessment thereof for the two fiscal years ended December 31, 2006, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles except that (i) the audit report of Deloitte on the effectiveness of internal control over financial reporting as of December 31, 2006 contains an adverse opinion because of the effect of a material weakness related to a deficiency in the controls over the accounting for pension and post-retirement liabilities and (ii) Deloitte's audit report on the Company's consolidated financial statements includes an explanatory paragraph related to the adoption of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," as revised, effective December 27, 2004, FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligationsan interpretation of FASB Statement No. 143," effective December 25, 2005, and Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," relating to the recognition and related disclosure provisions, effective December 31, 2006, and an explanatory paragraph relating to the Company's restatement of its 2005 and 2004 consolidated financial statements.
During the Company's two fiscal years ended December 31, 2006, neither the Company, nor anyone on its behalf, consulted with Ernst & Young with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, and no written report or oral advice was provided by Ernst & Young to the Company that Ernst & Young concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue or (ii) any matter that was the subject of either a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a "reportable event" as described in Item 304(a)(1)(v) of Regulation S-K.
Submission of Stockholder Proposals for 2009
Stockholders who intend to present proposals at the 2009 Annual Meeting under SEC Rule 14a-8 must ensure that such proposals are received by the Corporate Secretary of the Company not later than November 25, 2008. Such proposals must meet the requirements of the SEC to be eligible for inclusion in the Company's 2009 proxy materials.
On August 6, 2007, the Board of Directors approved an amendment to the Company's By-laws that, as permitted by Section 602(d) of the New York Business Corporation Law, added provisions specifying the procedures for stockholder nominations of directors and the making of other proposals at the Company's annual meeting. The amendments became effective upon the Board's approval and will first apply to our 2008 Annual Meeting.
As amended, the By-laws provide that the nomination of persons for election to the Board and the proposal of business to be considered by stockholders may be made at the annual meeting as set out in the Company's notice of such meeting, by or at the direction of the Board or by any stockholder who is entitled to vote at the meeting on such nomination or other proposal, and who, in the case of a holder of Class A common stock, complies with certain notice procedures. Any holder of Class A common stock proposing to nominate an individual for election to the Board by the Class A holders or proposing business to be considered by the Class A holders at an annual meeting must give written notice to the Secretary of the Company generally not less than 90 days nor more than 120 days before the first anniversary of the preceding year's annual meeting. As a result, stockholders who intend to present proposals at the 2009 Annual Meeting under these provisions, must give written notice to the Secretary of the Company generally no earlier than December 23, 2008 and no later than January 22, 2009.
Certain Matters Relating to Proxy Materials and Annual Reports
The Company may satisfy SEC rules regarding delivery of proxy statements and annual reports by delivering a single proxy statement and annual report to an address shared by two or more Company stockholders. This delivery method is referred to as "householding" and can result in meaningful cost savings for the Company. In order to take advantage of this opportunity, the Company has delivered only one proxy statement and annual report to multiple stockholders who share an address, unless contrary instructions were received from impacted stockholders prior to the mailing date. We undertake to deliver promptly upon written or oral request a separate copy of the proxy statement and/or annual report, as requested, to a stockholder at a shared address to which a single copy of these documents was delivered. If you hold stock as a registered stockholder and prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact Mellon Investor Services, P.O. Box 3315, South Hackensack, NJ 07606-1915, telephone (800) 240-0345. If your stock is held through a broker or bank and you prefer to receive separate copies of a proxy statement or annual report either now or in the future, please contact such broker or bank.
By order of the Board of Directors
RHONDA L. BRAUER
The New York Times Company's Board of Directors, acting on the recommendation of the Nominating & Governance Committee, has adopted the following Corporate Governance Principles:
1. The Core Purpose and Core Values of the Company
The Company's core purpose is to enhance society by creating, collecting and distributing high-quality news, information and entertainment.
The core values that enable the Company to achieve its core purpose are:
In support of the Company's core purpose and core values, the Board is committed to the editorial independence at all Company properties.
2. Director Responsibilities
In considering whether to request a director to resign, the Board of Directors is expected to consider all relevant facts and circumstances, including, without limitation, the number of directors elected at the Annual Meeting under the circumstances described in (i) and (ii) above, the qualifications, and past and expected future contributions, of such individual as a member of the Board and Board Committees, and what the Board believes to be the underlying nature of and reasons for any "withhold votes" directed at such individual or nominees for director in general.
Within 65 days of the certification of the shareholder vote at such Annual Meeting, the Board of Directors will publicly disclose whether the Board has decided not to request the resignation of a director pursuant to this Section, including as appropriate the facts and circumstances that contributed to that decision.
3. Director Qualifications
Directors should also advise the Chairman of the Board in advance of accepting an invitation to serve on another public company board.
4. Director Access to Officers and Employees
5. Director Compensation, Independence and Stock Ownership
6. Director Orientation and Ongoing Director Education
7. Chairman, CEO and Vice Chairman Evaluation and Management Succession
8. Annual Performance Evaluation
The Nominating & Governance Committee will propose the format for each annual evaluation.
9. Board Committees
10. Periodic Review
Front of Postcard:
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New York Times Company Annual Meeting of Stockholders 10:00 A.M., Tuesday April 22, 2008
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Back of Postcard:
NEW YORK TIMES COMPANY
Attn: Corporate Secretary
The New York Times Company
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 2008
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
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YORK TIMES COMPANY OFFERS STOCKHOLDERS OF RECORD
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The New York Times Company
ANNUAL MEETING OF STOCKHOLDERS
APRIL 22, 2008
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(Continued and to be marked, dated and signed, on the other side)
YORK TIMES COMPANY OFFERS STOCKHOLDERS OF RECORD
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had returned your proxy card. We encourage you to use these cost effective and convenient ways of voting, 24 hours a day, 7 days a week.
If you have
any questions, or need assistance voting please contact Georgeson Inc.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED ONLY IF YOU ARE VOTING BY MAIL
THE NEW YORK TIMES COMPANY CORPORATE GOVERNANCE PRINCIPLES (Revised as of February 21, 2008)