War at the Wall Street Journal (6 page)

Bancrofts—proper, unemotional, reticent in all ways—rarely discussed money or business. ("My mother would rather discuss pornography," one said.) Amid all the drama of the funeral and the inheritance, Elisabeth wasn't quite prepared for Billy's approach—but she wasn't surprised. She knew him well enough to expect some rabble-rousing from this like-minded soul. When Billy asked the young heiress if she would come to Omaha, Elisabeth looked past her grief and agreed to accompany Billy to the meeting. The times, quite suddenly, were changing.

The following year provided a whirlwind education for Elisabeth and her cousin in the subtleties of family control. A few weeks after her mother's funeral, Elisabeth was on a plane to meet Buffett. Awed by the prospect of meeting such an esteemed investment mind, Elisabeth dressed up in her favorite white Chloé suit. She prepared herself to hear what kind of advice the mentor to the Washington Post Company's Kay Graham might have. Elisabeth was a newspaper heiress of a new generation and of a different ilk from Mrs. Graham. She didn't want to run the company; she just wanted it to make money for her. With Billy at her side, she approached Buffett's legendarily modest Berkshire Hathaway headquarters and explained their situation to him. They were frustrated with Dow Jones's management and their inability to break through with Hemenway & Barnes. Billy's frustration showed, and he appeared petulant in front of Buffett. Elisabeth, the more savvy and self-aware of the two, made a better impression.

They thought Dow Jones's management was doing a poor job of running the company, but they couldn't find anyone in a position of power to give them a serious hearing. At the time, Billy's father, William Cox Jr., and Elisabeth's uncle Chris Bancroft, who had taken over Bettina's seat at her request, both served on the board. But even their relatives, or rather, especially their relatives on the board, wouldn't hear of any complaints about the company. Chris Bancroft lived in suburban Dallas with his wife, an accomplished bassoonist and arts philanthropist whom George W. Bush named to the Texas Commission on the Arts while he was governor. Tall and athletic and an avid sportsman, Chris ran a small investment company where he mainly managed his own fortune. He was a disappointment to many in the family, who had expected him to take a more active leadership role, perhaps even as a patriarch. He felt more comfortable on the sidelines. Yes, the performance was disappointing, but the "professionals" were taking care of it. Certainly neither Billy nor Elisabeth had the expertise to judge the company's management, they were told time and again. Elisabeth met Buffett alone several times after that first meeting and spoke with him regularly.

Buffett told them something different: they had standing at the company, especially Elisabeth in her new role as an income beneficiary of the huge Article III trust. They should use it to prod management, Buffett advised. "Act like owners," he said. He suggested they contact Tom Murphy, who ran Capital Cities/ABC with Buffett as his largest shareholder, to sound him out about taking on a role at Dow Jones.

Elisabeth went about hiring a team of advisers better equipped to mount a company takeover than to advise a young thirty-two-year-old woman on her inheritance. Her financial adviser McNally was a friend of Nancy Peretsman of the boutique media investment bank Allen & Company, whose yearly summer Sun Valley conference was a breeding ground for stratospheric media networking that sometimes led to very lucrative deals. (The seeds of Disney's acquisition of Capital Cities/ABC began there when Michael Eisner sat down with Buffett and Murphy and proposed buying the firm.) Elisabeth and Billy went to see Peretsman, who listened carefully to their complaints. She then laid out the dismal prospects of Dow Jones. The stock was trading at around $36 a share in 1996, down from its then high of $56.25 in 1987 (missing one of the great bull markets in history). Profits had been roughly flat for the past ten years, at about $185 million. When Peretsman compared the company to its peers, she offered a stark picture: ten years before, Dow Jones and Reuters had the same market capitalization of $3.5 billion. In 1996, Reuters's market capitalization was more than $20 billion, while Dow Jones's stayed stuck at $3.5 billion. The only number that had continued to rise consistently over the past decade, Peretsman noted, was the amount the company had paid out in dividends, much of which went to the Bancroft family elders. In 1986, dividends totaled $53.6 million and were the primary source of income to the trusts. Ten years later, the number had climbed to more than $90 million, about 50 percent of Dow Jones's net income. To the untrained eye, it looked as if Dow Jones was paying off the Bancroft elders to keep them out of company affairs.

Nancy Peretsman became Elisabeth's close confidante in the ensuing months. (Stan Shuman, Allen & Company's managing director, was Rupert Murdoch's banker, a connection that was, at the time, unspoken and unnoticed, at least by Elisabeth.) Peretsman introduced Elisabeth to Ira Millstein, the influential corporate governance sage of Weil, Gotshal & Manges, who quickly took on the cousins' case. Elisabeth soon had some of the most powerful names in Corporate America on her side battling the entrenched lawyers at Hemenway & Barnes.

Early on, she wanted to confide in her new group of advisers. "I had been arrested for drugs. I had a felony charge. I wanted them all to know right up front because I knew it would come out," she remembers. Buffett, in particular, didn't care. He encouraged her to seek a seat on the board. "Warren did say, 'Well, who are they comparing you with, Jesus Christ? Everybody's got skeletons in the closet. That's ridiculous.'"

The confession—and absolution—emboldened Elisabeth. She and Billy called on cousins of their generation who might be sympathetic to their cause, and family elders who were not. Whenever she doubted her path, there was an army of her advisers cheering her on, unlike her family, who seemed only to withhold and judge.

Billy could not contain his enthusiasm for the progress they seemed to be making. "Finally," he thought, "we'll get the company to where it needs to be." As he and Elisabeth continued their crusade, word eventually trickled out—"It was very orchestrated," Billy remembers—about the dissatisfaction within the family. "Disgruntled Heiress Leads Revolt at Dow Jones" appeared in the February 3, 1997, issue of
Fortune
magazine, publicizing the cousins' attempt to challenge Peter Kann and the lawyers at Hemenway & Barnes. The piece laid out all the company's ugly numbers and talked about family rifts.

Even the elders who wanted to gloss over the troubles couldn't deny them: "I think Lizzie is very much behind the company," Martha Robes, a family board member and one of Jane Cook's New England daughters, told
Fortune
at the time. Robes was particularly close to Kann and lived in Etna, New Hampshire. She was a member of the older generation and had inherited her mother's blind loyalty. "But she's listening to a lot of outsiders ... who are getting her all wound up." Later that year, Robes resigned from Dow Jones's board from her sailboat, where she and her furniture-maker husband had begun a six-and-a-half-year circumnavigation of the globe.

Though there had been tension before, airing the dirty laundry in the press was a step too far. Elisabeth's uncle Chris barely spoke to her. Billy left his job at Dow Jones just before the article appeared. (He wrote a resignation fax and left a voice mail for his boss; he packed his office over the weekend.) After the story appeared, Hemenway & Barnes called an emergency meeting of the family, extracting loyalty oaths from each of the attendees. The four family members on the board—(Elisabeth's uncle) Christopher Bancroft; (Billy's father) William Cox Jr.; his sister Jane MacElree, the Hill family matriarch; and Martha Robes—decided to make their own public statement, which they did to the
Wall Street Journal
and
Fortune.
The outrage under the surface was hard to detect in the tight-jawed statement:

 

We are members of the Bancroft family and directors of Dow Jones & Co. On behalf of the family, which has controlled the company for nearly a century, we want to respond to your recent articles so that there can be no misunderstanding about our family's long-term commitment to Dow Jones.

The Bancroft family met this past weekend at one of our regular meetings. At that meeting family members representing all parts of our family unanimously reaffirmed their commitment to Dow Jones's remaining an independent public company and the world's premier business news and information company. The family has absolutely no interest in relinquishing control of this important and unique enterprise. At the same time, as owners, we, along with the rest of the board of directors and management, want to see increasing shareholder value over the long term.

A sound system of corporate oversight is critical to the success of the company. Dow Jones has a long history of strong and capable independent directors. We all believe that this tradition should be continued.

The family is confident about the future of this great company and fully intends to be part of it.

 

The cozy relationship between Dow Jones and its ruling family was never the same. Billy and Elisabeth were thrown together by the circumstances of their rebellion and grew closer. But their actions catapulted Dow Jones & Company into a most unwelcome spotlight and put Elisabeth and Billy at bitter odds with the elder generation of Bancrofts. They forever cemented their joint reputation as Bancroft family rogues.

 

The articles heightened Murdoch's interest in Dow Jones, and he lined up with the other circling CEOs—among them Don Graham of the Washington Post Company, Arthur Sulzberger of the New York Times Company, and Marjorie Scardino of Pearson PLC—to see Kann. Murdoch, obviously not the most prized suitor on this occasion, eventually got a meeting. He had heard about Kann—the Pulitzer Prize–winning CEO with the close relationship to the Bancroft family. Murdoch told Kann he'd love to own Dow Jones; Kann told him it wasn't for sale. He might as well have added the words "especially not to you."

Though he had a global empire of cable networks, movie studios, and satellite businesses, Murdoch loved to think of himself as a newspaperman at heart. The identity, inherited from his father, Keith, was as important to him as the trappings that came along with his wealth and held far more appeal than the other entertainment holdings Murdoch had acquired. The
Wall Street Journal
and the
New York Times
were the best newspapers in the United States, Murdoch's adopted home. Owning either paper would be the epitome of being a newspaperman. (Owing to its conservative editorial page and its devoted coverage of the business world, Murdoch had always preferred the
Journal.
He had once joked in front of a crowd of admiring CEOs, "I'd love to buy the
New York Times
one day. And the next day shut it down as a public service.") And he always enjoyed owning a hometown paper. "From 1988 to 1993 were probably the unhappiest years of his life," notes his longtime former general counsel Arthur Siskind. "It was the only time in his adult life that he lived in a city [where] he didn't own a newspaper."

Despite the pressure, Kann survived, though even his most loyal supporters had begun to doubt his skill as a CEO. The nepotism factor, too, troubled the Bancrofts. In an age when modern boardrooms were bowing to shareholder pressure and demanding CEO performance, a husband-and-wife team atop a publicly traded company was difficult to defend. To appease the family, Dow Jones appointed some new independent directors to its board in 1997, ones who were meant to increase the professional quotient on the board and keep management in check. The family, eager for a more forceful presence on the board, pushed for Hammer to take a seat as a director.

Murdoch would remember his meeting with Kann for years to come. Kann dismissed the meeting so entirely that ten years later, he couldn't be sure it had even happened.

 

After the
Fortune
piece surfaced, Jimmy Lee called Roy Hammer and asked him, "What do we need to do?" There was a motive, of course, in this method: he thought the financial stress of the Telerate debacle—Dow Jones had to take a nearly $1 billion write-down in its investment in the firm the year after Bettina died—might help move the Bancrofts toward selling. But Hammer, loyal to the family elders and mindful of his 6 percent fee derived from the company's generous dividends, was characteristically standoffish and gave Jimmy little hope.

Jimmy had continued to think about ways the mogul Murdoch might move on his prey, and he broke through personally with him at Herbert Allen's Sun Valley conference in 1998, nearly a year and a half after the world learned of Elisabeth's revolt. Jimmy was pleased to be attending the conference; he was the only investment banker allowed inside the exclusive gathering of the world's most powerful media executives and their families. He had been coming since 1994, and every year he plotted his movements carefully. Ever since the meeting here between Buffett, Michael Eisner, and Tom Murphy in 1995 sparked the merger between Disney and Capital Cities/ABC, the demand to attend the gathering had exploded. The guest list expanded, and the relaxed cocktail parties, hayrides, and white-water rafting outings promised billions of dollars in business to attendees who made the most of their visit.

One by one, the gleaming Cessnas, Falcons, and Gulfstream jets filed into the small Hailey airport, on the edge of the Sawtooth Forest, their passengers transferring to SUVs that whisked them to the green oasis that was the Sun Valley resort in the shadow of Dollar Mountain, transformed every year into a high-powered playground for media barons. The conference took over the entire town that week. Herbert Allen was one of the most powerful bankers in the entertainment and communications business, and he drew his pick of influential and rich moguls each year to the resort where Ernest Hemingway had started to write
For Whom the Bell Tolls.
The conference had grown considerably to four hundred or so attendees and now included tech geeks such as Microsoft's Bill Gates and Intel Corp.'s Andy Grove—but Allen still reached for the old Hollywood glamour that had initially defined the gathering. Everything was studiously casual, and Allen wrote a personal note to every conference goer that was waiting in his or her suite or cottage upon arrival, often perched on the fleece jackets Allen doled out each year for chilly nights. Jimmy kept close tabs on who would be invited to the chalet-style resort, and once in his room, he carefully looked through the meticulous conference agenda and list of attendees.