How Sam Zell and Randy Michaels Changed the Tribune

Article paints a portrait of an immature management group

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    NEWSLETTERS

    AP

    The Chicago Tribune is a company in trouble. Its numbers are down and its leadership is lower.

    That's about the only conclusion one can draw from a New York Times expose on the company's management.

    Reporter David Carr offers details on the behavior of owner Sam Zell and and top executive Randy Michaels, which, according to the story, is less than professional. Not only does the story allege mismanagement and sexual harassment, it points out a number of egregious activities that seem to denigrate the legacy of the Chicago newspaper.

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

    “Here was this guy, who was responsible for all these people, getting drunk in front of senior people and saying this to a waitress who many of us knew,” said one of the Tribune executives present, who declined to be identified because he had left the company and did not want to be quoted criticizing a former employer. “I have never seen anything like it.”

    Michaels shows up frequently in the story, usually attached to an anecdote that skirts the line between bad taste -- like the time he held a poker tournament in the venerable offices of Colonel McCormick -- and sexual harassment: 

    The new permissive ethos was quickly on display. When Kim Johnson, who had worked with Mr. Michaels as an executive at Clear Channel, was hired as senior vice president of local sales on June 16, 2008, the news release said she was “a former waitress at Knockers — the Place for Hot Racks and Cold Brews,” a jocular reference to a fictitious restaurant chain.

    A woman who used to work at the Tribune Company in a senior position, but did not want to be identified because she now worked at another media company in Chicago, said that Mr. Michaels and Marc Chase, who was brought in to run Tribune Interactive, had a loud conversation on an open balcony above a work area about the sexual suitability of various employees.

     But the real juicy stuff is reserved Zell, who purchased the company by leveraging debt and optioning employees' 401K accounts, and then quickly took it into bankruptcy. 

    Until the bankruptcy is resolved, Mr. Zell’s handpicked team will continue to run the company, but it is frozen out of any large strategic alliances or purchases. The issue of who will run the company will remain unsettled until the bankruptcy is resolved. Mr. Zell remains the chairman of the board and is no longer involved in the day-to-day operations of the company.

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

    Reports say that Zell sent an internal memo to his staff in the wake of the Times' article, voicing his displeasure. The Tribune has not replied to requests for comment.

    For more details, read the whole story in The New York Times.