STOCK OPTIONS MAY BE THE GIFT THAT KEEPS ON GIVING

Opening the door to holding a share of Knight Ridder may keep staff

While they were yukking it up over at the Poynter Institute's MediaNews web site about the advanced degree of holiday miserliness among newspaper publishers, Knight Ridder dropped something far from a lump of coal into the Christmas stockings of its 17,000 non-management workers.

Stock options.

On Dec. 21, Knight Ridder said it would be granting options to "each full-time employee ... who does not currently receive options." The workers are to receive an option to buy 100 shares of the company's stock, which vest in one year at the price of $54.8125. Of course, the company's stock has had a 52-week high of only $59, but it's the thought that counts.

And, perhaps with 100 shares under their belts, Knight Ridderites will see fit to drive the company to new heights of profitability that will make the stock soar.

It could happen.

Nonetheless, this "way of saying thank you" – as Knight Ridder Chairman and CEO Tony Ridder was quoted as saying in the company's press release – is a departure from the normal viewpoint of U.S. newspaper publishers regarding the overall value of the workforce.

But, perhaps not to seem profligate, a couple of weeks earlier the San Jose-based company announced that it would seek to trim 440 jobs from its overall ranks (that workforce reduction did not include the 68 positions taken from KnightRidder.com announced a few days earlier). Most would come from attrition, the company said, but there was a possibility of layoffs.

While only a two percent reduction, this one-two-three punch of dot-com layoffs, overall company downsizing and stock options added about $4 to the company's stock price – a gain of about seven percent. The rest of the sector wasn't slouching either: Belo Corp. was up $2 (about 13 percent) between Thanksgiving and Christmas, while Gannett Co. Inc. was up $6 (about 10 percent), Pulitzer Inc. was up $4.75 (another 10 percenter), the New York Times Co. was up about $3.50 (about nine percent) and Tribune Co. was up about $3 (eight percent). In the same period, the Dow Jones Industrial Average gained barely three percent, while the Nasdaq lost about six percent.

The really good news, though, is that Wall Street didn't, to return to a theme, play Santa Claus punishing naughty children either. While the overall newspaper sector was up, Knight Ridder's stock option plan didn't seem to worry the investment community.

Ridder's fellow CEOs, though, may have blanched a bit when they heard about the scheme; traditionally, newspapers pay a wage that is somewhat lower than what could be earned in similar industries. Giving workers stock options? I suspect that Ridder may have heard this over the phone once or twice: "Are you out of your mind?" (Of course, excessive executive compensation is OK: Gannett's chief executive, Douglas McCorkindale, the week before Christmas exercised 51,175 stock options valued at about $3.1 million.)

With the slowing economy, it would appear that publishers are going to have to do some belt-tightening in the near future to keep on Wall Street's good side. But Tony Ridder is crazy like a fox – sitting in the middle of the Silicon Valley, Ridder sees the long-term corporate benefits to stock options.

First and foremost, a lot of those 17,000 Knight Ridder employees will think twice before leaving the company in the next year, awaiting investiture in their options. Don't take this lightly – turnover is a costly business reality that Ridder may have sidestepped for the next 50 weeks or so.

And that incentive thing may have a little more benefit than I'm willing to give it. I certainly know people at high tech Silicon Valley companies who work their butts off specifically to raise their stock price and ultimately cash in.

Hell, I'm sitting in a home that was purchased with high tech stock options.

Maybe Ridder's Christmas present to his staff was something the entire industry should consider.

-- David M. Cole, e-mail: dmc@newsinc.net

Inside ...

• The Oregonian faces competition of a different sort – a brand new non-daily
• Strategies for growth show how companies have been shaped
• Iowa paper takes its first steps toward fees for content
• Circulation directors at five newspapers weigh in on the likelihood of raising prices
• Say we're given 1000 years to get everything right. What would you tackle first?
• Persons

From NEWSINC., Jan. 1, 2001, Copyright © 2001, The Cole Group. All Rights Reserved.