Re: [Discuss-sudbury-model] Re: First Amendment Schools

From: Mike South <>
Date: Thu Nov 16 21:38:00 2006

On 11/16/06, Amanda Phillips <> wrote:
> You ignored the key issue in private corporations shareholder voting: consent. I
> said I wouldn't bore everyone with corporate governance issues, and so I won't.
> The point is that if you don't like the NY Times shareholder voting structure,
> then you simply do not have to buy any shares. Those who do VOLUNTARILY
> purchase shares obviously see some value in it that you don't.
> Whatever you say about the NY Times shareholder voting rules, it has no relation
> to American democracy. It's only connection with Sudbury democratic schools is
> that it is based on voluntary consent.

I work (but do not speak) for another newspaper company (McClatchy)
that has a two-class share system. If you buy into a two-class
company, you are basically saying "I approve of the way the people
with the power are running it, and I think I can make money off of
what they are doing.". If you buy into a one-class company, you are
saying something more along the lines of "I think this company's
asset/position/potential are good, and as long as they listen to the
masses, I think I will make money off of what they do."

You could make an analogy of an open-bordered dictatorship (i.e. one
you can leave at will) vs. a democracy. There are some cases where
you might prefer life in the dictatorship. For example, if you have a
dictator who is benevolent, whose ideology you more or less agree
with, who perhaps will listen to reason. Particularly when the
alternative is a country run by the people, yes, but the people there
are all sit-on-the-couch-and-watch-sports-and-sitcoms types and they
don't make good decisions at the polls.

 Basically, if the dictator is good, and you can leave if he turns on
you, you might vastly prefer the dictatorship.

Recent case in point. In one case, you have McClatchy, where >90% of
the voting shares are with the McClatchy family. They have a smart
strategy toward acquisitions, move carefully into new markets, etc.
On the other hand, you have Knight-Ridder, which went public before
dual-class structure was created. A big shareholder in K-R got the
idea that he might make more money off a sale of the company, and that
idea got pushed through. McClatchy figured out that it could buy K-R,
sell off the big name papers (which were financial dogs, very well
known, etc, but also union laden, not in growth markets--not the kind
of thing that McClatchy sees as high potential), and we could triple
in size without significantly changing the basic characteristics of
the type of newspapers we own.

Upshot of this is that K-R, the one run by the masses, got sold and
split up, and the K-R shareholders didn't really get much of a return
(the sale price was not much higher than the price of the stock at the
time). Meanwhile, McClatchy, the one run by the dictators, is in a
sweet position with very little pain.

However, if McClatchy had been required to go to the masses and say
"We're gonna buy K-R, but sell every paper in it that you've heard of,
like the San Jose Mercury News and the Philadelphia Inquirer. Is that
ok with you?" they very well might have gotten rejected, because the
masses might be thinking "gee, what do you want with a company that
big when you're selling off the only part of the brand I've ever heard

In short, McClatchy's leadership, at the moment, seems to be doing a
pretty good job at knowing their business and how to navigate. What's
more, they have a track record of making intelligent decisions when
"the market" was doing things that gave short term gains but probably
caused long term damage to all the single-class newspapers.

If I was a shareholder in McClatchy and they put it up for a vote as
to whether to keep the two-class thing or go to a one class, I would
now, more than ever, vote to keep it two-class. The probability that
the market is going to be better able to gracefully figure out how
newspapers will survive the internet than the McClatchy leadership is,
in my opinion, very, very low.

For that reason I think that the business would much more likely be
hurt by a "more democratic process" than helped by it.

I would submit that if a "dictator" with a piece of private property
started a Sudbury model school on that property and turned over
control (because, as "dictator" (by which I really mean "private
property owner"), he had power to do so) of the school's
operations/budget/etc to the school meeting, life under that
dictator's rule would be better than life in a school run by the
democratic process that has produced our public schools. Even if the
school meeting's power was limited, by, say, not having control over
the deed and thus not being able to vote to sell the property and use
the proceeds to buy another, they could still have very meaningful
control over their lives/education/etc.


> Amanda
> Quoting
> > Hi,
> >
> > This is Stuart. Harlan challenged my assertion that in America, people with
> > power or money have far more voting power than those who do not. Please
> > pardon
> > the tangential relationship of what follows to the Sudbury model. Here are a
> > few examples that support my claim:
> >
> > 1. About 90% of the districts for Congressional seats are considered "safe
> > seats" for the incumbents. While the money and power advantages inherent to
> > incumbency are part of the explanation, another key reason is gerrymandering.
> > A
> > voter in a gerrymandered district is much less likely to make a difference
> > than
> > a voter in a non-gerrymandered district. In effect, legislators who
> > gerrymander transfer power from voters to themselves.
> >
> > 2. In the crucial swing states or districts, the voters' wishes can be
> > thwarted by state officials. In 2000 in Florida, partisan state officials
> > worked
> > tirelessly to block recounts; a month later, the Supreme Court (by a 5-4
> > majority
> > on the critical question) did the same thing, in part because the recounts
> > would take a week and it was "too late." Most experts believe that a recount
> > would have changed the results of the national election. In the deciding
> > state of
> > Ohio in 2004, many districts likely to support Kerry had problems with their
> > voting machines, resulting in 2-3 hour lines and lower voter turnout. In
> > addition, Robert Kennedy Jr. has described numerous instances of suspected
> > tampering with electronic voting machines, which had no paper trails to
> > enable
> > reported results to be audited.
> >
> > 3. Politics as practiced in Washington, and often at the state and local
> > levels as well, is largely about money and power. Campaign contributions get
> > more
> > than just "access." Many members of Congress are highly focused on gathering
> > contributions from the day they are elected. As for local politics: when I
> > lived in Santa Clara, CA, the company that had the local garbage monopoly
> > donated
> > enough money in the City Council election to swing the election in favor of
> > its supporters. I used to be a Wall Street analyst, and I learned that a high
> > percentage of the decisions to award local cable television and garbage
> > monopolies were corrupt. These companies were born in "original sin."
> >
> > In sum, gerrymandering renders many votes largely impotent. In the contests
> > that do matter, partisan or corrupt officials may determine the results. And
> > when the winners take office, they are expected to raise large sums of money,
> > making them beholden to their financial backers. So, if you live in a
> > gerrymandered district, vote on voting machines lacking paper trails and
> > overseen by
> > partisan officials, or have representatives whose decisions are influenced or
> > dictated by money or power, then I would say your vote is relatively
> > unimportant.
> > You get 1 vote (which I still think you should exercise, and which is a lot
> > better than O votes!) , while the folks with garbage or drug companies (to
> > name
> > two examples) get 100 votes.
> >
> > Separately, someone on this list thought I was unfair in casting aspersion on
> > The New York Times' two-class share structure, in which certain shares hold
> > disproportionate voting power. Here is why I don't like dual-class voting
> > structures. In the academic literature on corporate governance, it is well
> > known
> > that two of the key "agency" problems afflicting corporations are:
> >
> > 1. The ability of a company's largest shareholder to use its leverage to
> > extract disproportionate value from the corporation, for example by making
> > favorable deals with management concerning purchases or sales of assets.
> > (This
> > problem is more prevalent outside the US, though it is not unknown here.)
> > 2. The ability of corporate management to extract disproportionate value from
> > the corporation. Often this takes the form of excessive compensation or by
> > managers purchasing part of the company in sweetheart, no-auction deals.
> >
> > Dual class share structures result in both of these problems. Yes, there may
> > be "valid" reasons for a dual-class structure, but I'm sure there are equally
> > valid reasons why China and Saudi Arabia are governed the way they are. A
> > dual class structure permanently entrenches some relatively small group,
> > which of
> > course uses its power to benefit itself disproportionately. The basic idea
> > behind democracy is that it disperses power.
> >
> > In a message dated 11/13/06 7:48:37 PM, writes:
> >
> > That is pretty much the way American democracy works, too: people with power
> > and/or money get 100 votes, those who lack them get 1.
> >
> >
> >
> > Now Stuart, how does that work. I challenge you to teach us or withdraw
> > your assertion.
> >
> > Harlan
> >
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Received on Thu Nov 16 2006 - 21:35:21 EST

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