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Who, or What, Is Behind Postmedia's Election Endorsements?

When hedge funds own newspapers, it's difficult to know.

By Paul Willcocks 19 Oct 2015 |

Paul Willcocks is a journalist and former publisher of daily newspapers across Canada.

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The Vancouver Sun's endorsement. Postmedia papers unanimously endorsed the Conservatives in their election editorials.

So did thoughtful editors at Postmedia's daily newspapers across Canada consider the needs of their communities and then unanimously decide to endorse the Conservatives in election editorials?

Or did CEO Paul Godfrey, a Conservative supporter, issue an edict demanding the corporation's 43 daily newspapers urge their readers to re-elect Stephen Harper?

It matters. And the corporation's newspapers, quick to demand transparency from other institutions, have fallen eerily silent about their endorsement editorials.

The only confirmation of a head office command came from Edmonton Journal columnist Paula Simons after that newspaper's Conservative endorsement.

"And yes," she tweeted. "Before you ask, this was a decision made by the owners of the paper. As is their traditional prerogative."

It wouldn't be surprising. The Journal acknowledged that Postmedia ordered it to write an editorial calling for the re-election of the totally discredited provincial Conservatives earlier this year. The corporation's three other daily newspapers in the province -- the Calgary Herald and the Edmonton and Calgary Suns -- also endorsed the Conservatives. They didn't respond to questions asking if Postmedia's head office had ordered the endorsements.

The effort didn't work out so well -- the Conservatives went from 61 seats to 10.

But the endorsements mark a bleak day, or another bleak day, for Canadian newspapers.

Readers expect newspaper endorsements to reflect the careful judgments of editorial boards and the needs of their individual communities. A pro-Conservative Facebook friend, labouring under that delusion, celebrated the apparent tidal wave of endorsements for Harper from newspapers across the country.

Instead, it appears the endorsements actually reflect the views of one or two corporate managers in Toronto.

Sure, owners have exercised this "traditional prerogative" in the past, as Simons notes. Most of Canada's newspapers were started by men hoping for political influence and profits.

But those owners influenced one paper. Postmedia owns more than half the English-language daily newspapers in Canada, with papers in every major city outside Atlantic Canada.

Investors call the shots

Simons' tweet raises another interesting point. These endorsements reflect the owners' views, she suggests.

Postmedia is effectively owned -- certainly controlled -- by the hedge funds that put up the money to rescue the former Canwest newspaper group from the brink of bankruptcy.

Postmedia opted for a clever share structure to qualify as Canadian-owned for tax purposes. That's important because advertising spending in Canadian publications is tax deductible. Ad spending in foreign media isn't. Without a claim to Canadian ownership, Postmedia is done.

So when Postmedia listed its shares on the Toronto Stock Exchange in 2011, it created two classes of shares. Class B shares, mostly foreign-owned, represent about 99 per cent of the actual investment in the corporation today, but are limited to 49.9 per cent of the votes in any matter to be decided to by shareholders.

It's a useful fiction for tax purposes. But the big investors and lenders are calling the shots. And the biggest investor in Postmedia, with almost 40 per cent of outstanding shares, is New York-based GoldenTree Asset Management, which also holds much of the corporation's high-interest debt.

Godfrey's statutory obligation as a corporate officer is to act in shareholders' best interests. So if he did order the newspapers to call for Harper's re-election, is he acting in the interests of U.S. hedge funds, or Canadians?

I ran newspapers for three different owners -- corporate, private and foreign -- and none took a role in endorsements or any other editorial positions.

That's not to say owners have never used their power. The Aspers tried to impose editorial positions on Canwest papers in 2001, sending out "national editorials" all the papers had to publish. But a backlash and their growing financial woes encouraged them to focus their attention on more pressing problems. Conrad Black certainly had an agenda for the National Post.

But mostly, owners have been more worried about making money than editorial influence.

It might be that the silence from Postmedia, and the few hundred journalists at its paper across the country involved in endorsement decisions, is the most troubling aspect of this affair.

The Globe and Mail published a remarkably silly endorsement editorial calling for readers to re-elect the Conservatives and hope that Harper would immediately resign. But editor-in-chief David Walmsley at least did a Facebook conference to try and explain, unsuccessfully, the paper's position.

But from Postmedia, the Vancouver Sun, the Province and the other newspapers, nothing.

Answers may come

There may still be answers. I'm going to call into Postmedia's conference call Thursday when Godfrey will take questions from investors and analysts on the latest bleak quarterly report from the corporation. (The conference call is at 12:30 p.m. Vancouver time, and the number for the rest of us -- listen only -- is 1-800-785-6380.)

Conrad Black has already participated once this year, to chide management for cuts that reduced the newspapers' value. And in his pre-election column, Black backed Justin Trudeau, and rejected Harper and "another four years of government by a sadistic Victorian schoolmaster."

So he might have questions about why Godfrey damaged the credibility and brand value of Postmedia's newspapers by ordering support for Harper. (Or why he failed to deal with the issue if that was not true.)

But it's too late. Postmedia readers now have to wonder if editorial decisions are based on local editors' best judgments, or edicts from a Toronto office. The damage is done.

Postscript: There has been criticism of newspapers, including the Vancouver Sun, for accepting Conservative ads that replaced their front pages with a yellow wrap attacking Justin Trudeau and urging people to vote for Harper because he won't raise taxes. The ads would once have been unthinkable, but newspapers are desperate for revenue and offer such packages to anyone with the money to pay for them. It's hard to see why the ads would be acceptable for a car maker, but not for a political party.  [Tyee]

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