Tribune Co. CEO Randy Michaels appears poised to resign so the troubled media company can focus on emerging from bankruptcy protection instead of dealing with the perception that its leader had fostered the sexist culture of a "frat house."
The Chicago Tribune reported Wednesday that Michaels would likely step down by the end of this week. The newspaper cited unnamed people familiar with the situation.
The Tribune said that Michaels and the company's board had mutually concluded that the cloud hanging over his leadership threatened to complicate Tribune Co.'s efforts to end its nearly two-year stint under Chapter 11 protection.
The planned restructuring, which the company hopes to complete by year's end, would affect a media stable that includes several major newspapers, including the Chicago Tribune and Los Angeles Times, as well as more than 20 television and radio stations.
Tribune Co. spokesman Gary Weitman declined to comment on the report of Michaels' upcoming departure. Phone messages left for Michaels weren't immediately returned. The company's nine other board members either declined comment or didn't return messages.
Replacement by Committee
Two bankruptcy lawyers who aren't involved in the Tribune Co.'s case said removing Michaels makes sense, given the uproar that was caused by an unflattering portrait published two weeks ago on the front page of The New York Times.
The story, based on interviews with more than 20 current and former Tribune employees, asserted that Michaels had encouraged sexual innuendo, profanity, poker parties and other bawdy behavior since he joined the company nearly three years ago as an executive vice president in charge of broadcast and interactive. He was promoted to CEO in December.
"You don't want the leadership to become a lightning rod that causes a fire," said John Penn, a bankruptcy lawyer in Fort Worth, Texas.
Tribune Co. plans to replace Michaels with a four-person committee that includes Don Liebentritt, the company's chief restructuring officer, according to the Chicago Tribune. The newspaper said the three other men are: Eddy Hartenstein, publisher of the Los Angeles Times; Tony Hunter, publisher of the Chicago Tribune Media Group; Nils Larsen, Tribune Co. chief investment officer.
Tribune Co. has been mired in contentious bankruptcy proceedings since December 2008.
The filing came a year after real estate magnate Sam Zell took the company private in an $8.2 billion deal that loaded the business with debt just as the worst advertising slump in memory hit the newspaper industry.
Creditors Could Take Over
The Tribune Co.'s biggest creditors are in line to become its new owners in exchange for forgiving most of their debt, if they can come up with a plan that's mutually acceptable to all key parties. A reorganization plan submitted earlier this year unraveled after an independent examiner concluded that some of the dealings leading to the Tribune's 2007 buyout had bordered on fraud.
The proposed ownership group, which includes JPMorgan Chase (JPM) and distressed debt specialist Angelo, Gordon & Co., probably would have wanted to bring in its own CEO anyway.
"It appears what Tribune Co. is getting now is a caretaker group," said Ira Herman, a bankruptcy lawyer in New York.
As chief restructuring officer, Liebentritt has been steering the Tribune's reorganization. By remaining in that role besides his new duties, there would be continuity in the reorganization effort, and that should reassure the company's major lenders and other creditors, Herman said.
"The area of concern would be whether replacing the CEO will disrupt operations," Herman said.
If Michaels leaves, he would be the top Tribune Co. executive to leave under fire this month. Last week, Chief Innovation Officer Lee Abrams stepped down after sending an email to staff with links to a satirical news report containing profanity and nudity.
The email followed The New York Times' scathing depiction of Michaels' management style. The Tribune Co.'s board had expressed its support of Michaels in that article.
Employees Eager to Cut Ties
Michaels, a former radio disc jockey who later became a broadcast executive, had attempted to defuse the Times' story in a memo he sent to employees on the evening before the article's Oct. 6 publication. "Our culture is NOT about being offensive or hurtful," Michaels wrote.
Many Tribune Co. employees seemed eager to cut ties with Michaels, given that the publicity about his behavior had become an embarrassment to newspapers that prided themselves on their hard-hitting coverage of political corruption and other issues.
"When and if this comes about, the first reaction of an awful lot of rank-and-file people around here will be to take a good, hot, cleansing shower and the second reaction will be to count all the silverware," said Bob Secter, a veteran political reporter for the Chicago Tribune.
A labor representative for another Tribune Co. newspaper, The Sun of Baltimore, said Michaels already has done enough damage to the company.
"Under his leadership Tribune Co. has taken significant steps backward in reputation," said Cetewayo Parks, executive director of the Washington-Baltimore Newspaper Guild.
Michaels had previously been CEO at Jacor Communications, a radio company formerly owned by Zell, who remains Tribune Co.'s chairman.