Conrad Black

by A Matter of Principle

  We had certainly operated our business at a profit in the intervening years, but there was almost US$2 billion of debt after we took the public out of Southam. We could easily manage it with our current annual operating income of more than $400 million, but with any economic downturn, we might scrape some of the covenants (borrowing conditions). In the holding company, Hollinger Inc., the cost of ending the old Argus Corporation imposture as owners was that there was a substantial accumulation of debt there too.

  Our company had acquired scale, our operating results were commendable and improving, and our products were almost universally admired, other than by diehard political opponents. The distinction of many of our board members (we had individual boards for many publications, like the Spectator and the Jerusalem Post), and our association with many successful political leaders, led by Ronald Reagan, Margaret Thatcher, the Bushes, Tony Blair (in Irish and Alliance matters), and the leading provincial premiers in Canada, as well as prime ministers Brian Mulroney, Paul Martin, and Stephen Harper (as opposition leader), and the association with swashbuckling capitalists such as Jimmy Goldsmith, Gianni Agnelli, Dwayne Andreas, James (Lord) Hanson, Jacob (Lord) Rothschild and Sir Evelyn de Rothschild, the Reichmanns, and, with some toing and froing, Kerry Packer, Hal Jackman, Peter Munk, and Paul Desmarais – not only brought our companies a great deal of business experience and access but their stature gave our company some instant recognition. But beneath a glittering and proud facade, dangers lurked that gnawed at me constantly. The capital structure was rickety, and some of the institutional shareholders, disapproving what they regarded as the proprietary style in which my associates and I ran the company, detected that some shares would have to be sold out of the control bloc. They began holding hands to depress the stock price, trying to starve us out, as a couple of them admitted to me, while agitating against the scale of management fees we were receiving. These fees were not abnormal and were independently approved by the Audit Committee. The stock was not heavily traded, as the big blocs, ours and those of several institutions, accounted for 60 per cent of it, and the stock had been moving slowly or treading water, as there was nothing to prompt heavy activity. In these circumstances, it is not difficult to move or freeze the price if the market operators don’t have to file insider reports. The institutional world can always use friendly-hands buyers and sellers. I well knew how it was done and that it was being done, but there wasn’t much I could do about it, except raise the underlying per-share value by buying and cancelling whatever shares our means could afford to take up without straining the loan covenants. The assets and the profits were real, but if recession struck and the deglamorization of newspapers accelerated, it could become problematical. Then I might find I was building an airplane in the sky; the aerodynamics were sound but perhaps not if the financial weather became extremely turbulent.

  Despite my endless expressions of confidence in the future of the newspaper, it was obvious that wringing a value from newspaper franchises was going to be a good deal more complicated than it had been.

  –

  FOLLOWING MY ENCOUNTER with Rupert (and Anna) Murdoch at Davos, where Rupert hinted at the likelihood of a de-escalating price war in London, I concluded that it was time for another corporate reorganization. Unfortunately for non-commercial readers, these are complicated. The plan was to concentrate operations in the U.S. company, American Publishing, which had a dual-tier share structure (multiple votes for one class), and to move the Canadian company toward privatization by offering American Publishing shares to the Canadian shareholders (American Publishing was renamed Hollinger International). This would give us access to U.S. capital markets, a more flexible capital structure, and have the effect of a merger between companies. Both the sale of the Canadian assets and their eventual resale would each generate a profit of nearly US$100 million. Like all the related-party transactions we produced (where some parties are on both sides of the deal), this one enured greatly to the benefit of the public shareholders of both companies, the Canadian Hollinger Inc. and the U.S. Hollinger International.

  BACK IN LONDON, the newspaper price war, though de-escalated, continued with erratic initiatives by Rupert Murdoch, which we countered. The Times went to ten pence on Monday for the “Summer of Sport,” including the 1996 Olympics and World Cup. The “Summer” lasted almost two years. The Times cut its Saturday paper to thirty pence for a time. Only when he virtually wrapped The Times in five-pound notes, as in his insane inclusion of Eurostar tickets (the tunnel train between London and Paris), could he narrow the gap between us from 400,000 to about 250,000. A few of these pyrrhic episodes disabused him of this expedient. In the early stages of the war, I had not been able to set foot out of doors without encountering someone who would tell me that the Telegraph was doomed. As transatlantic television personality David Frost foretold: “You will know you’re winning when people you knew thought that you would lose tell you they knew you could do it. You will know you have won when the same people tell you that not only did they know you could do it, but if you recall, you have won by following their advice.”

  The end of the price war produced an awkward silence. Almost everyone in Britain except the officers of the Daily Telegraph was so terrified of Murdoch, and smart opinion was so convinced of the inexorable decline of the Telegraph, that the failure of The Times to catch the Telegraph was simply not mentioned.

  The conventional reaction of the British chattering classes was unimpressive. Almost to the last man and woman they expressed their dislike of Murdoch as down-market, treacherous, anti-British, and anti-monarchist in particular. Yet it was obvious when the price war broke out that the majority of opinion hoped for and expected a Murdoch victory. No one attacked the Royal Family as violently and effectively as News Corporation, and especially the Prince of Wales as his marriage faltered. Yet the Prince had his official biography excerpted in Murdoch’s Sunday Times. It was as if Murdoch were head boy of the British school: unpopular but terrifying and inevitable and the devil they knew. The Duke of Edinburgh, whom I have always found an impressive man in all respects and in a very difficult role, was so outraged at this truckling to Murdoch that his office called, unsolicited, and offered us a wide-ranging interview. It was a thoughtful gesture and a very good interview.

  Yet there was obviously a perception that I had had it too easy in Britain, that I had gained control of the Telegraph rather effortlessly, and while the newspaper had improved and I had continued the Telegraph policy of strong support for traditional British institutions, there was a reticence about me. In fact, as a friend who knew the British well said, “There was always a target on your back in England.” Because of British understatement, British envy and xenophobia, at least toward foreigners exercising an influence in their midst, may be disguised at times, but they are never out of mind, as I discovered.

  This mortal struggle in London, coupled with the refusal of the Australian political leaders of both parties to honour their promises to allow us to take real control of Fairfax, and the dilatory tactics of our factional opponents at Southam, denied us the opportunity to become one of the world’s largest media companies.

  By the time these problems had been resolved, the commercial hour of the newspaper was passing. Newspaper company shares were not good currency for acquisitions; cash flows were no longer bountiful enough to facilitate growth into other media. British national newspaper revenues never fully recovered and eventually became an albatross to News Corporation. Shareholders were already becoming restive about the sluggish market in newspaper share prices.

  The price war was a sideshow to Murdoch but a life-or-death struggle to us. However under-recognized our achievement, and whatever new worlds Rupert might conquer, as I said to Barbara, we could stand in our broom closet in the dead of night and sip champagne together because we had, in fact, won a great victory – but the sun was setting on the industry.

  * John A. (Bud) McDougald, who had succeeded his brother-i
n-law, W. Eric Phillips, and the company founder, renowned industrialist and sportsman E.P. Taylor.

  † Ravelston and Argus were private companies that I owned/controlled. All my voting shares in Hollinger Inc. (Canada) were held in Ravelston. So ultimately, Ravelston was the source of my control of Hollinger. Ravelston provided the management team for our newspapers, and the management fees for services provided to it. When I wanted to access American capital, we went public in America by creating Hollinger International (U.S.) into which we put all the newspapers, leaving Hollinger Inc. as the holding company managing Hollinger International. To eliminate some confusion, Hollinger Inc. will be referred to as Inc. (Canada) and Hollinger International as International (U.S.). There was one more change. After my ejection from the companies, Hollinger International had a name change to Sun-Times Media Group (STMG).

  * I have always found that in distressed companies such as The Telegraph plc and Massey Ferguson, the secretaries and executive assistants are as impressive and unflappable as the principal executives are demoralized and exhausted.

  * At David Radler’s enthusiastic suggestion, Barbara shortly became the company’s editorial vice president, and as it grew, her wholly benign influence on editorial quality grew also. She was an authentic expert on how to produce a good and lively newspaper, as a successful former editor of the Toronto Sun and an award-winning columnist in the uniquely competitive London newspaper market. There would be inevitable criticisms, but her impact on the Chicago Sun-Times, and some of the larger Canadian newspapers especially, was very positive. Because she was an executive, she was underpaid as a columnist and not paid as a director, and her compensation level was beneath what she could have commanded in the free market. Max was already calling her, more or less humorously, but very unjustly, “Lady MacBeth,” but she never intervened at the Telegraphs, though she didn’t hesitate to critique the paper to me. Sometimes I agreed with her, and sometimes not.

  [CHAPTER TWO]

  WHAT WAS MOST ENJOYABLE about the Telegraph was not the stiff cardboard invitations to almost every important social, cultural, and political event in London and certainly not the grand state dinners. It was being at least a presence in the great debates over the foreign policy issues of our time. According to U.K. political correctness, I often brought the Telegraph out on the wrong side of those debates. I didn’t think so, but we played a part in them. I had access to Cabinet ministers and historians, academics from the best British universities, and thinkers from that extraordinary seam of British intellectual life. The Telegraph’s magic opened doors in Europe and even some in North America.

  It wasn’t all pleasant, and occasionally there were conflicts and rows, such as the fracas mentioned earlier over Max Hastings’s firing of Carol Thatcher (whose mother was a great and friendly prime minister with a parliamentary majority of over 100), but also involving many other writers. The Sunday Telegraph managed to libel Muammar Gadhafi’s son as a terrorist, and the uncommonly difficult and gigantic Scots writer Bruce Anderson, a sidekick of Perry Worsthorne and Frank Johnson, referred to the Attorney General of Ireland, Mr. Murray, as “a shifty unshaven fellow, who would try to sell a gypsy a three-legged horse.” Perry Worsthorne, editor of the Sunday Telegraph, had found a charming lawyer who did not believe in the tort of libel, and some of these liberties were unfortunately expensive. I never penalized the offending reporters.

  I was always attracted by the traditional newspaper publisher’s influence on public affairs, when cautiously exercised, but I was always peering over my shoulder at the electronic media, looking at the corporate mirror for any potential financial vulnerabilities, and staring furtively about at the more redoubtable of our competitors, Rupert Murdoch and Vere Rothermere. Most political influence, like supposed influence on one’s journalists or even children, and like, I later discovered, instructions to counsel, was illusory or fleeting. But even the false sensation of importance was bracing.

  A good part of my determination to keep the Daily Telegraph upmarket was not only because I was certain this was the best way to ensure its viability, but because I believed in its power to influence positively to some extent the serious political arguments of the time. This was a dangerous addiction, as I kept telling Barbara when contemplating whether we had reached the right time from a shareholder’s point of view to sell the newspaper.

  There were many issues that ignited firestorms at the paper. The most heated moments at editorial conferences were over the Irish Question. Northern Ireland was the United Kingdom’s longest-festering domestic problem – an issue of great matter to a swathe of the British and almost no matter to anyone else, except some Irish Americans, such as the Kennedys, whose take on the issues was very tribal. Much blood had been shed over whether Northern Ireland could secede from the U.K. On this matter as on the question of integrating into Europe, Max Hastings and Charles Moore were in direct opposition to each other. The Sunday Telegraph’s Moore was against any compromise. Although he is himself a Roman Catholic convert, Charles strongly identifies with the Ulster Protestants, to the point where he almost ran as an independent Unionist MP in a Northern Ireland by-election. I have always found it difficult to understand the appeal of a political movement whose raison d’être is to stage provocative and insulting marches through the residential neighbourhoods of other religious groups. This is perverse even by Irish standards. The Daily’s Hastings wanted to pull British troops out, oblivious of the requirements of British sovereignty and the fate of the abandoned Ulster Unionists’ majority.

  Bombs planted by the Irish Republican Army had gone off in London streets and shops and then finally in 1996 at Canary Wharf, where our newspaper offices were housed. The bomb, intended primarily for our paper though other papers and large financial firms were also housed there, took the roof off the Guardian’s printing plant, and so we printed their next day’s edition. Several people died, including my newsagent, a pleasant East Indian who was stationed directly in front of our offices. As the Telegraph had substantial influence in Northern Ireland, Prime Minister Tony Blair intervened with me when he structured the Good Friday Agreement in 1998 to prevent Moore from endorsing a no-vote. Our editorial of support, a bland and tepid one at that, was wrung from the leader conference only by my threat to write the editorial myself – always a means of setting a fire under the editor’s chair. I didn’t mention the prime minister but said that we were not going to ally ourselves with the Sinn Fein terrorists and the Paisleyite anti-papist bigots in opposing an arrangement that, whatever its limitations, was supported by all respectable elements involved, including the British and Irish governments and parliaments. The Telegraph was not decisive in the referendum and chiefly spared itself needless embarrassment.

  IF THE IRISH QUESTION – rather like the Quebec Question in Canada – was of little interest and matter to anyone but the British and some Irish Americans, the European Question was of tremendous importance to America but never to America’s public, press, or political elites. The European Union (EU), headquartered in massive splendour in Brussels, is a huge, overbearing, and petulant organization. From 1996 to 2009, the EU commissioners have struggled to get their equally massive constitution (forty times longer than the American Constitution) ratified by member countries. Joining up to the EU is in effect resigning one’s own national sovereignty. For America, it would be equivalent to Congress turning over most of its serious powers to some multinational institution of the Organization of American States who would in the name of unity “harmonize” its members’ domestic, monetary, and foreign policies. Initially, it was thought all EU members would hold a referendum on the new constitution. When the French and Dutch referendums resulted in a “no” vote, Germany and the United Kingdom put their referendums on hold. The EU approach is that of an admirer turned stalker: Brussels never takes “no” for an answer. Should a referendum go against its constitution, the EU arranges either for a second vote (Ireland) or for the parliaments of the variou
s countries to vote “yes” without the direct consent of the electorate. People cherish their national institutions, and while, to differing degrees, they may want to be part of this union – and its grants, trade policies, subsidies, and transfer payments – electorates tend to dislike giving away their sovereignty. The parlous financial situation is gradually weakening the EU, a situation not helped by the inclusion of countries from Central and Eastern Europe with tottering economies, nor by the propensity of the EU to leap on every costly passing bandwagon, such as the unachievable 20 per cent reduction in carbon emissions, despite unconvincing evidence connecting them to global warming, which it is not clear is actually occurring.

  As it is now, the EU is an attempt to set up a challenge to American power by a continent that still wants America to solve its problems. For some reason, no U.S. administration has really grasped this, though Nixon and Reagan and Bush Jr. all expressed reservations (to me) about the motives of the Euro-integrationists. Domestically, it is an attempt to establish permanently a body of regulators (in Brussels) composed of the most enthusiastic Euro-joiners among the politicians and civil servants of the member countries and turn absolutely everyone else, including the political classes of each European country, into the regulated, following the rules of some polite version of syndicalism. The Daily Telegraph had been, with The Times, the Mail, and the Sun, the leading bulwark against Britain being subsumed into a federal Europe, in spite of the enthusiasm of Max Hastings for signing up.

  Western Europe is a tired, socialistic continent, without the energy even to reproduce biologically, almost incapable of private-sector job creation, and reduced in strategic terms to forming a European Union rapid deployment force that was, in fact, for some years nothing more than parade ground units ready to march down the main boulevards of the European capitals on their national days and often even relying on American air transport to get them there. Nine of the ten most aged populations in the world are in Western Europe. In Italy, only three people in ten work, at least officially. In fact, many retirees work in the grey market. In the 1990s, in the United States, 44 million jobs were eliminated as superfluous or inefficient and 75 million private-sector jobs were created, for 31 million net new jobs. In the European Union, outside the United Kingdom, a net 5 million jobs were created in the same decade, all in the public sector. The paradox of this has been that the Europeans do not see that American power, which they resent, maintains their ability to be weak, to have shrunken defence budgets, a relatively stagnant economy, and a general attitude of righteous lassitude.