The mood was understandably sombre when a group of Torstar Corp. directors gathered in August for a board meeting at the publisher's Toronto headquarters. Torstar's stock had tumbled 20 per cent in the past year, a combination of weak performance from the company's Harlequin Enterprises book publishing unit and the continued deterioration of the North American newspaper industry, which is in the grip of a punishing decline in readership and advertising sales.
Some analysts were expressing concern about the strength of the company's balance sheet, while others openly questioned its decision to buy a 20-per-cent stake in rival Bell Globemedia, owner of the CTV network and The Globe and Mail. There was little comfort to be found in the company's second-quarter financial results: Profit was down almost 30 per cent, thanks in large part to Harlequin, which got hammered by the appreciation of the Canadian dollar, and it wouldn't be long before investors began fretting over the safety of Torstar's long-entrenched dividend.
As pressing as these financial matters were, they were not the sole focus of the meeting. Instead, Torstar chairman Frank Iacobucci found himself grappling with a somewhat diversionary matter: The fate of the top two managers at the company's flagship daily paper, the Toronto Star.
Former Star publisher John Honderich, a Torstar director who chairs a voting trust comprising five families that control the company, had arrived at the meeting with a litany of criticisms of the newspaper's editorial direction. He informed the group that the families had met to discuss a variety of concerns at the Star, in particular what they perceived to be a
drift away from the so-called Atkinson Principles, a commitment to social justice reporting that is formally enshrined at the paper. To make matters worse, he went on, it had been a poor year for awards at the Star, and circulation was ebbing.
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