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Tribune Co. CEO resigns amid tales of raunchiness; Ran a Frat House Instead of a Newspaper

CHICAGO – from www.latimes.com – Having lost the support of many employees, his board and the creditors who will soon take over the media company, Tribune Co. Chief Executive Randy Michaels resigned Friday, as the company’s board sought to end one of the most tumultuous episodes in the history of the 163-year-old Chicago institution, which is now in bankruptcy.

Michaels will be replaced by a four-member office called an Executive Council, which will be charged with stabilizing the company while it struggles to exit Bankruptcy Court after almost two years of fractious, stop-and-start negotiations with creditors.

The new caretakers are: Eddy Hartenstein, chief executive and publisher of the Los Angeles Times Media Group; Tony Hunter, president and publisher of the Chicago Tribune Media Group; Nils Larsen, Tribune Co. chief investment officer; and Don Liebentritt, who is in charge of the company’s Chapter 11 restructuring.

Tribune owns the Los Angeles Times, Chicago Tribune, KTLA-TV Channel 5 and other media properties.

Hartenstein, 59, came to the Los Angeles Times in August 2008. During a lengthy career at Hughes Electronics Corp., a defense contractor and satellite maker later acquired by General Motors Corp., he pushed the idea of using satellite technology to beam television programming directly into the homes of consumers.

He convinced his bosses at GM to finance what eventually would become DirecTV Group Inc. He was with DirecTV, first as its president and then chief executive, from its inception in 1994 until 2004, after GM sold its stake in the company to Rupert Murdoch’s News Corp.

Hartenstein is on the boards of Broadcom Corp., SanDisk Corp., Sirius XM Radio Inc. and the City of Hope hospital in Duarte.

Michaels’ departure followed weeks of escalating allegations that he and his “friends and family” — a cadre of former colleagues and associates from the radio industry — had tarnished the company with boorish, sexist behavior and a general atmosphere of juvenile unprofessionalism in the corporate suite.

Since he was installed in 2007 by Tribune Chairman Sam Zell, Michaels has maintained that his raucous, unconventional style was intended to foster creativity at a company desperate for new ideas.

But in the end, sources say, the former on-air radio personality was undone by a growing perception among once-supportive Tribune board members that his tactics were more irresponsible than effective. His behavior, they concluded, not only publicly embarrassed the company but exposed the board to potentially damaging charges that directors were standing by while management ran amok.

“Some of what he was doing was necessary” to shake up a stale corporate culture, said one board member on condition of anonymity. “But he was way too heavy-handed.”

The company said Larsen would also serve as chairman of its television operations. Jerry Kersting, whom Michaels brought into the company, will continue as president of Tribune Broadcasting. Gerry Spector, who, like Michaels, was appointed by Tribune Chairman Sam Zell after the company’s 2007 leveraged buyout, will stay as chief operating officer, reporting to the council and focusing on several systems and infrastructure projects already in motion.

“The council will provide the company with stability and continuity as it enters what is traditionally the busiest time of the year for its business units and their advertising partners,” Zell said in a statement. He did not address Michaels’ departure directly.

The new council will run the company until Tribune and its creditors can agree on a restructuring plan that will allow the company to emerge from Chapter 11 protection. At that point, the group of banks and hedge funds that own Tribune’s senior debt will take over the company and pick a new board of directors. That board probably will pick its own CEO, and creditors have been looking for possible candidates, sources said.

Besides the endorsement of Kersting, one question not immediately answered on Friday is what will happen to Michaels’ recruits still at the company, many of whom are scattered throughout the broadcasting, Interactive and corporate divisions in important positions. When asked Friday whether he would stay at the company, Marc Chase, president of Tribune Interactive and a close ally of Michaels, said that he now reports to Hunter and that “I have no plans to leave.” When asked whether Hunter had confirmed his status, he referred a reporter to Hunter, who was unavailable for comment.

Besides managing through the bankruptcy and navigating treacherous waters in the media industry, the new team will have to deal with a deep well of resentment that has built up at Tribune Co. over the three years Zell and Michaels have been in control. Anger over the $57.3 million in bonuses that have been approved by the court since the company filed for Chapter 11 in 2008, for instance, is palpable among employees who haven’t had an annual salary increase in several years.

And while the company is still recovering from the recession and resulting layoffs, employees are hungry for signs that all the new ideas and creativity espoused during the Michaels era will ultimately spur new revenue — especially in the Interactive division, which was hailed by the Zell team as a key to the company’s future in a digital age.

Tribune’s creditors have commended Michaels and his team for stabilizing the financials of the company amid a devastating recession and seismic shifts in the media business. And though the group has been roundly criticized in media circles for cutting costs too far and cheapening the products, the view among many outside the industry is that new management injected a set of hidebound newspapers and television stations with an important new sense of urgency.

But what led to Michaels’ downfall and soured many important creditors on him even before the present crisis, sources said, was his seeming recklessness and lack of discretion. An irony not lost on many at Tribune Tower during the crisis was the CEO’s apparent inability to hew to the first rule in the new employee handbook he introduced when he took over: Use your best judgment. Although he repeatedly justified his often outrageous management style with the mantra that “it is our intention to create a fun, non-linear creative environment,” those methods often went too far, critics assert.

Instead of being a tool of motivation, Michaels’ “shock and awe” campaign was often perceived as being offensive and stifling by those who didn’t get the joke. And when allegations of improper sexualized comments came to light, it appeared the loose employee handbook condoned bad behavior more than good judgment.

As Denise Brown, a former member of the company’s corporate communications team told the Chicago Tribune this week, “if you spoke up you were portrayed as a sissy.”

Michaels and his team, many of whom worked together at Jacor Communications and Clear Channel Communications, also stood as a group apart from the company they were attempting to transform. The new chief became a polarizing figure at Tribune Co. the moment he arrived at Tribune Tower in 2007, recruited by Chicago real estate magnate Sam Zell, who had taken over the ailing company in a controversial $8.2-billion leveraged buyout. That much was not surprising given that Zell was openly critical of the “old-media” corporate culture fostered by former Tribune CEO Dennis FitzSimons and said he wanted someone to disrupt the old way of doing things.

Zell called Michaels “one of the most creative human beings I’ve ever known…. He is exactly what Tribune needs to keep moving forward — smart, decisive, relentless, irreverent, fun and cutting edge.”

But as Michaels took over and began recruiting new managers, they seemed less focused on winning hearts and minds than on trying to roust a company they believed was failing to embrace the future. They almost immediately created a chasm at the company between those who found their style refreshing and invigorating and those who found it mocking and contemptuous of Tribune Co.’s long history and journalistic tradition. In either case, the message in official communications was clear: Take it or leave it.
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A small example was that many members of Michaels’ Clear Channel alumni insisted on posting goofy pictures — or no pictures at all — on the company’s Web directory that employees use to find one another. They also began issuing faux “press releases” to introduce the stream of new employees recruited from Clear Channel. Sometimes they offended, other times they just bewildered.

One of the more infamous was the release announcing the hiring of Kim Johnson, who, it was said, was “a former waitress at ‘Knockers — The Place for Hot Racks and Cold Brews.’ ” Another ushered in Chase as president of Tribune Interactive. It referred to the new steward of one of the company’s most crucial divisions as “another freaking Clear Channel Communications executive on the payroll” and said he had “obviously blackmailed his way into a position he is not remotely qualified to hold.” The announcement, attributed to “Hugh Jass — A Reputable Media Source,” included a fake resume for Chase littered with typos and entries such as “President of Buying Crap” for EBay and “Vocabulary Advisorist for George W. Bush.”

Aside from creating confusion about the true identities of people being hired for important positions, these missives hit a sour note with many employees, who found them frivolous at a time when the company’s revenues were sinking. Not all employees recoiled at the new regime, of course. Some embraced it as a refreshing change, despite misgivings about some of the more rowdy behavior. One longtime employee of WGN-AM 720, who asked not to be named, said that while the behavior of Michaels and his recruits could be juvenile and unprofessional, “they’re all so creative,” something she found liberating after earlier years of stifling management. When two members of the Chicago Tribune ad department once flew to Kentucky for lunch one Saturday on the private plane of Lee Abrams, Michaels’ controversial chief innovation officer, they each found him charming and insightful.

At the same time, the disdain that Michaels and his team held for traditional corporate culture could often stray over the line of propriety. By the time the New York Times published a report that colored the company as a raucous “frat house” characterized by inappropriate highly sexualized behavior, a lack of stored good will with large parts of the organization meant the team had little support when they most needed it.

The trigger that turned a bad PR situation into a crisis was an e-mail from Abrams that contained a link to an off-color newscast parody featuring nudity and raunchy behavior. While it was deeply offensive to some employees, especially women, to many it was emblematic of a broader and more troubling lack of decorum. Abrams resigned last Friday, one week before Michaels, his boss.

On Wednesday, the day after news broke that Michaels planned to resign, a fake Halloween tombstone emblazoned with “R.I.P.” appeared in his office on the sixth floor of Tribune Tower. While many believed some wag had put it there as a final salute, sources said the gesture had come from Michaels, who put it there himself.

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