The CEO Torstar needs won’t want the job

People arrive to the home of the Toronto Star at one Yonge Street on November 28, 2016.Glenn Lowson/The Globe and Mail

Next week, Torstar Corp. will interview candidates to be the next CEO of the 125-year-old media company. There may be no tougher job in corporate Canada.

The role requires a transformational leader with the vision and skills to turn a newspaper chain with rapidly-falling revenues into a cutting-edge digital publisher. Qualified executives may be out there. But why would they want this job?

Torstar has been a graveyard for chief executive officer dreams and a destroyer of wealth. There is a real business: The company owns Canada's largest-circulation newspaper, more than 100 community papers and assorted online properties. But the internal challenges are enormous. In no particular order, the next boss must deal with dysfunctional family ownership, a dispirited work force, indifference from Bay Street and digital assets that are, at best, second-tier.

It should come with danger pay, but for a job this difficult, the compensation is middling. Consider the personal finances of departing chief executive David Holland, who held senior roles at Torstar for 31 years. The headline number on the CEO's compensation seems reasonably impressive: He made $2.5-million last year.

But like most top executives, Mr. Holland tied his fortunes to those of shareholders, typically taking half his pay in Torstar equity. Shares have been on a steady slide for more than a decade, from $30 in 2004, to less than $2 today.

That long decline eroded the value of Mr. Holland's nest egg: Working off last year's data, Torstar shares the CEO set aside over his career are worth approximately $600,000; his stock options are currently worthless. He has a generous pension plan, so no need to pass the hat. But Mr. Holland finishes his career without the kind of massive stock gains that attract top talent.

If you're a promising executive in the digital space, you want to work for a startup, not for Torstar.

Then there's the resistance a new CEO will face in selling the Torstar board on any radical turnaround plan aimed at boosting the share price and migrating the company into a world where news comes through your phone.

Consider the game plan rolled out by CEOs who successfully reformed companies that were being disrupted by technological change. Lou Gerstner at IBM is a great example. An outsider, he slashed costs and walked away from businesses the company had once dominated, such as personal computers. Old-school IBM employees freaked out. But the stock price soared.

Rival Canadian dead-tree media companies have opened the door to executives from other sectors. After a brutal financial restructuring that wiped out shareholders, phone-book publisher Yellow Pages Ltd. landed a digital leader from France, Julien Billot, in 2014. The focus is now on building online communities, and Yellow Pages' share price has more than doubled in the past four years.

Torstar has a history of tissue rejection when it comes to outside executives. The problem is rooted in a board of directors that is dominated by members of the five families with voting control, including chair John Honderich, and guided in part by the founder's progressive social policies. Running this company is not just about generating profits or boosting a flagging stock.

Mr. Holland's predecessor as CEO was an out-of-the-box hire: Former University of Toronto president Robert Prichard. While skilled, Mr. Prichard departed relatively quickly, in part because he could not get along with Mr. Honderich.

Taking a page from IBM's Mr. Gerstner, an outsider auditioning for the top job at Torstar might propose dumping most of its print properties to raise money, starving the remaining publications for capital and diverting cash to promising digital businesses. That strategy, while sound, is not going to win a candidate the top job. It flies in the face of the Torstar founding families' mandate to be agents of social change as newspaper publishers.

In coming weeks, executive search firm Caldwell Partners will send a string of CEO candidates over to be vetted by the Torstar board. Digital revolutionaries will steer clear. The next CEO is likely to be a media veteran, a cost-cutter well versed in the headwinds facing print publications, but lacking an alchemist's formula for turning news into gold. Any executive with those skills can find better places to work their magic.