$300 million profit?

The Wall Street Journal (subscription required) reports in its Nov. 23 edition that one reason Bruce S. Sherman, chief executive of Legg Mason’s Private Capital Management LP wants Knight Ridder sold is to enhance profit performance by his firm. PCM owns 19 percent of Knight Ridder and recently urged the conglomerate's board to “aggressively pursue the competitive sale of the company.” If the targets are met, Sherman and his firm pocket $300 million. The Journal says, “Legg Mason. . . had agreed to make the $300 million payment to Mr. Sherman and other principles if PCM reaches certain growth targets by next Aug. 1” To reach those growth targets, PCM needs a big winner and evidently it decided that forcing the sale of Knight Ridder might help it get there. That helps explain the timing of PCM’s desire to cash out its stake. Those who would question the morality of putting $300 million in profit above the interests of citizens who rely on those papers for information will, of course, be accused of naivety for neglecting to consider the morality of honoring shareholders who own Knight Ridder and investors who gave money to PCM expecting a profit.