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Big Emmis investor says Smulyan's clout unfair

January 8, 2007
A big Emmis Communications Corp. investor has submitted a proposal to shareholders to do away with a special class of stock that gives shares held by CEO Jeff Smulyan extra voting power.

The proposal—disclosed in the company’s proxy statement filed with the Securities and Exchange Commission this morning—was submitted by Frank Martin, whose Elkhart-based Martin Capital Management owns 8 percent of Emmis’ Class A stock.

Because of the special class of stock, Smulyan has 60 percent of the company’s voting power, even though he holds less than 20 percent of its shares.
“Such disparity in voting power and economic interests becomes contentious when it provides ... for the perpetual entrenchment of a manager whose record may not otherwise warrant such a privileged ‘untouchable’ status,” Martin’s proposal said.

In the proxy, the board said it is taking no position on the proposal because the issue is moot. It said such a change would require Smulyan’s approval, and he has notifed the board he won’t grant it.

Shareholders are scheduled to vote on the proposal at the company’s annual meeting, set for 2 p.m., Feb. 13, at the company’s headquarters on Monument Circle.

Today’s filing also says that Randall Bongarten, the former head of Emmis’ TV division, received $2.7 million in severance when he stepped down about a year ago. Bongarten left Emmis because it is selling its TV stations and narrowing its focus to radio.

The proxy statement covers the fiscal year ended in February 2006. For that year, Smulyan received annual compensation of $1.77 million—$684,000 in salary, plus a bonus of $1.09 million—about the same as he earned the prior year. Emmis shares declined 12 percent for the fiscal year ended in February 2006, and have slid further since.

In the proxy statement, the board’s compensation committee said Smulyan’s pay was justified “based on the success of the company’s television station sales, [the] company’s performance in achieving ... operating income targets ... and Mr. Sumlyan’s general leadership of the company.”

Emmis recently disclosed that Smulyan has agreed to $1 in salary in the fiscal year that starts next month.
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