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Emmis investor castigates director Susan Bayh

July 10, 2008

By Norm Heikens

Susan Bayh, lead director for Emmis Communications Corp. and wife of U.S. Sen. Evan Bayh, has been blistered in a letter from an Emmis investor who says she isn't taking proper responsibility for her board seat.

Frank Martin, senior partner in Elkhart-based Martin Capital Management, said Bayh is indirectly responsible for a long-term decline in the Indianapolis radio and publishing company because she hasn't forced improved performance from CEO Jeff Smulyan despite her position as lead director.

"The long-decaying destiny of Emmis seems irretrievably the consequence of a monumental and serial travesty of corporate governance that may be your legacy," Martin wrote in the four-page missive. "As exemplar, the person appointed to the office of lead director is emblematic of the deficiencies in corporate governance at Emmis."

Bayh was not available for comment.

Martin's firm owns 9.7 percent of Emmis stock - shares worth a total of $5.5 million after investors further bludgeoned the stock this week.

The stock slumped 12 percent on Thursday after Emmis reported a loss worse than anticipated by Wall Street. Emmis lost 5 cents per share from continuing operations, a penny worse than expected.

Martin, who sent his letter to Bayh on Monday, has been sharply critical of the company's governance for more than two years.

He's been pushing the board to reward long-suffering shareholders by selling off its holdings-an idea Smulyan has opposed.

Though Smulyan holds a special class of stock that gives him voting control of the company's shares, Martin says that does not mean board members have to acquiesce to his wishes.

This month's letter is the first directed at a particular board member. Bayh was singled out because she is the lead director, and as such the most influential, the letter said.

"Can you, in good conscience, speak with the pride of accomplishment that comes from a job well-done, feeling free to tell your family and friends of your role in shaping and nurturing Emmis into the company it is today?" Martin asked.

An investor in Emmis' initial public offering in March 1994 would have seen the value of the shares plummet to the current level from the $7.21 paid after adjusting for a split six years later, he said.

Bayh and the other three independent directors should push the company into divestiture during the Emmis annual meeting Tuesday, Martin said.
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