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[whitespace] Mercury montage Paper Trail: The San Jose Mercury News published 25 stories and six editorials since April in support of Sun Microsystems takeover of the Agnews campus. Editorial page editor Rob Elder says he was not influenced by a boardmember of his paper's parent company who is also a major Sun stockholder.

The Mercury News' rah-rah position on the Sun takeover of the Agnews Development Center benefited a millionaire board member, raising ethical questions about interlocking directorships in the media

By Michael Learmonth

A LMOST FROM THE MOMENT Sun Microsystems Inc. announced last April its plans to build a corporate campus on the historic Agnews Developmental Center property in Santa Clara, it became clear that it had a very important ally--the San Jose Mercury News.

Capping months of boosterish editorials and news stories about the merits of the project, the Merc wrote in a Sept. 7 editorial, "Sun Microsystems' proposal for a huge--and beautiful--research and development

campus on the site of Agnews West Development Center presents the city of Santa Clara with a tremendous opportunity."

Four out of seven members of the Santa Clara City Council agreed with the newspaper's assessment and ultimately approved the project in October. Many Santa Clara residents were not satisfied, and in December opponents collected enough signatures to force a June 9 ballot measure on the project.

But in the Merc 's extensive coverage of the issue--more than 25 stories and six editorials since April--not once did it mention that a board member of its parent company, Knight-Ridder, is a major stockholder and board member of Sun.

M. Kenneth Oshman, who founded ROLM Corporation with three associates in 1969 and merged it with IBM in 1984, has served on the board of directors of Sun Microsystems since 1988 and on the Knight-Ridder board since 1996.

Over the past year, according to records submitted to the Securities and Exchange Commission, Oshman has owned a stake in Sun Microsystems worth more than $20 million.

On June 30, 1997, three months after the Agnews deal was announced, Sun reported that Oshman controlled a total of 530,000 shares of stock worth about $19.7 million. He owned 140,000, had options on another 70,000 and controlled 320,000 shares as managing general partner of OS Ventures.

On Oct. 1, he exercised his option to buy 20,000 shares. Six days later, under the headline "Sun's Proposal for Agnews Gets Even Better," the Merc editorialized: "With the latest proposal from Sun Microsystems to preserve more buildings at the old Agnews campus, we hope the Santa Clara City Council can soon gather a majority that sees the light."

On Oct. 16, the day after the Santa Clara City Council approved the Sun project, the Merc weighed in with an editorial congratulating the council for recognizing that Agnews "can't be preserved in amber."

That day, Oshman transferred 310,400 Sun shares from indirect ownership to his own name.

On Nov. 13, Oshman exercised options on another 35,000 shares. On that day, according to the Fort Lauderdale-based Investnet, Oshman had direct ownership of a total of 505,400 shares of Sun stock worth $22.3 million. According to records submitted to the SEC, Oshman realized a $1,623,700 paper gain this year on Sun options alone.

On Jan. 8, after Agnews preservationists collected enough signatures to force a vote on the Sun project, the Merc took a final stand: "Preservationists are exercising a legal right in forcing this vote, but we think it's a bad idea."

Board Member Bystander

R EACHED AT Echelon Corp., the Palo Alto company which he founded and where he serves as CEO, Oshman denied any connection to the decisions made at the Mercury News. In fact, he said he was completely unaware of the paper's editorial crusade in favor of Sun.

"There is absolutely no link between my being a member of the Knight-Ridder board and the Mercury News ' position on anything," he said.

Oshman says his responsibilities as a Knight-Ridder director are limited to ensuring that the company performs in the interest of shareholders and have no connection to the day-to-day operation of the individual papers.

"Boards of directors don't run companies," Oshman said. "I think the last thing the board of a newspaper would be involved in is trying to influence the editors."

Rob Elder, editorial page editor of the Mercury News, said Oshman "did not have anything to do with the position we took." He said that he is aware Oshman is a Knight-Ridder director, but that he "had no idea" Oshman was also such a large shareholder and director of Sun Microsystems. He said he knows Oshman only by reputation from his years in Silicon Valley.

Oshman said he has known Elder for "a number of years," and while he would never think of using his board position to influence the editorial process, he said he "would expect to be able to express my opinion [to him] as an experienced individual."

However, the interlocking directorships keep the Merc and Sun in each other's communications orbit, and one of Oshman's allies is in a position to influence the Merc 's editorial page.

In 1996, Tony Ridder, chairman and CEO of Knight-Ridder, appointed Oshman to the board.

"I have known Ken Oshman for more than 15 years, and he is one of the best executives I've worked with," Ridder said. "While I was publisher in San Jose, I served on two community boards that he chaired."

Ridder was publisher of the Merc from 1977 until 1986. When he was in San Jose, Ridder was Elder's boss. Now Tony Ridder is the top executive of Knight-Ridder.

Knight-Ridder is a $2.7 billion corporation that owns 37 newspapers around the country, including the Miami Herald, the Philadelphia Inquirer and the Detroit Free Press.

Ridder was unavailable for comment, but vice president/corporate relations Polk Laffoon said, "I would be very surprised if Tony Ridder knew anything about these issues."

He said publishers frequently have input into editorial decision making, but denied that influence ever came from members of the Knight-Ridder board.

Rationale Thinking

T HE MERCURY NEWS has said its editorial board supports the Sun takeover of the state-owned Agnews property because of the 3,600 jobs it promises the city and the amenities that such a development might bring to Santa Clara's North Bayshore neighborhood.

"Santa Clara will never get a better deal for Agnews than the one that Sun is offering," the Merc concluded.

The deal that the Santa Clara City Council approved would allow Sun to build a $229 million campus on the Agnews grounds, preserving only four of the buildings on the historic quad. Sun agreed in a compromise to save and move 12 more historic buildings off-site. The remaining 61 dormitories and support buildings would be destroyed.

Absent from the Mercury 's editorials has been mention of other issues pertaining to the project. For example, preservationists within the city of Santa Clara and elsewhere in the valley have argued that Sun should preserve more of Agnews' Mission Revival buildings, which are listed on the National Register of Historic Places.

Even Mercury architectural critic Alan Hess expressed misgivings about Sun's plans to demolish the lion's share of the historic buildings at the site, saying it will "gut" the original vision of the center's creators and leave the historic structures "afloat as isolated structures."

Other opponents object to adding more traffic to the already crowded Montague Expressway, regarded by the Merc 's own columnist, Gary "Mr. Roadshow" Richards, as "the No. 1 bottleneck in Silicon Valley." Open-space advocates mourn the loss of the last big chunk of open space in Santa Clara. Still others object to the terms of the deal between the state and the private corporation: Sun is paying about $412,000 an acre for Agnews, while Informix paid more than five times that amount--$2.22 million an acre--for nearby land last January.

Their Masters' Voice

B EN BAGDIKIAN, a former Washington Post editor and oft-quoted media critic, said he's surprised that the Mercury News didn't acknowledge that a local Knight-Ridder board member is a Sun stockholder.

"I think any time the paper or a major officer has an interest in something that the paper is supporting or giving a lot of publicity to, it is ethically obligated to disclose a connection," Bagdikian said.

By taking a very strong and sustained editorial position in favor of the Sun development, Bagdikian said, the Merc raised the ethical stakes.

"If the paper is editorially in favor of it, that raises the level of expectation that they disclose that a director is involved," Bagdikian said.

Elder, however, said he believes the Mercury News was under no obligation to disclose the relationship.

"When we think we see something that people could construe as a connection, we try to acknowledge that connection," Elder said. "There are guys in Silicon Valley who own stock in everything, and we write about them all the time."

According to Sun's 1997 annual report, Oshman serves as a director of only two corporate boards, Sun's and Knight-Ridder's.

Morton Mintz, a consumer affairs reporter for the Washington Post for 30 years, argued that conflicts such as this are intrinsic in newspapers owned by large corporations.

"These enterprises are themselves big business; they identify with big business, and within that there is the seedbed of all kinds of conflict," Mintz said from his home in Chevy Chase, Md.

In his book, The Media Monopoly, Bagdikian decried the fact that a vast majority of the nation's daily newspapers had fallen into the hands of giant corporations run by board members with financial interests that may conflict with those of readers.

Bagdikian also criticized the influence corporate directors can exert over newsrooms. In an era of advanced journalistic standards, that influence is rarely explicit or discussed, he wrote.

"Most bosses do not have to tell their subordinates what they like and dislike," Bagdikian wrote. "A parochial myth that permeates all media is that intervention of owners into the content of news is no problem. But it persists as a problem.

"When an editor makes a news decision based on corporate orders, or knowledge of ownership wishes, the editor seldom states the reason."

Mintz said he is troubled that there are so few news professionals on the boards of the corporations that own news organizations. The boards are influential businessmen who have large financial stakes in other companies that may, at times, become the subject of news stories and editorials, he said.

The business interests of corporate directors inevitably play on the minds of some editors and reporters.

"People whose primary if not secondary concern is their own career enhancement would not do something to hurt a member of the board who has the ear of the chairman," Mintz said.

One of the Santa Clara City Council members who voted against the Sun project was angered but not surprised to hear about the connection between Sun and Knight-Ridder.

"They should have disclosed it," Lisa Gillmor said. "They should have come clean. Especially in this case where they took such a strong position in favor of Sun Microsystems."

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From the January 29-February 4, 1998 issue of Metro.

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