Doing It Her Way   

Katharine Graham defied Wall Street by investing in the Washington Post Co.’s future.

Katharine Graham will be deservedly remembered for standing up to the government in a difficult time. But what sticks most in my mind about her is an appearance she made before investment analysts on Wall Street in 1979.

The Washington Post Co.'s stock had dropped more than 17 percent that year, and I'm sure the analysts were expecting to hear about vigorous actions to cut costs to bolster earnings. After all, the major reason institutional investors had put so much money into newspaper companies in previous years was their reputation for predictable, steady growth in earnings.

Instead, they heard Mrs. Graham say that costs associated with the launch of a new magazine along with other factors would significantly penalize the next year's earnings. She then made this memorable comment: "In operating our business, we seek maximum ultimate value. We don't employ accounting or management techniques to smooth our results. We'd rather go from X to five times X in zigs and zags than go from X to four times X in neat, orderly steps."

This was not what the analysts wanted to hear, and suddenly sales of the company's stock soared--at 18 times the level of the previous month--as some institutions bailed out.

Of course, there were buyers on the other side of these sales, and it's worth pondering how the buyers made out, assuming they stayed the course. The company's stock when Mrs. Graham made her remarks was selling for about $19 per share. Recently, it commanded $576.

There is a point to Mrs. Graham's philosophy that sometimes seems lost on chief executives of other publicly owned newspaper companies. Her credo always was to invest in the future--hang the immediate consequences--and always to recognize, as she said many times during her leadership, that good journalism is good business.

Fortunately, her legacy has been carried on by her son, Donald, now the company's chief executive. The Washington Post Co. continues to invest in the future, most recently in a variety of Internet initiatives that have had a marked negative impact on the company's earnings.

The current downturn in advertising revenue, which has driven so many newspaper companies into paroxysms of cost-cutting, newshole reductions, hiring freezes and layoffs, has not deterred the Washington Post Co. from following its longstanding, long-term-oriented strategy. It all began with Katharine Graham.

Much has been written, including by Mrs. Graham herself, about how shy and insecure she was in 1963 when she took over the company after the tragic death of her husband. Even a few years later, by which time she was unquestionably in command of the now-publicly traded company, she was a visibly nervous public speaker.

I recall that at one of her early presentations before Wall Street analysts, her hands shook a bit as she reached for the lectern. But her words were not shaky.

Obviously, there was steel there, and in retrospect it is not surprising. After all, her first real job in journalism, at the San Francisco News, involved covering the rough-and-tumble labor disputes on the shipping docks, where among her confidants was notorious left-wing labor leader Harry Bridges. Her initial stories so impressed the editors that she quickly became the newspaper's chief street reporter for the dock strike.

Maybe it was on the docks where she got her appreciation for salty language. A story that I've been told so many times that I assume it is true concerns her first board meeting as the first woman ever elected a director of the Associated Press.

As the gentleman in charge (I believe it was William Davis Taylor of the Boston Globe) introduced her, he advised the directors to tone down their usual profanity now that a lady was in their midst. Mrs. Graham muttered, loud enough for everyone to hear, "Oh, shit!"

She was always down to earth on the few occasions I was in her presence. I've always been uneasy around children of privilege, but never with her. She had the ability to seem genuinely interested in whatever one said.

Mrs. Graham always gave credit to others in the Washington Post's defiance of the Nixon administration in publishing the Pentagon Papers and the Watergate investigations.

But it was her company that faced losing valuable broadcast licenses because of an unfriendly government and her company that was widely denounced for its Watergate coverage, even by many within the newspaper industry.

And it was her final decisions that helped preserve the press' right to publish and helped to bring down a corrupt administration. There have been few giants in the newspaper business who have truly made a difference in the conduct of journalism. She surely was one of them.