Grayer Resigns As CEO Of Kaplan

Protege Named To Lead Post Co. Education Unit

The head of The Washington Post Co.'s biggest revenue-generating business is resigning after 17 years, the company said yesterday.

Jonathan Grayer, 43, chairman and chief executive of Kaplan, a wholly owned subsidiary of The Post Co., joined Kaplan in 1992 and became the education company's president and chief operating officer in 1997. Grayer will be succeeded at the end of the year by Andrew S. Rosen, chief executive of Kaplan's higher education business.

According to SEC documents filed yesterday, Grayer will receive his base salary, which was not disclosed, and incentives, in addition to $46 million related to the Kaplan stock option plan. Honoring the noncompete clause of his contract will net Grayer an additional $30 million by November 2011

When Grayer took over Kaplan, which The Post Co. bought in 1984, the test-prep company founded by Stanley Kaplan was losing money. Grayer grew the company through acquisition and aggressive management, shifting its focus toward the high-profit higher education business and expanding overseas. This year, Kaplan is on pace to report revenue of more than $2 billion. Kaplan's third-quarter operating income grew 36 percent on revenue gains of 17 percent this year, compared to the same period of 2007.

Kaplan now provides about 53 percent of The Post Co.'s revenue. The newspaper division, including the flagship Washington Post, provides about 17 percent. Last December, Post Co. Chairman Donald E. Graham rebranded The Post Co. as an "education and media company," an acknowledgement of the newspaper's diminishing status, as it sheds circulation and advertising dollars.

Grayer and Graham both said Grayer was not asked to leave. "He is resigning after 17 years, during which there have been tremendously long days, very long weeks and very long years," Graham said yesterday. "After 17 years of hellacious effort, he is going to go off and do different things."

"I have done this nonstop since I was 29," Grayer said. "I thought this was a good time for Andy to succeed me. It was something Don and I had always planned on."

Rosen, although four years older than Grayer, has been Grayer's protege and close friend for years. He has worked at The Post Co. since 1986, first as a staff attorney for the newspaper and then as assistant counsel at Newsweek before moving to Kaplan in 1992.

In 1997, the Post established a compensation plan to retain Grayer and his young management team. It was designed to fend off poaching from companies with soaring stock prices that were crafting rich options packages for their executives.

To calculate the value of Grayer's stock option plan, the Post hired Goldman Sachs to determine its value if it were a stand-alone public company. Goldman determined that Kaplan's stock would trade at $2,700 a share.

Asked whether he had made any attempts to spin off Kaplan to run as a separate business, Grayer said, "It has always been clear that The Washington Post is a company that is set up for the purpose of protecting the long-term interests of its assets and held together as a holding company," Grayer said. "The controlling owners of the company have always been clear they wanted to own Kaplan forever and as much of it [as possible] forever. I always knew that would not change."

The announcement was made after the close of financial markets. Shares of The Post Co. closed at $370.50 yesterday, down 5.9 percent.