Washington Whispers is U.S. News & World Report's crack political gossip column. Yet much of the whispering last week in the Washington publication's headquarters concerned interoffice politics.
Last December, U.S. News Chairman John H. Sweet sent a memo to employes saying a bonanza might be coming their way. He said that if a $200 million joint real estate venture in which the company was engaged proved successful, the value of the company's stock would go up and so would the employes' profit sharing.
Last week another Sweet memo reported the good news that the company's stock had appreciated 209 percent during the year ended last December. But it also had some bad news: employes leaving the company before normal retirement age (65) would not be able to collect their benefits in a lump sum, as had been customary. Those changing jobs in mid-career would have to forego income from interest earned on lump sum distributions. Benefits would be made available to employes only upon normal or late retirement and only in the form of an annuity.
"It was like Mount St. Helens when the memo hit," said one employe. (Like all those who agreed to discuss the situation, the employe did so on condition that his name would not be used.) "It has caused a lot of unhappiness and resentment, especially among older workers who had planned to retire early," said another. "Others are angry because of the way it was handled: a pronunciamento."
A third mused that U.S. News has long prided itself on being a company owned by its employes. The memo "was an unpleasant reminder that we are just employes without a voice in the company."
U.S. News is a privately held corporation. The majority of the shares are held by the employes profit sharing trust. But the voting control is held by the board of directors.
In addition to its magazine, the company is now involved in a major development project near its headquarters in the District's West End section. The complex will include more space for itself, as well as a luxury hotel, an office building and condominiums. Seeking to diversify, U.S. News last fall purchased Parkway Productions, a company providing satellite transmissions of programming to more than 300 stations.
In his March 11 memo, Sweet noted that the value of U.S. News stock had been reappraised at $470 per share and that it now makes up 85 percent of the $27.5 million profit sharing trust fund. The other assets amount to $4 million. He estimated that the increase in the value of the company's stock meant the company would have to put out $6.6 million in benefits this year.
Since the company stock is privately held, there is no public market for it and it cannot be sold to fund the trust obligations. The other assets are liquid, but insufficient. As a result, the board of directors decreed that no more lump sum settlements would be approved and made the decision retroactive to March 2. This effectively prevented anyone from exercising an option to retire early.
U.S. News President James H. McIlhenny declined comment on the memo, saying it would be inappropriate for him to discuss an internal matter.
Meetings have been scheduled this week between employes and management in an attempt to ease the tension.