CONTRACTUAL GOOD FAITH AND THE PRESS --In 1999, Baron Woolf, the Lord Chief Justice of England and Wales, Britain’s highest court said that “[Contractual] good faith is the most important contractual issue of our time.”

According to legal principle in our country, good faith is an element of every contract. That is, a contract not made in good faith is not a contract.

In that context, now-Washington Post staff writer and former American Prospect editor Harold Meyerson has some good comments this morning on the bankruptcy of the Chicago Tribune newspaper:

“Once Tribune entered bankruptcy, the employees' shares in the company became, and will remain, valueless. On the other hand, Zell stands to recoup a decent share of his own $315 million investment because he structured it in such a way that a bankruptcy court must treat him as a creditor. Smart guy, that Zell. As for the multitude of reporters, editors and other laid-off employees who are still collecting their severance payments, Tribune has announced that their payments will come no more.

Zell isn't the sole culpable party in the disgrace that is Tribune.

The board members who sold him the company could have sold it, in disaggregated parts, to buyers who were willing to put up their own money. Hollywood mogul David Geffen offered to pay a cool billion for the L.A. Times, but the people who had run the company for decades preferred to sell to a fellow Chicagoan with no background in media, in a deal that brought them millions and put no one except their employees at risk.”

As the late Texas columnist Molly Ivins wrote years ago when one of the newspapers she wrote for folded, it wasn’t declining circulation or ‘television’ that did the paper in. It was layers of corporate debt, added each time the paper was bought by one acquirer after another, each time adding more indebtedness that eventually overloaded the final corporate parent.

The arrangement Meyerson accurately cites above as a factor in the demise of the Tribune should be illegal. There is no inherent reason why a ‘leveraged’ buyout, meaning a purchase with credit rather than cash, should trump a good sound buyer.

As Meyerson also recaps,

“Zell disparaged and to a considerable degree dismantled the staffs of the major newspapers he owned, one of them (the Los Angeles Times) a great national paper. He did so to pay down the debt he incurred when he bought Tribune last year--debt he incurred by refusing to put much of his own money into the paper. Instead, he paid for the company with the $8.2 billion employee stock ownership plan (a move in which Tribune employees had no say whatsoever), against which he borrowed massively from banks to keep the company going.”

Another gambit that should be illegal. There is no inherent reason, and no good reason at all, why an employee plan—stock ownership, pension, etc—should be collateral for someone else’s unreasonable risk.

One of the best things that then-Sen. Barack Obama said in his primetime address at the 2004 Democratic convention was that most people know how little it can take to bring about a big improvement.

Treatment of employees is a primary area and—aside from foreign affairs including the Iraq war and the so-called ‘war on terror’—perhaps the primary area where a little improvement would mean all the difference. Contractual good faith would be a good vehicle, shoring up both contract and employees. Corporations came into being via law. They are purely creations of law, not natural beings. There is no inherent reason why one newspaper, for example, should be allowed to purchase another at risk of its target’s very survival.