In Scott they trust at GMG

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The Independent Online

For a company that turns over £440m and owns some of Britain's most recognisable media brands, Guardian Media Group's overriding philosophy is somewhat vague.

Its sole shareholder is the secretive Scott Trust. Created in 1936 by the family of CP Scott, editor of The Manchester Guardian for 50 years, the trust was established to avoid death duties.

Its deed? To keep the newspaper running "upon the same principles as they have heretofore been conducted". No wonder that 66 years on, GMG is such a diverse – some say unfocused – company.

On top of controlling The Guardian and The Observer, it owns regional and local newspapers, runs a collection of dot coms, has a half-share in a large magazine publisher and owns stakes in radio operators. With £200m in the bank, GMG could be signalling the start of a spending spree with its £41m offer for Jazz FM.

Unlike many of its quoted rivals, GMG enjoys the freedom to make decisions that may not pay dividends for years to come. How many shareholders would allow a company to increase its investment in dot coms from £7m to £34m as the technology market was crumbling?

As its deed suggests, it is difficult to pin down exactly what the Scott Trust does. Its chairman, Hugo Young, offers the best explanation in GMG's annual report: "It is less Prime Minister, overseeing every decision, but more monarch, confined to listening and warning."

The trustees are a mixture of editors, GMG executives, businessmen and members of the Scott family. Serving members include Alan Rusbridger, editor of The Guardian, Paul Myners, chairman of GMG, and Anne Lapping, former board director of Channel 4. But like most of what goes on at the trust, the appointment of trustees is somewhat nebulous. Charles Scott, a former trustee, says: "It is desirable that they would be the sort of people who would read The Guardian ... I don't think anyone with strong right-wing views would be appointed."

In 1981 three basic terms of employment for trustees were established: they should not serve for more than 10 years; they should retire at 70; and if also employed by GMG, they should resign on leaving the company.

Hugo Young, a Guardian columnist, has been a trustee since 1989. But the terms were altered in December 1998 to allow him to stay on.

The Scott Trust's next meeting is on Thursday and top of the agenda will be GMG's offer for Jazz FM. It is understood that GMG has other radio interests in its sights. This could see GMG increase its stake in stations such as Oneworld Radio, in which it holds a minority interest.

In magazines, GMG owns 48 per cent of Trader Media Group, which publishes titles such as Auto Trader and Top Marques. The other shareholder in the business is venture capitalist BC Partners. There is speculation the two parties could put the business up for sale this year.

Similarly, there is talk that GMG could scale back some of its loss-making new-media interests, which include the online classified company Fish4. And many are wondering how long GMG will put up with the estimated £10m-a-year loss made by The Observer.

In GMG's annual report, chief executive Bob Phillis says that "the scale of the investment [in new media] is such that our investment strategy is regularly reviewed". But when it's reviewed by the Scott Trust, toilers at GMG's operations can be assured that no rash decisions will be taken.