The big handoff at Hearst

  @FortuneMagazine October 31, 2013: 6:37 AM ET
HEA18 frank bennack steven schwartz

Executive vice chairman Frank Bennack (left) and CEO Steven Swartz, in front of a painting of William Randolph Hearst at Hearst Corp. headquarters in Manhattan


On Sept. 12, 2001, Hearst Corp. executives were scheduled to meet with their board and architect Norman Foster at company headquarters at 300 W. 57th St. in Manhattan. Hearst had long outgrown its original six-story art deco building, commissioned by William Randolph Hearst in 1926, and Foster had been brought in to come up with a plan to expand. The terrorist attacks of Sept. 11 waylaid that meeting, but not Hearst's ambitions. Five years later the company moved into a stunning, 46-story cutting-edge tower (deemed "the most beautiful skyscraper to go up in New York since 1967" by The New Yorker's architecture critic) built within the original landmark structure.

The move is classic Hearst: building a new future on top of its old-media foundation. What was once a newspaper publisher has evolved into a diversified holding company with a far broader mandate than its iconic founder could have imagined. Today Hearst's assets include stakes in online media site Buzzfeed and financial services company Fitch Ratings. It operates medical and auto industry databases. In what was arguably one of the smartest deals ever, Hearst acquired a stake in cable juggernaut ESPN, a holding that's the envy of the media world. (Even further afield, Hearst Ranch sells meat from grass-fed stock and wine.)

Meanwhile the company has shed businesses that underperform, including the San Francisco Examiner, Hearst's flagship newspaper. "Nothing is sacrosanct, and nothing is susceptible to not changing," says Hearst's executive vice chairman Frank Bennack Jr. Bennack, 80, is the undisputed architect of Hearst's new look. About 90% of Hearst's revenue now comes from businesses that were not part of the portfolio when he became CEO in 1979. This summer in a historic handoff, Bennack -- who has been with Hearst for almost 50 of the company's 126 years -- passed the CEO baton to his handpicked successor, Steven Swartz, 51.

Amid this transition, Hearst, which is privately held, gave Fortune a rare look inside its portfolio of companies and its venture-capital-like approach to investing. The businesses are run by outsiders, but William Randolph Hearst's heirs still play a role in the company -- five of 13 spots on its board of trustees go to family members. The remaining eight trustees are current or former Hearst executives. All 13 trustees are on the Hearst corporate board of directors, and they, in turn, elect the other 11 directors -- also all insiders.

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