Corporations Work Hard to Prevent Reporting; When Intimidation Doesn't Work, Other Methods Are Used. (Journalist's Trade)

Article excerpt

Reporters who cover corporations might as well be covering the affairs of a medieval king sequestered behind castle walls and a moat. Corporations are not like city halls, county courthouses, or state assemblies where information is harvested freely by reporters. Efforts to scale the castle wall, even to interview the rank and file, often end in a dousing of scalding water, usually administered by the corporate executive whose job it is to keep the news media in check.

Unlike public sector reporters who benefit from public records laws, open meetings, and a robust flow of information from the bowels of government, reporters on corporate beats are accustomed to exclusion. Corporations whose stock is publicly traded disclose a large amount of information about their finances but, as in the case of Enron and too many other companies, the information is written to obfuscate, not enlighten. (And these reports are prepared primarily for stockholders--the corporation's owners.) Publicly held corporations also conduct once-a-year meetings--again, primarily for shareholders--that seldom offer truly candid assessments of a company's financial condition and prospects. In many instances, corporations hastily rubber stamp the routine business on the agenda, then dance around the inquiries of shareholders who dare to challenge company policies or suggest changes in corporate governance. Some corporations actually go as far as to conduct these meetings in places such as Wyoming and North Dakota to discourage attendance, as the bygone SafeCard Services did in the 1980's.

So it came as no surprise when I read about the heavy-handed response by Enron to early inquiries about its finances by reporters Jonathan Weil of The Wall Street Journal and Bethany McLean of Fortune. Weil had to run a gauntlet of seven Enron officials before writing a September 2000 article that rankled Enron. (His experience reminded me of a 1978 assignment when an electric utility dispatched a battery of four executives to hear my questions about a controversial power project that threatened a town's mountaintop water reservoir. When one executive groped for an answer, another would chime in, and when the rapid-fire, two-hour interview was done, I wasn't entirely sure who had said what in my notes.) McLean's questioning months later ruffled Enron's feathers even more. Jeffrey Skilling, Enron's former CEO, called her questions "unethical" before hanging up on her. Enron nonetheless sent its damage-control squad to New York to meet with her. Expecting the worst, Enron founder and Chairman Kenneth Lay called one of McLean's editors in a fruitless attempt to spike the story.

Preemptive strikes by corporations whose dubious business or accounting practices are about to be exposed are merely another hurdle for corporate watchdogs in the news media. It doesn't stop there. Competent business reporters are regularly blackballed for writing critical stories or for failing to trumpet a corporation's business ventures.

Quarterly earnings reports can be a minefield in this regard. Decades ago, when the bottom line meant just that, net income (or loss) was the ultimate measure of a corporation's performance. But in today's environment of permissive accounting rules and forgiving investment analysts, reporters are criticized for not giving corporations enough credit for so-called "one-time" charges against earnings. Events and items such as plant closings, severance payments to laid-off employees, business write-offs, and even unsold products are singled out in corporate earnings reports as "extraordinary" or "non-operating" expenses. Corporations, eager to present the most favorable picture possible to potential buyers of their stock, prefer investors to look at the profit line shorn of the "one-timers." The idea behind all of this is to expunge past blunders and steer investors to the future, which somehow always manages to be bright. …