Magazine article American Journalism Review

Business as Usual: While News Organizations Have Energetically Uncovered Corporate Abuses and Editorialized for Reforms, Their Parent Companies Have Been Less Than Enthusiastic in Applying the New Standards to Their Own Operations

Magazine article American Journalism Review

Business as Usual: While News Organizations Have Energetically Uncovered Corporate Abuses and Editorialized for Reforms, Their Parent Companies Have Been Less Than Enthusiastic in Applying the New Standards to Their Own Operations

Article excerpt

In 1905 oil baron John D. Rockefeller sensed that the attacks he had suffered from muckraking reporters and crusading journals like Joseph Pulitzer's New York World were about to subside. As newspapers became more and more profitable, Rockefeller reasoned, their proprietors would be less inclined to focus on corporate misdeeds and more likely to play by the same rules as the other captains of industry. "The owner of the World is also a large owner of property, and I presume that, in common with other newspaper owners who are possessed of wealth, his eyes are beginning to be opened to the fact that he is like Samson, taking the initiative to pull the building down upon his head," Rockefeller wrote in a letter to an associate.

Nearly a century later Rockefeller's words ring truer than he could have imagined. In recent years, newspapers and other media operations have posted profit margins that he would have envied. And in recent months, they have covered the country's corporate accounting and governance scandals in a way that he could have appreciated.

While they have duly reported on some of the most egregious examples of corporate wrong-doing, America's news organizations have regularly omitted or glossed over the shortcomings of some of the most powerful businesses in the country: their own. Media companies have also shown a willingness to ignore the advice of their editorial writers and columnists on the subject of stock options--an issue that has created a split within the industry and that appears to have surprisingly large consequences for at least some media firms.

To be sure, publicly traded companies in the news business do not deserve to be tarred with the same brush of criminality that has been applied to the likes of Enron, and the acknowledged federal investigations into General Electric's compensation disclosures and AOL Time Warner's accounting appear to be limited in scope. Many media companies can argue, with some credibility, that they have clean records. But a review of filings with the Securities and Exchange Commission shows that all of them have engaged--to one degree or another--in the kind of questionable activities that have been much in the news this year. For example:

* The newspaper company that today bears Pulitzer's name and is run by his heirs disclosed earlier this year that it has paid its independent accounting firm to serve as an internal auditor as well--the kind of arrangement that also existed between Enron and Arthur Andersen and one that has been likened to putting a fox on special retainer to guard the henhouse. Pulitzer says that it began using this setup as an efficiency measure but abandoned it in early 2001, before the Enron scandal erupted.

* At Belo, Knight Ridder, Lee Enterprises, McGraw-Hill and Media General, executives or other insiders failed to file reports last year about stock transactions by the deadline required under federal law--the same kind of infraction for which President Bush has been criticized. The missed deadlines appear to be isolated cases, and companies downplayed their significance. Media General said its violation was "inadvertent." McGraw-Hill blamed "an administrative oversight," and Knight Ridder said its mistake occurred when the husbands of two corporate officers took 401(k) distributions without filling out the necessary paperwork.

* Some news organizations have stocked their boards of directors with senior managers or outside executives with whom they do business. Boards like these, critics of the current state of corporate governance say, have a stronger incentive to serve as rubber stamps of CEO initiatives than to exercise independent oversight.

* All of the publicly traded media firms have engaged their independent accountants to handle tasks that go far beyond the auditing of books--a practice that will be curbed by the Sarbanes-Oxley law, the federal corporate reform legislation that took effect this summer, because of its potential for creating conflicts of interest. …

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