Tag Archives: Ethics
That’s the question that Dominic Jones wants answered, and he noted on his IR Web Report blog that he can’t get a straight answer from the business journalists who covered the ouster of Bob Nardelli from the Atlanta-based home improvement retailer.
Jones wrote, “No one seems to know for sure, in part because the figures for 2006 havenâ€™t been published yet. Even so, Iâ€™ve seen five different amounts quoted by the same number of media outlets.
“Take a look at the excerpts below:
“From the New York Times: ‘At Home Depot, Mr. Nardelli is expected to receive an exit package worth more than $210 million on top of the nearly $64 million he was paid during his six years at the helm.’
“From the Financial Times: ‘Home Depot said that, under the terms of his contract, Mr Nardelli would receive a severance package worth $210m, in addition to the more than $120m that he has received in compensation since joining the company.’
“From Bloomberg: ‘Home Depot Inc., the worldâ€™s largest home-improvement retailer, ousted Chief Executive Officer Robert Nardelli after investors criticized him for earning $225 million during his six-year tenure.’
“From the Atlanta Journal Constitution: ‘By the end of 2005, Nardelli received packages worth $154.3 million, not counting the value of stock options, since becoming CEO. His pay for 2006 hasnâ€™t been disclosed.’
“From the Associated Press: ‘As of the end of 2005, Nardelli had earned $123.7 million in compensation, excluding certain stock-option grants, since becoming CEO. His compensation for 2006 has not yet been disclosed.’”
Ouch. Read more here.
Wall Street Journal managing editor Paul Steiger has had to address concerns among the journalists at the paper after the Journal ran a story earlier this month about jet ownership that mentioned a number of the paper’s advertisers, Women’s Wear Daily reported.
Irin Carmon wrote, “The Wall Street Journal is clearly still learning the potential pitfalls of lifestyle journalism. A story on fractional jet ownership in the Dec. 13 Personal Journal section caused several staffers, including senior editors, to cry foul and resulted in managing editor Paul Steiger having to defend that the piece didn’t breach the paper’s historically strict ethical standards between editorial and advertising.
“The article, ‘Crunch Time for Fractional Jet Owners,’ by Candace Jackson, started on the section’s front page, below the fold, and reported on how fractional jet ownership companies were ‘struggling to keep up with surging demand.’ Then the perceived hiccup occurred: Four fractional jet companies advertised on the page to which Jackson’s article jumped â€” and three of the advertisers were mentioned in the article, among others.
“While visiting the Washington bureau a few days after the story appeared, Steiger heard enough complaints to raise the issue at his regular 4 p.m. news meeting and conference call, which a source said lasted about twice the normal duration. There, the managing editor defended the practice, noting the piece had been reported, written and edited independently, without knowledge of which companies would advertise.”
Read more here.
The president and CEO of Oreck Manufacturing is challenging a quote attributed to him in a story in the Tennessean, the daily newspaper in Nashville, that was later reprinted in the Sun Herald newspaper in Mississippi.
J.R. Welsh, a reporter for the Sun Herald, wrote, “The letter, originally sent to Sun Herald executives, was distributed to Oreck employees in Long Beach, Metairie, La., and Cookeville. In the correspondence, company president Tom Oreck criticized the Sun Herald’s reporting on his company, but did not elaborate on alleged inaccuracies.
“The newspaper has written extensively about the relocation and the fact that Oreck Corp. has been given numerous incentives worth millions of dollars by Harrison County government since 1997. The incentives were allowed under state law.
“Oreck also criticized the Sun Herald for reprinting a quote attributed to him by the Nashville Tennessean. That newspaper quoted him citing employee losses after Hurricane Katrina, and saying Oreck’s Long Beach employees no longer constituted ‘a productive work force.’
“Oreck said in the letter, ‘We notified the Tennessean that the statement… was a misquote and completely incorrect.’
“Randy McClain, acting business editor at The Tennessean, said Thursday his newspaper was never directly contacted by Oreck or the company.
“McClain said the reporter who had quoted Oreck was contacted by a Chicago public relations executive representing Oreck Manufacturing. She suggested a follow-up story on Oreck, but did not request a correction, McClain said. He added that a decision was made not to write a follow-up. McClain said The Tennessean stands by the quote and the story.”
Read more here.
Dominic Jones, writing on the IRWebReport.com web site, waxes about how the SEC fell into the same trap with business journalists that many companies it’s supposed to regulate have done — make a major announcement on a late Friday.
The SEC decided to announce on the Friday before Christmas that it was going to allow companies to report lower pay amounts for corporate executives in their upcoming shareholder reports.
Jones believes that the trick is so well known by reporters that they now look for late Friday announcements.
Jones wrote, “Unfortunately for the SEC, the fact that the announcement came late on the Friday before Christmas raises questions about why the change wasnâ€™t done more openly.
“So itâ€™s really not that surprising to see headlines like the one below from Dow Jones today:
“In it the SECâ€™s ‘last-minute decision to reverse course’ and ‘loosen’ the rules is heavily criticized by Rep. Barney Frank, incoming chairman of the House Financial Services Committee, who labels the regulatory u-turn ‘regrettable’ and says it underscores the need for congress to act against the ‘problem of executive compensation.’
“The New York Times draws attention to the timing of the SEC announcement. In the storyâ€™s first paragraph, the paper describes it as ‘a move announced late on the last business day before Christmas’ as if that is a highly relevant fact.
“Of course, there was lots of space in todayâ€™s paper after the long weekend so the article itself provides a thorough review of the rule change and its implications. (Another reason not to issue bad news on Friday.) Both SEC chairman Christopher Cox and division of corporation finance director John White were interviewed for the Times article.”
Read more here.
Clary Shirky, writing on the Corante web site, reports how a company called Linden Lab has been able to convince a bunch of well-respected financial reporters to write positively about the company simply by changing the language in its press releases.
Shirky wrote, “If you want to understand how Linden has managed to disable the fact-checking apparatus of much of the US business press, turning them into a zombie army of unpaid flacks, read on. (And, as with the earlier piece on Linden, this piece has also been published on Valleywag.)
“The basic trick is to make it hard to remember that Lindenâ€™s definition of Resident has nothing to do with the plain meaning of the word resident. My dictionary says a resident is a person who lives somewhere permanently or on a long term basis. Lindenâ€™s definition of Residents, however, has nothing to do with users at all â€” it measures signups for an avatar. (Get it? The avatar, not the user, is the resident of Second Life.)
“The obvious costume-party assumption is that there is one avatar per person, but thatâ€™s wrong. There can be more than one avatar per account, and more than one account per person, and thereâ€™s no public explanation of which of those units Residents measures, and thus no way to tell anything about how many actual people use Second Life. (An embarrassingly First Life concern, I know.)”
Later, he added, “Like a push-up bra, Lindenâ€™s trick is as effective as it is because the press really, really wants to believe:
“Professional journalists wrote those sentences. They work for newspapers and magazines that employ (or used to employ) fact-checkers. Yet here they are, supplementing Lindenâ€™s meager PR budget by telling their readers that Residents measures something it actually doesnâ€™t.”
Read more here. It’s the Internet bubble all over again.
Timothy O’Brien, the New York Times business journalist who wrote a book last year about real estate developer Donald Trump, must reveal his sources who told him that Trump was just a millionaire, not a billionaire, according to a judge’s ruling, the Philadephia Inquirer reported.
O’Brien became the Sunday business editor for the Times in May.
Reporter Jan Hefler wrote, “State Superior Court Judge Irvin J. Snyder ruled in Camden that O’Brien must disclose the three confidential sources who provided him with financial information about Trump’s net worth. In TrumpNation: The Art of Being the Donald, O’Brien wrote that Trump was ‘not remotely close to being a billionaire’ and was worth between $150 million and $250 million.
“Trump sued for $5 billion, saying he had lost that much in business deals and a damaged reputation.
“Trump has refused to divulge his net worth. Forbes magazine has valued his interests at $2.7 billion.
“‘It was a very good day for Donald Trump,’ said his lawyer, William M. Tambussi, even though Trump’s casino bid in Philadelphia was rejected.
“Tambussi said he would add O’Brien’s sources to the lawsuit once he learned their names.”
Read more here.
Bloomberg reported that a fake press release was issued for an Atlanta-based company. Business journalists should care about such issues because they often rely on press releases as the basis for stories.
James Gunsales wrote, “PR Newswire said it distributed a false news release this morning about Innotrac Corp., a call- center and warehouse services operator.
“The bogus press release came from a third-party distributor called eReleases, whose statements are carried on PR Newswire, said Rachel Meranus, a spokeswoman for PR Newswire. The fake statement said Innotrac had won a ‘multiyear, multi-million- dollar’ contract with Siemens AG. Innotrac shares soared before PR Newswire distributed a company release saying the first was unauthorized.
“‘We are reviewing our policy of accepting public company news releases from eReleases,’ Meranus said in an interview. ‘This has sent up a red flag for us.’
“The release, posted at 8:31 a.m. New York time, originated with Baltimore-based eReleases, a press release services company that works with PR Newswire, which is owned by London-based publisher United Business Media plc.
“Atlanta-based Innotrac, which manages warehouses, shipping and customer service call-centers for retail and wholesale companies, distributed a release at 11:13 a.m. characterizing the original release as ‘totally false.”’
Read more here. After Bloomberg and others were caught writing stories from fake releases, the wire service changed its policy and began referring to what newswire the press release originated in its stories.
Forbes.com columnist Gary Weiss jumped on the investigative business journalism site ShareSleuth.com again, wondering why the site hasn’t written more stories and why it’s focusing on one company.
Weiss believes that’s because the site is being used to promote the investments of its majority investor, Mark Cuban.
Weiss wrote, “Sharesleuth.com slammed Xethanol for the third time the other day, proving yet again the difference between a billionaire’s private insider-trading tinker-toy and a genuine investigative reporting outlet.
“A genuine investigative reporting vehicle on the stock market (or a genuine investigative markets reporter like Herb Greenberg or Chris Byron) would have found more than two interrelated, marginal stocks to ‘investigate’ in a four-month period.
“A billionaire’s private insider trading vehicle, caring not a fig about the public interest, is free to pursue its owner’s profit to its heart’s content — in this case by again slamming a company it has already beaten into the ground.”
Read more here. Weiss notes that the comments on the site have made Cuban defensive.
Consultant Geoff Considine ponders the use of stock picks in various business publications and wonders what consumers actually do with such lists in a post on the Seeking Alpha web site.
Considine, who has a consulting firm in Colorado that helps portfolio managers, wrote, “I have always had something of an issue with stock pick lists that are published in various old and new media channels. The gist of these articles is typically that a business publication wants to publish a list of the best stocks for the coming year. The publication polls a series of expertsâ€” typically money managers. Forbes is no exception, and they have just come out with a series of stock picks for 2007 from a set of professional money managers.
“I do not have a problem with this type of exercise in general, but I always wonder what the publishers expect people to do with these picks. The problem with stock picking lists is that there are some perverse incentives for the experts who participate in the activity. Specifically, if someone asks you for a â€˜stock pickâ€™ and you know that you will be ranked as either a winner or an â€˜also ran,â€™ you have a real incentive to pick a very volatile stock. Think of it like this. You know that a year from now you will get some positive attention if you pick a stock that shows enormous appreciation. If you pick a real dog, you can bet that the publication wonâ€™t be advertising the fact that they listed a big loser as a stock pick. If you pick a solid company that generates high returns relative to risk but still is not in the top performers, you wonâ€™t get much attention either. The way you get some good press in this type of exercise is to make a swing for the fences.
“I admit that I like to peruse these lists for ideasâ€”there are plenty of very smart analysts and money managers who come up with great ideas. To account for the tendency of stock pickers to make highly volatile picks, I take these lists and see how they look from a quantitative perspective. I expect the picks to be volatileâ€”more volatile than any index, in general.”
Read more here.
Reuters has begun selling a service that allows people to buy and sell stocks based on news events, according to a New York Times story.
Jeremy Peters wrote, “They will give subscribers the ability to mine past and present Reuters news articles in real time and automatically buy, sell or hold a stock based on market-moving events.
“The mining and sifting of news take place in computers dedicated to algorithmic trading; that is, automatic buying and selling based on complex mathematical formulas that aim to pick the optimal time to trade a stock.
“Although algorithmic trading on news events already exists, Reuters says its system is the most advanced. ‘;If an event breaks somewhere in the world, you want to be able to respond to that, or manage the event risks,’ said Richard W. Brown, business manager for Reuters NewsScope, as the new program is being called. ‘At a very simplistic level itâ€™s about speed.’”
Read more here. Business journalists can now say that they do move the market.Â