Corporate Disclosures And The Media (20 January 2003)
Eight years ago, when the IPO market was at its manic worst, corporate India first began to demand curbs on media reporting. While companies indulged in the most bizarre strategies to woo journalists and engineer glowing coverage of shady public issues, they wanted a code of conduct for business journalists.
The Press Council of India obliged and produced a set of guidelines, exclusively for financial journalists. They said that — business journalists should not accept gifts, trips, discounts, loans or similar gratification that would compromise their position. Journalists should not write about companies whose shares they held. Newspaper owners/editors should not use their connections to further their business interests; and journalists and their friends/relatives should not use inside information to make easy money.
The guidelines were rather unfair and forgotten soon after they were issued. Although business writing undoubtedly needs to be purged of chequebook journalism, the problem is by no means restricted to the pink press or their cousins in the general dailies. Political journalists with their access to political power, play a bigger role in brokering deals for industrialists. The establishment woos them with government-quota housing and foreign junkets as a part of ministerial entourages and at senior levels, they are given state honours, nominated to important bodies and eventually to the Rajya Sabha. The Press Council ignored all this when it chose to depict financial journalists as more corrupt than others.
The demise of the IPO market temporarily ended the debate over journalistic ethics. But developments over the last few years have again underlined the need for introspection and a workable code of ethics. The Ketan Parekh led boom of 2000-01 has seen the worst kind of price ramping with the media being active participants in Ketan Parekh’s shenanigans. Not only were journalists singing paeans to Parekh, the Big Bull, and promoting his stocks, but media owners too were wooing and lionising him in order to get their IPOs placed at high premia. In the process, they lent credibility to Parekh’s manipulation and blatantly violated the Press Council’s guidelines, that media owners should not push their business interests through their publications.
Although this caused a lot of hand-wringing over media ethics, the real pressure for better ethics within the media has come up in connection with the Securities and Exchange Board of India (Sebi) and the stock exchanges focussing increased attention on continuing disclosures by companies.
Companies invariably complain that journalists like to jump the gun and break news before it is fit for publishing. Journalists argue that they are only doing their job and hunting down scoops before the company decides to hold a press conference to announce its plans to the world. At the same time, stock exchanges and regulators tear out their hair over wrong reports and in trying to figure out where a journalistic scoop ends and the need for uniform public disclosure begins.
Companies complain that journalists classify categorical denials as a ‘may be’ and milder refutations such as ‘no comments’ as a ‘yes’ or a ‘probably’. Even a more pompous response like — “it is not the practice of this company to react to rumours or hypothetical situations” — are also stuck at the bottom of reports without any attempt to recheck the information.
Look at the other side again. Journalists say that companies compete with movie stars in issuing false denial over their affairs — in this case corporate affairs. They also use their advertising muscle to suppress negative coverage and to pressure journalists. Moreover, as the Joint Parliamentary Committee (JPC) noted, companies are often in league with stockbrokers to manipulate share prices and they employ a battery of public relations professionals to manipulate the media and engineer positive coverage. They also bribe politicians to influence business policy. All journalists have a arsenal of anecdotes about off-the-record scoops organised by public relations executives, sometimes accompanied by an “official denial” for the regulators benefit; or of companies stonewalling the media even when the share price movement is screaming about a major corporate development. Another situation is when all those who do not fall under the strict Sebi definition of ‘insider’ are freely discussing corporate developments, while the company remains in denial mode.
This doesn’t mean that all companies play dirty games, or that every journalist is guilty of breach of ethics, shoddy research and wrong analysis — but there is enough that is wrong on the part of both to warrant closer examination.
The problem gets worse when regulators draw a blank to their questions. In the last couple of years, the two major national bourses have been writing to companies seeking a confirmation of media scoops in order to ensure that all investors have equal access to correct information. More often than not, companies respond with outright denials or ambiguous evasions. Hence, the demand for a media code or a system of disseminating information that separates the truth from speculation and true from false.
The corporate sector has offered several suggestions, all aimed at imposing media curbs. They range from asking Sebi and the Press Council to come up with a new code of conduct for the financial media (including the electronic media and internet magazines) and educating journalists on how to cover business events to bizarre ones like having Sebi register media personnel and decide who can write about companies and what the content of the article should be. Some even want journalists to reveal their source of information to the regulator. No, this isn’t a joke. Some of these suggestions have been made with all seriousness to the regulator and they only demonstrate how ignorant corporate India is about how the media works.
Obviously, a re-examination of the journalistic role is warranted in the light of frequent mistakes, denials, insider trading and bad ethics in the media and it is best not mandated by the market regulator.
A couple of years ago, Sebi suggested that any television show or press report that quoted an analyst’s stock recommendation needs to flag his personal investment interest if any. It also set up a committee to introspect the question of business reportage in the present context. Maybe it is time for Sebi to revive the effort and set up a joint committee comprising business and the media to work out an acceptable set of rules that are equitable to both sides. This is critical for the interests of readers and investors who always seem get a short shrift in all debates about governance, disclosures and accountability. -- Sucheta Dalal