Ethics Still Rest on Shoulders of Individual Journalist

By Mary Flannery
January 29, 2004 06:21 PM

There's no shortage of reasons for business writers and editors to be barred from owning individual stocks.

First, such a policy addresses head-on the ethical problem of reporters separating their own financial interest from professional responsibility. It eliminates conflict of interest.

Secondly, it sends a reassuring message to the public that we are policing ourselves.

And a message of this kind is needed. Even one incident of apparent ethical sponginess resonates with readers who are already suspicious that the information they receive is either cooked or at least warmed-over.

This wariness was fueled by the recent disclosure that Thom Calandra resigned as CBS Marketwatch chief commentator after he was identified by the company as the target of a U.S. Securities and Exchange Commission informal inquiry. His newsletter, The Calandra Report, was ended. Marketwatch said the SEC asked Calandra for records of his personal stock trades, copies of his newsletter and copies of email alerts sent to his subscribers.

Thirdly, such a policy works to keep reporters and commentators honest. It removes one source of temptation. It simplifies our lives.

So on many levels, it makes sense. But is it really necessary? And more importantly, will it deter those who want to dodge the policy?

Unless the policy also bans spouses, significant others and adult children from individual stock ownership, it seems more for show than for substance. Of course, such a policy does insulate the employer from liability. But the reader may have a false sense of the journalist's ethical purity if that policy is all they have as a yardstick.

Practicing business journalism is a daily ethical challenge. Every day we must put serving the reader first by asking the right questions, weighing the information and writing accurately based on our experience. It's not only a matter of trust. It's also a matter of money. What we tell readers can make or lose them money.

For instance, we all are well aware of the pitfalls of reporting on a thinly traded public company. Not only is it hard to get accurate information on the company's prospects, every published word is posted immediately on Internet chat rooms. A one-paragraph note on an incremental event -- the filing of a Food and Drug Administration application -- can generate EXCLAMATION POINTS of joy. And a novice investor may be fooled. That is why we think twice about what we print, why we may at times downplay rather than overplay.

Institutional rules also help filter pressure from investors to cover small companies. The Philadelphia Inquirer , for example, has a revenue threshold that determines for which companies we report earnings: A company must have at least $50 million in quarterly revenue for the Business News section to carry an earnings chart.

It requires a vigilant editor to sniff out a stray whiff of personal outrage in a reporter's news article. For instance, tech or telecom reporters cannot introduce their own personal frustration in their copy about the cable monopoly that services their neighborhoods.

There are hard lessons to be learned when a columnist or reporter agrees to participate on a panel or on a radio talk show. Even if the reporter is repeating information that he or she has reported in print, appearing on a panel or talk show can lend that further credibility. So we learn to ask: Who's sponsoring the program? What's the agenda? Is it really an infomercial for a financial services company?

Of course, it's important to watch what information you put on a budget of stories for tomorrow's paper. Even if the news is expected, the naming of a new chief executive can move the market. Anyone with access to the budget -- usually anyone in the newsroom -- can learn this piece of information 18 to 24 hours in advance. The bottom line: Keep news off the budget.

The Inquirer , like many media organizations, is in the process of reviewing its ethics guidelines. Some have chosen to ban employees from trading individual stocks. Reuters reporters must notify editors when they report on a company in which they or family members hold a stake. The journalists cannot trade in the company's shares within one month before or after they conduct their reporting.

The Philadelphia Inquirer's ethics policy states that:

"Staff members with investments or stock holdings in corporations should not make news decisions that involve those corporations, and they should also be aware that an investment in a similar or competing company or field could constitute a conflict.

"Although this guideline should not be considered a barrier against staff members' owning stock, investments in mutual funds might frequently be the better course.

"If staff members are assigned to, or find themselves covering, a story in an area where they have investments, they should immediately tell their department head and suggest that they disqualify themselves."

The policy puts the burden on the individual to recognize and report a conflict of interest. It doesn't try to dictate ethical behavior. Instead, it relies on trust. In the end, that's what connects us to our readers.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism