Who's Running the Company? - International Center for Journalists

CHAPTER 1
What’s Good good governance, Governance and why Why should Should journalists Journalists care? Care?
The problem with governance stories
is that they are convoluted and complicated.
If they weren’t so convoluted,
shareholders would do something….”
— Alexander Dyck, professor of finance and business
economics at the University of Toronto
‘‘Journalists and other critics later asked whether Satyam’s
Making the complicated understandable
“The problem with governance stories is that they are
convoluted and complicated. If they weren’t so convoluted,
shareholders would do something…. There’s an
incentive for the parties engaged in the company to hide
and confuse what’s going on,” according to Alexander
Dyck, professor of finance and business economics at
the University of Toronto, who has researched the impact
of news stories on companies.
That’s why it’s vitally important for business reporters
writing about complicated accounting maneuvers to avoid
jargon and present facts in a user-friendly way. Explaining
and defining terms, avoiding insider terminology and writing
clearly help attract readers and viewers to stories they
might otherwise skip as too dense.
Get out in front of the story
Stories about greed and corruption have dominated
business coverage in the last decade. But in many cases,
journalists have been forced into follow-up mode once a
company has already imploded.
That was the case with the Satyam story, where the discovery
of massive accounting fraud led to the company’s
collapse, which was not covered until after the fact.
PricewaterhouseCoopers, the external auditor, approved
Satyam’s inflated balance sheet figures for several years.
auditors were sufficiently independent and expert, and
questioned why auditors did not notice the red flags,
which included millions in missing cash.
Just a year before it was awash in scandal, Satyam won a
Golden Peacock Award for excellence in corporate governance
from the World Council for Corporate Governance.
The Council later rescinded the award and complained
that the company had failed to disclose material facts.
But Business Week reporter Beverly Behan wrote that the
Satyam board was clearly flouting good governance practices.
Journalists could have learned by examining the
composition of the board that it lacked financial expertise,
was only barely independent and failed to meet independently
of management — all counter to good governance
practices.
As the Satyam case demonstrated, impressive business
awards and glossy annual reports are no guarantee that
companies are operating legally and ethically.
One of the most sensational business corruption cases
continues to unfold in Croatia, as of this writing. Managers
and board members of the respected food company
Podravka have been embroiled for three years, since
2009, in charges that certain members colluded to use
company money to illegally attempt to take over the
company by buying its shares and investing in another
company.
REPORTER’S NOTEBOOK
“If you know how to read financial statements, it goes a long way to helping any reporter or anybody else not to
have to rely on official publications from the people running these companies or the regulators who protect them.”
— Jonathan Weil, former Wall Street Journal reporter who wrote first Enron story, now Bloomberg news columnist.
Source: Audit Interview, Ryan Chittum, Columbia Journalism Review
14
WHO’S RUNNING THE COMPANY?