August 20, 2005
Another Example of Bad Corporate Governance: The Wall Street Journal
I, along with most other members of the business community in the United States, find time to read the Wall Street Journal every day -- the nation's number one newspaper. It is as accurate as a newspaper can be about developments in the financial community. But I have noticed some curious weaknesses. The Wall Street Journal is usually late to a corporate management scandal story (reporting only after others have made the claims) and its editorial page is strangely tolerant of management misfeasance (until fraud -- malfeasance-- is the only possible verdict and then it jumps on in severe condemnation, joining others). Now we learn, from the New York Times, whose business section does far better investigative reporting than does the Journal, that the corporate governance practices of the Wall Street Journal are -- under all modern accounts -- very, very poor. I understand that the editorial page is independent of the business affairs of the paper but --It would seem hard for the editorial staff to hammer the management structure of Google (for supervoting stock that gives founders absolute control) when the Journal itself has such a system. It would have to press for proper corporate governance when the Journal itself does not have it.
Ownership of the Journal is divorced from managment power (using supervoting shares and trusts), managers are self-perpetuating and stifle any dissent (dissenters are shunned as disloyal), and managers run the paper for personal goals rather than company profits (pride in the press stuff). This is as bad as management gets short of fraud and the financial results show it -- lackluster profits, a refusal to innovate, a refuse to entertain offers, and a refusal to capitalize on a valuable trade-mark. I am reminded of a famous 10th Circuit case in 1972 in which the Court allowed the owners of the Denver Post to refuse a very generous offer by New York buyers, in order to protect a locally owned editorial page, on the grounds that the paper, a poorly run, politically biased, parochial rag at the time, was "quasi-public."
August 20, 2005 | Permalink
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