When it functions effectively, this system depends on an ascending flow of information that works something like a food chain. At the lower reaches of this chain is the media. But after the recent revelations about Enron, WorldCom and other big-name companies, we are left asking how virtually the whole of the established press-never mind all the other wicket keepers of oversight that are theoretically watching over us-failed to notice that so many of America’s biggest corporations were financial houses of cards.
When the media fails to do its job, the remaining system of checks and balances is hobbled. Government officials are poorly informed. Stock analysts get few revealing hints of disarray. CEOs go unchallenged by a reality other than their own. Corporate boards lose a larger frame of reference. Regulators become partially blinded. Politicians remain unenlightened. And even presidents, who constitute the top tier of this food chain, are left informationally deprived.
Until a year or so ago, society as a whole-the media included-was so enthralled with “the New Economy,” the long boom and the dynamism of the country’s new go-go entrepreneurs, venture capitalists, start-up kings, IPO underwriters and other sundry progenitors of next “new, new thing” that few wanted to appear to be the skunk at the garden party by naysaying or raising doubts.
Almost anyone associated with big companies had stock options, investments and fat paychecks. Investors were harvesting unprecedented returns. Media outlets and their dot-com cousins were growing like weeds and hiring with abandon. Even universities and nonprofits were flush from boom-time philanthropy. In short, we were all on the escalator.
Media outlets were also engaging in an orgy of mergers, acquisitions and conglomeratizations, ineluctably becoming part of the very corporate structure that they are supposed to cover as watchdogs. One consequence: “shareholder value” all too easily trumped investment in the kind of in-depth, investigative reporting that might have revealed the boom’s feet of clay.
Publicly traded newspaper chains were looking for 20 to 25 percent returns on investment in order to woo investors, while broadcast media outlets aimed for upward of 40 percent returns. But except at some of the most conscientious media outlets, there was no similar ardor to beef up reportage, especially coverage that might seem abrasive, negative or out of step with the optimism of the time. Who wanted to wreck the big party at home? If investors were so anxious to worship at the temple of Ken Lay, Steve Case, Jack Welch, Henry Schacht and Bernie Ebbers, who wanted to rain on their parade? I vividly recall attending the 2000 World Economic Forum in Davos. It felt like a revival meeting for the pantheon of this new brand of triumphal American entrepreneurialism with nary a discouraging word.
So, how did we in the media-and almost everyone else, for that matter-miss Enron and the other big business stories now coming to light? After all, there is a long and august tradition of good investigative journalism in America.
For insight, I turned to Lowell Bergman, a seasoned and respected practitioner of this craft who worked for many years as a producer at “60 Minutes” (before its now well-known debacle with his tobacco story) and who now reports for the PBS documentary series “Frontline” and the New York Times while teaching at Berkeley’s Graduate School of Journalism (where I am dean). Since he happened to have done a prescient PBS documentary last summer on Enron and the California energy crisis in which he interviewed Ken Lay before the fall, he was a logical person to query as to why the fourth estate failed to uncover the corporate recklessness that is only now becoming apparent.
“After our victory in the cold war, we went into the middle of a celebration of pure capitalism,” he told me. “All the historical lessons of the business cycles and booms and busts were forgotten. Many CEOs began to think that the economy could only go up. They thought you could make money by losing money. They got drunk on the euphoria and threw out all the safeguards. When you pointed out that their numbers were not backed up by reality, their answers didn’t make any sense. No one was listening, because everyone was making money.”
Of course, “everyone” included the media. Television and radio, where most people get their news were, according to Bergman, “simply not putting enough resources into investigative and international reporting … GE’s Jack Welch only went on “60 Minutes” when he published a book that he wanted to flog,” says Bergman. “And did anyone press him on whether his numbers were cooked or his stock inflated? Before the antitrust suit against Microsoft, did anyone at NBC ever take a real look at Bill Gates? I can’t remember any billionaire who was criticized on ‘60 Minutes.’ Robert Maxwell, Donald Trump, Leona Helmsley, Jack Welch-they all got positive stories.”
One of the problems was that media companies became so wrapped up in cross-ownership that they became part of the speculative go-go boom that they were supposed to cover. Disney owns ABC. Viacom owns CBS. GE owns NBC. And Time Warner and AOL merged. “It’s rare that a media outlet looks at its owner,” says Bergman.
When print reporters covered owners and CEOs, it was often to extol them as heroes of the “New Economy.” Examinations of company fundamentals came to be viewed almost as retro, as almost a fuddy-duddy exercise by people who were too old-fashioned to be able to grasp the dynamics of this new, intoxicating world. “Business sections started looking like sports pages,” says Bergman. “Reporters spent a lot of time covering PR news releases instead of looking behind the curtain.”
Like sports reporters, business reporters need access if they are going to cover CEOs thoroughly. And in this era of corporate spin, access is all-too-easily denied any journalist who has an air of investigative independence about him. Why should a CEO take a chance with a really hard-nosed reporter? Just before the Enron bubble started to burst, Bergman talked to Enron’s Lay and Vice President Dick Cheney for his documentary on the California energy crisis. “The view of the media then was, ‘Well, maybe there is a conspiracy to jack up energy prices, but Enron is the most innovative, exciting and successful company in the business’,” he remembers. “Lay didn’t make sense on how [Enron] was making money, but they were posting big numbers. Most people were just not in a critical mood.”
So, finally, this notion of a “critical mood” is everything. If the media becomes so much a part of commerce that it loses its ability to stand apart and critically cover the market place, as we now belatedly learn, everyone suffers. Every structure needs an alarm system. And the media must play a crucial part in the circuitry of such a system.
