Bennett Coleman, a very big media house, is onto difficult ethical terrain with a concept of `private treaties'. Here, they get invested in some companies, and then these companies get favourable media treatment. Their media outlets trumpet these stocks, hopefully a good IPO takes place, and Bennett Coleman makes a good return on their portfolio. The expectation of free advertising and glowing editorial treatment probably leads to their purchases of these stocks getting done at bargain basement prices.
- A good story by Archna Shukla in Mint,
- A great editorial in Business Standard,
- A feature in The Hoot.
- Salil Tripathi at the SAJA Forum.
Sucheta Dalal says:
MoneyLIFE has in its possession a document to prove that journalists are being designated as champions for PT clients to tailor editorial coverage to enhance the value of these companies and TOIs investment. An e-mail by The Economic Times editor, Rahul Joshi (dated 29 November 2007), says, At ET, we are carving out a separate team to look into the needs of Private Treaty clients. Every large centre will have a senior editorial person to interface with Treaty clients. In turn, the senior edit person will be responsible, along with the existing team, for edit delivery. This team will have regional champions along with one or two reporters for help - but more importantly, they will liaise with REs (Resident Editors) and help in integrating the content into the different sections of the paper. In this way, we will be able to incorporate PT into the editorial mainstream, rather than it looking like a series of press releases appearing in vanilla form in the paper. He then goes on to name the PT champions for each region, who will advise the regional editorial chief to carry stories about PT clients. He also designates trouble shooters in each region, probably to ensure that no PT client is offended with negative coverage.
It reflects poor ethical standards on the part of Bennett Coleman to do such a thing. First, a question of fact: Do good papers in the world, such as New York Times, have private equity portfolios where editorial coverage and advertising are bartered in return for shares? Compare and contrast against the soul-searching that the New York Times has institutionalised on far more subtle kinds of conflicts of interest. I am curious about the role that law can play here. If the New York Times embarked on such a thing, would it be outright illegal? If it was not outright illegal, what else might go wrong for New York Times if they did such a thing?
The only saving grace lies in the fact that Bennett Coleman has put up their hall of shame, of firms who are willing to cooperate with such a scheme, on the web. Some names in there make no sense - e.g. I can't see how they can get a fabulous return on an investment in ISB. But many are recognisable targets of laudatory coverage.
I have often felt that in order to become a well functioning market economy, there has to be a culture of high ethical standards, a sense that certain things are just not done. While ethical standards require legal foundations, there is something about ethics which goes well beyond law. A go-getting atmosphere, where all kinds of behaviour is welcome, is a highway to becoming a banana republic. You may like to see something that I wrote in 1997, about how an atmosphere of low ethical standards induces entry barriers and hampers competition.
While there are signs of progress on the economy as a whole, in recent years, the scale of corruption in India associated with real estate and natural resources appears to be straight out of your worst stereotypes of a banana republic. CEOs have an incentive to do bad things: e.g. the stock market likes electricity generation projects which have locked down coal supplies, which favours entrepreneurs with a gift for manipulating the government. Ministers are rumoured to have become like Bennett Coleman, asking for shares in return for unethical actions. With natural resources and land, we are experiencing the well known pathologies of the `resource curse'. The only saving grace for us is that by now, the real estate and natural resource related sectors are a small part of the economy.
I'm not one of the proponents of the view that blogging fundamentally changes mainstream media. But in this one respect, I can see that it helps. The rise of the Internet in general and blogs in particular has helped to reduce the mindshare of Bennett Coleman. Blogs have helped make such murky practices more visible.