Coda: The Legacy of a Business Editor, The New Era of Junk Journalism, and the Lament of Investors

The Legacy of James W. Michaels
The most talented business editor of our time was the late James W. Michaels, chief editor of Forbes, who some may remember from his appearances on Forbes on Fox. I spent the 1990s as publisher of Forbes, where he taught me the editorial ropes. Jim was a true believer, who never—and I mean never—blinked.

The Michaels’ Chart was his idea of a journalist’s business model. He would take a legal pad sheet and divide it into four parts. In each quadrant he would write: “who’s dumb, who’s smart, who got hurt, who got helped.” To Jim, those were the ingredients of a good story. It was simple and it worked. Skip the missionary stuff, the populist rhetoric, and the scene setting. For Jim Michaels, business stories, like their subjects, were an irrefutably Darwinian affair, in which only the strongest survived.

The New Era of Junk Journalism: Paid Content is So 90s. Boards Should Take Note.

Advertising is now king. First The New York Times and now Rupert Murdoch’s Wall Street Journal announced they are going free with their online offering, while at the same time raising the cost on the newsstand. This change portends a tectonic shift in the way media works. To begin with, after more than a decade of poor shareholder performance, newspaper budgets for research and fact checking have been slashed, or these critical functions have been so devalued they are handed over to interns or done by the reporters themselves. The results are palpable: business reporting is now more personalized and less factual, slanted and less incisive, and more influenced by third parties with axes to grind. But there’s good news. Even the chattering classes are more likely now to get their business and news fix online than they are to spend time with the Gray Lady each day. It’s just so 21st century.

The Investor Lament: What We Have Here is a Failure to Communicate.

Not only do we respect investors like Ralph Whitworth, we also want them to serve on boards. Why? Because, for the most part, the conscientious activist investors make us think about issues long in advance of their adoption or legislation. But I am getting ahead of my story. The debate between Lucian and Marty (see “Bebchuk vs. Lipton”) is not a mere academic exercise, it goes to the heart of what shareholders and board members should be asking each other: who owes what to whom?

Lately, there has been a rash of investors trying to speak more directly to board members on such matters as shareholder advisory votes, Say on Pay, majority voting, proxy access, et al. What we find is that in most cases, the board’s reluctance to engage in direct communications comes from several factors–which I am empathetic to, but believe we must learn to overcome: First, the board is not built for external dialogue, quite the opposite, everything we do is cloaked in confidentiality. Second, the plaintiffs’ bar would welcome more proactive board communication, as it would provide one more avenue for their litigation. Third, the board’s role is not to discharge opinions, it is to cast votes, which are binding. Finally, in many cases board members lack the skill to communicate effectively with investors and the media, and they fear they might put the company at risk through misstatement or plain error (Chuck Prince: “We’re still dancing.”)

Nonetheless, we believe that boards need to be more proactive in responding to shareholders and figure out a sensible means of doing so—starting with Jeff Kindler’s and Peggy Foran’s approach at Pfizer. So when an investor comes calling, boards should at least learn to speak softly, as we know the investor carries a big stick.