Acknowledgements

University of Leeds

Institute of Communication Studies: MA Dissertation

The Business/Financial Journalism:

The Role and The Ways to Be Independent from The News Sources

Shigeru Endo

(MA in International Journalism)

September, 2006

CONTENTS

Acknowledgements 4

Abstract 5

Chapter 1 INTRODUCTION 6

Chapter 2 LITERATURE REVIEW 12

The Nature of Corporations 12

2-1-1 The Pursuit of Profit 12

2-1-2 Perception Management and PR 13

2-1-3 The Presence of Corporations Is Bigger 17

2-2 The Role of Business/Financial Journalism 18

2-2-1 Journalism and Democracy 19

2-2-2 Business/Financial Journalism 20

2-2-3 Problems of Business/Financial Journalism 21

2-2-4 The Way to Be Independent 24

Propaganda Model 25

2-3-1 Ownership 26

2-3-2 Advertising 26

2-3-3 Limited News Sources 27

2-3-4 Flak 28

2-3-5 Anti-Communism 29

2-3-6 The Model Is Still Applicable 29

2-3-7 Criticism 30

Chapter 3 BACKGROUNDS 32

The Frauds 32

3-1-1 Enron 32

3-1-2 WorldCom and Livedoor 35

3-1-3 The Sarbanes – Oxley Act 36

The Cases of Insider Trading in News Organisation 37

3-2-1 The Mirror 37

3-2-2 Nikkei 39

3-2-3 Codes of Conduct 40

Chapter 4 METHODOLOGY 42

Interviews 43

Questionnaires 44

Limitations and Difficulties 45

Chapter 5 FINDINGS 46

5-1 Role of Business/Financial Journalism 46

The Problems in Reality 53

5-2-1 Narrow Angles 53

5-2-2 Lack of Knowledge 55

5-2-3 Editors and Journalists Relationships 55

5-2-4 Concerns on Regulations 57

5-2-5 Routine 58

5-2-6 Unfairness 59

5-3 The Reason Why Business/Financial Journalism Failed to Detect The Frauds such as Enron and WorldCom 60

Power of PR 62

Business Aspects of News Organisation 63

The Way to Avoid The Manipulation from The Sources 65

5-6-1 Education 65

5-6-2 Multiple Souces 67

5-6-3 Transparency in Reports 69

5-6-4 Strong Attitude to Complaints 71

5-6-5 Codes of Practice 72

Chapter 6 CONCLUSION 76

BIBLIOGRAPHY 79

LIST OF THE INTERVIEWEES 84

Appendix 85

Code of Practice, Press Complaints Commission (PCC) 85

2. The Financial Times Department: Code of Practice 86

The Interview with William Dawkins 88

ACKNOWLEDGEMENTS

This dissertation is a compilation of my life as a journalist in Japan and a postgraduate student in the United Kingdom. From building the structure of this paper to interviews and research, the whole process was very stimulating experience. Now I finally reached to finish this research, and I would like to express my gratitude to this opportunity to study and research in the United Kingdom.

I would like to express my thanks to the journalists who accepted my offer even though they are extremely busy. I am grateful to William Dawkins, Dan Bogler, Nigel Scott, Joanna Blythman, Mitsutoshi Kouta, Naoko Miyashita, Masahide Inatome, and Kazuyuki Sasaki for providing the stories of their precious experiences in business/financial journalism. I really need to thank Michael Rowles at the University of Leeds, the supervisor of this research, who introduced me many informative websites, books, and people to whom I should contact, and always kept encouraging me at the very last moment. I really appreciate the support. In addition, I would like to thank Katrin Voltmer and Robin Brown who were my module leaders at the University of Leeds, and inspired me very much in the areas of communication and journalism studies. The discussion became the basis of this research.

In addition, I would like to thank to the British Council for the support my life in the United Kingdom. Because of its support, I could concentrate on my study and obtain the opportunities to meet many interesting people.

I would like to show my biggest gratitude to my friends who I met at University of Leeds all over the world. Through the discussion, I changed many points of views. Finally, I am really grateful to my parents and my brother for their support and trust.

ABSTRACT

In recent years, the activity of corporations spreads globally and their influential power increase very much. The powerful in politics is generally examined by election in democracy, but what about corporations? In this context, the role of journalism is significant to detect their wrong doings for the public. However, to what extent, is journalism successful to detect them and warn people in reality? If it is difficult, what are the reasons? How do the actual journalists tackle to pursue their role? This paper focuses on “business/financial journalism” which is considered to specialise in economic matters, and examines its role, problems and the way for journalists to tackle them. This dissertation tries to answer these questions by using the Herman and Chomsky’s propaganda model, as well as through interviews with actual journalists working for business/financial news organisations in London, Leeds and Tokyo. It concludes that it is actually hard for journalists to detect frauds, but they pursue their role through education, self-regulation, and being transparent in the articles.

Chapter 1

INTRODUCTION

Journalism is expected to report the truth and to play a watchdog for the powerful. The powerful is now not only governments but also corporations. This is the time of globalisation and people are influenced by corporations through employment, their products and services, and the like. Besides, as the scandal of Enron shows, they sometimes commit the fraud which causes a huge loss among investors. Business/financial journalism always report about corporations, but to what extent is it successful to detect the truth? If it is difficult, why and what is the obstacle?

The aim of this paper is to examine the role of business/financial journalism in democratic society. What is the role and how business/financial journalists communicate with their news sources? Business/financial journalism usually deals with companies’ profitability, their strategies to expand their business, their new products and services, the movements of their stock prices and the like. Like other journalism which covers political issues or social problems, business/financial journalism has an influential power in society. Some citizens may choose the products based on the information through the media’s reports, and some may invest a company’s stock because of the newspaper’s articles on its profitability.

This research topic stems from my career as a business/financial journalist at the Nihon Keizai Shimbun, Inc. (Nikkei). For thirteen years, I have worked for this Japanese economic daily newspaper and I now cover about forty public companies in Japan. The news gathering process consists of calls from sources, mainly the public relations team of companies. Furthermore, leaked information such as business strategy plans, business restructuring, and financial situation provide news lead. The routine consists of having the interview with my sources, and write about a company’s stories. On the day of reporting the story, the company’s stock goes up and down sharply, making me wonder whether my stories have been triggering a company’s stock be bought or sold. The question is whether or not he has been manipulated by his news sources that have the intention to make their stock price move.

The hypothesis of this paper is that some of the business/financial journalists feel their role cynically, and realise it for just professional investors, bankers and other limited people. In addition, the others may feel their sources’ intention to manipulate the contents of reporting, and lose their way to understand their role in society. Almost all journalists may have their own self-regulation to tackle with the manipulation or other pressures.

It is possible to say that a company is the one of the most influential factors in society just like a politician. It affects the individual life through its products and services, so it is a powerful actor in society. A politician, another powerful actor in society, is examined by citizens through election, but how is a corporation checked and analysed by them? The business/financial journalism can play the role of watchdog to company’s wrong doings, and to provide citizens the information to judge the company.

Most major companies have a public relations (PR) department that communicates with journalists through press releases, briefings, and special events. Some companies use independent PR agencies as well. The PR people approach business/financial journalists to let them report the stories favourably and sometimes blocks from journalists’ investigation about the companies’ scandals or other negative reports. When the journalists are passive to obtain companies’ information and the PR people’s attempt to manipulate works well, the reports on companies will be just like “free advertisement”. PR can work as ‘manipulator’ for journalists. In that case, it is impossible to call the reports as journalism.　In other words, the reports will have a risk to create the companies’ good and positive images in public, even though the reality will be different.

The rise of PR makes it difficult for journalists to act independently. When journalists try to confirm a news lead about the company, the questions will be diverted to the PR section in the company. To obtain some information, journalists need to have their own network not relying on the PR only.

To compare with political journalism, business/financial issues have some jargons. For example, the financial market system and the related laws take time for journalists to understand these issues. This complexity will make journalists rely on the sources’ knowledge, and the reports will be possibly manipulated or at least shaped by the sources.

In addition, the Internet era allows many companies the creation of their own websites. It is possible for them to provide the information directly to the citizens in ways that suit them. The information on the websites is mainly what the companies want to appeal, and can be overloaded. To sort them out, the public relies on business/financial journalism to provide objective information.

To compare with political journalism, business/financial journalism is not frequently discussed in the academic arena. One of the reasons may be the accessibility for the scholars to the people concerned. The process of news production is not open but private, and the people in journalism and companies’ PR team hesitate to talk about it. It is actually difficult to initiate communication between journalists and PR people or news sources on business/financial issues directly.

In this paper, the first section is literature review. At the beginning the characteristics of the corporations are discussed. Corporations sometimes do not care the governmental rules for pursuing their own profit. The role of public relations is also argued. Next, the role of journalism is discussed. It includes the characteristics of business/financial journalism. In addition, Herman and Chomsky’s propaganda model is examined. This model can be referred to analyse in the findings.

As back ground information, the actual business incidents are argued such as Enron and the insider dealing incidents in The Mirror and Nikkei. In addition, the Press Complaints Commission’s Code of Practice is discussed as an example of self-regulation.

This research conducts the interviews with the actual business/financial journalists and corporate public relations people. The section of Findings is based on these interviews.

Chapter 2

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