Posts about transparency

To ombud or not to ombud

Peter Preston in London’s Observer is comparing and contrasting ombudsmanly techniques as the Guardian prepares to shift to a new holder of its position and as the New York Times debates whether it should still have one:

So there, perhaps, is one basic difference between the New York Times and the Guardian. [Outgoing Guardian Readers’ Editor Ian] Mayes, appointed by the Scott Trust (which owns the Guardian) and thus proof against sacking by notionally nettled editors, is an insider who basically aims to explain, mediate and correct rather than censure. He’s slow to anger and punctilious in his judgments. [New York Times Public Editors Daniel] Okrent and [Barney] Calame, by contrast, are outsiders: they know about journalism, but not the inner sanctums of the Times. After the humiliation of Jayson Blair’s lies, they were new brooms supposed to sweep clean.

NY Times Executive Editor Bill Keller has been arguing — or perhaps floating trial balloon pins — that with the new openness at the paper, there is less need for an ombudsman. I say he’s right and he’s wrong. When The Times appointed Okrent, I remember saying that this could be a crutch and that every editor should be a public editor, every journalist an ombudsman. But Okrent proved to be effective not just as a representative of the readers and not just as a critic of the paper but also as a critic of journalism. So though I think that Calame has been weak broth by comparison, I now believe that The Times should continue to have an ombudsman when his term expires. The role could, indeed, change. But I think that The Times of all papers should have someone keeping an independent eye on it — and on journalism. If The Times wants to maintain its status as the leading light of American journalism, how can it do less? And, yes, that means that others in the paper — including Keller himself — should also see themselves in the role of explaining their process; transparency should be part of their job descriptions and even part of their bonuses, for transparency is now the essential building block of trust. And The Times still needs to rebuild its trust — and I don’t just mean after Jayson Blair; I mean that every journalist must build and rebuild trust every day with every story.

And there are limits to transparency and openness as last week’s episode at the Telegraph demonstrates, when a correspondent got nicked for revealing too much about his (flawed) process and for being (too) direct with a reader. The problem in organizational journalism is that the organization abhors transparency; it wants control. And so I have come to believe that it is also necessary to have someone whose role is openness. And then let the insiders compete with their openness, with the knowledge that there is always someone who can ask the uncomfortable question and give the uncomfortable answer (which, after all, is what we expect of everyone we cover).

Is it better if that person is an insider tasked with explaining or an outsider assigned to probe? I tend to think that all the insiders need to do the explaining and that the outsider is there to act as countervailing pressure on them. But as Preston points out, times, like The Times, have changed:

What’s in the New York wind now may be a far softer, insider system. Would that be disaster on the trust-in-journalism front? Perhaps. Yet there’s also a pinch of necessary change in the mix. When Mayes began his Guardian stint a decade ago, many of today’s bloggers hadn’t bought their first PC. If they didn’t like what the paper printed, they could write a letter to the editor and maybe (one chance in 10) see it printed. But now the Guardian, like its competitors, maintains an open, and very public blogging zone, where readers can put the boot in at will. More than 80 more have piled online this week, most still unconvinced about the need to hang Saddam on a front page.

There’s a feisty scorn here for what’s seen as the old routines of journalism: sacred communicators on stage, groundlings sitting in a pit. Why wait a week for an ombudsman to adjudicate when you can burn the theatre yourself?

Why, in sum, believe that the business of holding newspapers or broadcasters to account hasn’t altered hugely in the last few years, and isn’t altering still? . . .

Guardian column: Making mistakes

Here’s my Guardian column this week — about making mistakes and corrections online — in full:

The internet speeds up the dissemination of not only information but also misinformation. So what are we to do about this? Regulate? Legislate? Complain? Ignore? Or respond?

Consider the experience of Tim Toulmin, director of the Press Complaints Commission, when the BBC responded tartly. On my site and on the MediaGuardian podcast, I called Toulmin – with apologies, dear readers – a “Brit twit” for thinking that one could regulate this vast conversation, which is what blogs really are.

Only problem is, Toulmin didn’t say that. He told me by email that if he had, he might have understood my moniker for him. But instead, he complained to the BBC and to me, making reference to damage and lawyers. Both of us clarified what we wrote. And Toulmin told his tale in last week’s MediaGuardian.

The internet can be better at corrections than old media. A fix can be attached to an error where it occurs, and many online denizens pride themselves on confessing missteps faster than their print and broadcast counterparts. But the internet can also be worse – online, errors can spread wider faster and take on a longer half-life. I wish we had a technical solution – that everyone who linked to an incorrect article could receive an alert and correction.

The internet brings a fundamental change to the relationship of publisher and subject: now the subject can publish, too. So Susan Crawford, a professor at New York’s Cardozo Law School and a member of Icann, the board that oversees internet structure, has blogged that in this era, “libel law seems much less relevant – rather than sue, you can just write back”. A commenter on my blog responded that some bloggers boast larger audiences than others, so this playing field isn’t as level as it seems: “On occasion, a weak target can become a cause célèbre.” True. But I still argue that libel law was built for an era when few owned the press and the doctrine must be updated to account for the democratised and accelerated means of response today.

Should blogs subscribe to a code of conduct? I don’t think so (and neither does Toulmin). Again, blogs are mostly just people in conversation and I don’t wave a code when I talk to my neighbours and friends; I know that my integrity rests on my credibility. On the other hand, when I argue that bloggers who commit acts of journalism should enjoy the rights and privileges of professional journalists, how can I say that they should not suffer the same regulation? Well, for me, that’s easy, because as an American first amendment absolutist, I bristle at any attempt to regulate speech.

And I do fear that in their efforts to protect truth, legislatures, courts and self-appointed industry watchdogs could chill speech in new ways. If the people fear retribution without the legal resources that the owners of presses have, they will either shut up or hide behind the anonymity the internet allows. That would be a tragedy.

We need to recognise that the internet alters how media operate. Blogs – whether written by professionals or amateurs – tend to publish first and edit later, which can work because the audience will edit you. In this medium, stories are never done; rather than turning into fish-wrap, they can grow and become more factual and gather new perspectives, thanks to the power of the link and, yes, the correction.

We all make mistakes. We’re human. And the internet makes our humanity more apparent than polished print and broadcast do. So we need to modify our expectations of media, tune our scepticism, update our laws, restrain our regulation and enhance our technology. We are left, though, with the same ethic of the error we have always had: it’s wrong to make them and right to correct them, and you get a bonus for apology. So, Mr Toulmin, I’m sorry.

What makes Sammy report?

Another in a series of clueless columns from NY Times Public Editor Byron Calame: He wonders what motivates reporters to report and so he asks some Times scribes and accepts what they say to him — anonymously, as if this would be a topic of the slightest controversy — as the truth. He starts by rejecting out of hand the notion that reporters could carry any bias or agenda. What a silly thought.

Some readers are convinced that certain reporters at The New York Times are motivated solely by partisan politics. A New Jersey reader’s March e-mail, for example, described one reporter as a “GOP operative/hack-writer” who “uncritically sounds his party’s theme today in a piece about the 2008 campaign.” But a Florida reader contended in a September e-mail that the anti-Bush political bias of the same Times staffer and a colleague “is in their DNA.”

My reviews of these two stories turned up no bias. More important, however, my stint as The Times’s public editor and my 39 years at a competitor lead me to conclude generally that reporters and editors in the newsrooms of major newspapers are not motivated by a devotion to any political party or cause. It just isn’t in their DNA.

Well, that’s that. Glad Calame has erased that. He then goes on to enumerate seven motives:

1. Being first with new facts or fresh insights. He separates factual scoops from the “intellectual scoops” that Times Executive Editor Bill Keller praises in memos. So he makes the scoop even haughtier than it is: not just ‘I know this before you do’ but now ‘I understand this before you do.’ Says Calame: “As one editor told me in an interview, ‘When you can look at all the dots everyone can look at, and be the first to connect them in a meaningful and convincing way, that’s something.’ ” That’s a whole new level of journalistic hubris, I’d say.

2. Pursuing stories that can have impact. In other words: Stories that have an agenda from reporters that have an agenda. That is partisanship of the sort that Calame rejects. I don’t. I just want it made transparent.

3. Winning prizes. I say that reporters and especially editors are all too motivated by prizes, to the sacrifice of simple service to their communities.

4. Impressing sources. Calame acknowledges: ” ‘This, of course, can become dangerous, if it leads reporters to write for their sources rather than for the broader public,’ one editor said to me, but ‘that sometimes happens.’ ” Yes, it’s just the sort of clubby, inside-the-Beltway and inside-City-Hall and inside-the-PR-firm reporting that makes reporters closer to their sources than their public.

5. Figuring out what’s really happening. See above.

6. Telling stories in a compelling way. Says Calame: “Many reporters find themselves motivated to search for the right words. One spoke of finding ‘an unseemly delight’ in simply producing what he felt was ‘a good phrase.’ ” This is the sort of show-off writing that makes us read through five paragraphs, past the jump, to figure out what the hell the reporter is really writing about. It is about ego over service.

7. Getting on the front page. Calame: “While it’s no longer a dominant motivation, the hope of turning up a really big story that will make it to the front page never seems that far from the minds of many reporters.” Bullshit. There is no greater ego gratification — aside from prizes — than the Page 1 scoop, as meaningless as that is becoming.

Mind you, I am not saying that reporters are motivated soley by politics or ego, though both clearly play a role. Reporters report to change the world and have an impact. What’s missing is their clear transparency about that.

Disclose unto us

Micah Sifry is pissed about today’s NY Times op-ed feature on bloggers paid by campaigns. I’m not. I think the more disclosure we have, the better. As I said at the Museum of Television & Radio panel I moderated, on which Micah served, and as I said in this post after the Kos convention, I do think we need to discuss the lines between journalism — that is, the imparting of reliable information, which bloggers do — and advocacy — that is, taking on a cause — and paid consultancy, which more and more bloggers are doing. We, of all people, must be very transparent about our roles and relationships, especially as we demand such transparency of media and politicians. It’s not just about appearances. It’s also about loyalties: Bloggers, I said at the MT&R event, are taking on roles of leadership and those who choose to follow deserve to know whether the bloggers to whom they link are more loyal to a cause or to a candidate and whether their loyalty stems from payment. So the Times charting these paid relationships is doing to us as we would do unto others. Golden Rule, I’d say.

: In the comments, Gray says I should repeat my disclosure that I consult for a Times Company division, About.com. Right, you are.

And nothing but

Edelman PR is throwing water on its own PR fire following the fakey Wal-Mart blog. Richard Edelman outlines a series of steps they’re taking. I’d say it’s really quite simple and can be boiled down to this: Tell the truth, the whole truth, and nothing but the truth. Lie, hide, fake, fool, or buy people and you lose. And I’m not being smart-assed. It really is that simple. And the more complicated you make the rules, the more loopholes you end up building in. It’s just like Mom used to say: Tell the truth and everything will be fine.

Corrupting blogs

The insidious effort to buy bloggers’ voice and credibility in the name of buzz just won’t stop. So I want to make my own blogger’s pledge to you:

1. No one can buy my editorial voice or opinion.
2. No one can buy my editorial space; if it’s an ad it will clearly be an ad.
3. No one should be confused about the source of anything on my pages.
4. I will disclose my business relationships whenever it is relevant and possible.

This is what I learned working in the newspapers and magazines. A wise editor at Time Inc. boiled down all the church-v-state company and industry rules and policies into those first three tenets above; the fourth, I added. This is how we assure our independence from advertisers and financial interests. This is how we earn our credibility.

It is fine for a blogger or newspaper or vlogger or TV show to take advertising, clearly labeled. It is wonderful for a blogger to get paid to write, editorially. But when you write what a commercial interest tells you and pays you to write, then you are no longer speaking as yourself but in the service of that marketer. That’s fine, too, but it isn’t content. It is advertising (or advertorial, same difference). See Rules 2 and 3.

This all seems simple and obvious to me. But it’s not obvious to others, who think they can buy bloggers’ opinions and with it that buzz. They don’t understand that buzz, too, is earned. And they don’t understand that once a blogger — or journalist or publication or friend, for that matter — is bought and paid for, the credibility and value of their voice is reduced or ruined.

Credibility is the cake you can’t have and eat, too.

The problem with this is that it doesn’t affect just one blogger. Bloggers’ detractors love to measure us by our lowest common denominator: if one snarks, all snark; if one sells out, all sell out. This is why Jason Calicanis calls it a cancer.

Calacanis has been tilting at this windmill, calling out PayPerPost very effectively. He is optimistic that they have seen the error of their ways but I’m not so sure. PayPerPost brags about this blogger earning $1,000. And so I read her blog and have no idea whether to trust that her opinions are her own or those of her paymaster: Does she really like these flip-flops, this security system, Disney, or FTD flowers, or Bath & Bodyworks? I have no way of knowing because she doesn’t say who’s paying her. Not that I’m in the market for a motorcycle, but I wouldn’t trust her opinion if I were.

And then there is the shameful lapse of Edelman, who said they were blog-savvy and transparent but turned out to be paying for a trip by a blogger and a Washington Post photographer, ferchrissakes, across America and extolling Wal-Mart’s big heart. Richard Edelman finally apologized. But now they make me wonder what else they’re quietly engineering. I find it cold comfort that the signed the Word of Mouth Marketing Association’s ethics policy; I find it discomfiting that there is such an association. That’s word of our mouths they’re talking about.

And I have recently received at least two request from advertisers, via sales agents, to have me and other bloggers write things about their products. Each one came with a think layer of lipstick on the pig — for example, the writing may appear on another site. But they’re still trying to pay me to write about their product. I passed up $5,000 for the latest offer, which is a good deal more than what I’ve been getting lately for other ads you see here. But turning it down was easy. See Rule No. 1.

Now understand well that I end up doing business with marketers, directly and indirectly via ads and employers. Edelman paid me to come speak at a corporate meeting and that has been on my disclosures page. I got six months’ use of a Sprint phone; they didn’t ask me to write about it but I told you about the campaign and then gave the phone away. I’ve just advised an advertiser and its agency on buying ads on blogs and I made it clear to them that I will disclose that when they come out with it. I ended up accidentally giving another advertiser free advice — and passed up revenue again — when I told them they should not try to market by spamming Wikipedia; since I didn’t end up doing business with them, I’ll spare them embarrassment of saying who they were. None of these people will buy my opinions. See Rule No. 1. And I will be transparent about my dealings with them. See Rule No. 4.

But this isn’t about ethics pledges and industry policies. It’s about personal integrity, about honesty, about having a direct and open relationship of trust and credibility. You may disagree with my opinions — and, oh, you do — but you should at least be assured that they are mine.

: LATER: Via a link to this post, I just saw a data base allowing bloggers to get things free for review. I don’t object to that. Journalists get free books, screenings, food, and at least use of devices for review. And bloggers can’t afford to do what Consumer Reports does and buy everything it tests. The opportunity for corruption still exists: ‘If I give bad reviews, I won’t get the stuff anymore.’ But if you give nothing but good reviews as a result, your credibility and value with, again, suffer. So I believe in revealing the source review material.

: Meanwhile note that CBS just paid $2 million to settle accusations of pay-per-play.

The transparent Guardian

We’re starting, just starting, to talk a good game about transparency in some quarters of American journalism — and, I’m afraid, still arguing over whether it is a good idea in others. But at the Shorenstein Center’s 20th anniversary fest this weekend, Alan Rusbridger, editor-in-chief of the Guardian, put us to shame, I’d say, with a talk about his paper’s open discussion of its corporate values, accountability, and transparency — in short, “what it means to run a newspaper along the sort of ethical lines we tell everybody else to run their corporations.”

Each year for the last three, the Guardian has issued a “social, ethical, and environmental audit” of itself, publishing it online and in print and hiring an independent auditor to check them on it. It is an impressive document that sets context by explaining the mission of the Scott Trust that owns the paper and by reviewing the changes in the business in the last year, trying to open the door on debates within the institution (see the discussion of objectivity in this post, below). The report reveals the results of reader surveys criticizing and praising the paper’s performance. It goes into considerable detail about the company’s relationship with its employees, rating itself on many measures. And, being a liberal institution, it pays homage to environmental concerns like recycling and power use.

Transparency in the UK means something different from transparency here. The papers here are, of course, mostly once-size-fits-all monoplies that are hung up on “the notions of impartiality and balance,” while the papers there engage, Rusbridger said, in “highly polemical argument… There is something about the British dustup that does grind out the truth.” The papers there start by wearing their hearts on their sleeves. Rusbridger showed a slide with many self-ascribed adjectives and assets of the paper: Liberal. Progressive. Trusted. Edgy. Serious. Independent. International. English-language but not American. Context. Analysis. Diversity. Well-resourced. Open. Un/self-regulated. That, already, is an ocean away from how we look at newspapers. Here, we start with and end with “objective” and haven’t’t much cared whether anyone believed that. In the UK, they start with “liberal” or “conservative” and then discuss the quality of the journalism, not the hidden agendas. Clearly, I prefer the UK model. But transparency must mean more than simple, shallow labels, of course.

Rusbridger explained the unique situation he works under: a newspaper supported by a trust, which is, in turn, supported by other profitable businesses (an auto magazine that clears 100 million a year plus radio and regional papers), and a mission to inform from a position of independence. “There is no proprietor and no conventional corporate structure telling us what to think,” he said, and I could hear the wheels whirring in the heads of the journalists in the room: No vice-presidents, no stockholders, no Wall Street. But Rusbridger was quick to add: “I will try to convince you that there are some things in this which are as much about self-interest as the desire to behave well.” That is, transparency is about serving our public well.

He quoted C.P. Scott, legendary and longtime editor of the Guardian, who wrote on the paper’s centennial in 1921 (see the post below): “A newspaper is of necessity something of a monopoly, and its first duty is to shun the temptations of monopoly.”

Rusbridger said that when he walked into the editor’s office 11 years ago, he was “rather shocked about the power I was about to acquire.” It sobered him. “Newspaper people are talking more about rights and less about transparency and responsibility. But the explosion of the web has changed all that, allowed readers to challenge us… or to bypass us altogether…. It boils down to the word we have been using a lot this weekend: trust. We should think rather more about trust than we used to.” He showed the latest of many surveys that showed how little newspaper people are trusted (39 percent believe the British broadsheets, 9 percent the tabloids, but 48 percent local MPs).

So in 2002, Rusbridger made its code of conduct for journalists public and hired a readers’ editor he could not fire. “In no other walk of life would the person who makes the mistakes be the court of appeal,” he said. That readers’ editor gets 18,000 complaints a year; 300 emails a week. Rusbridger said he feels confident that “very few errors escape detection because we have millions of fact-checkers.” And he showed one such error: a decision to “bleach” out a red severed limb in a picture of a train bombing, which was “the wrong decision if you’re going to have a code that says you’re not going to do that.”

He told about the morning conference, which anyone from the paper may attend — as many as 70 have — and everyone knows they are free to criticize the paper. That meeting is blogged (note also that NPR’s Morning Edition meeting is now blogged as well). I blogged the Guardian’s meeting once.

Since the last paper audit, the Guardian also started Comment is Free: “You are putting your commenters in the space where they can be rubbished… It’s quite a bumpy ride, we have to admit. But it is all part of the media experimentation demanded by the web…. We’ve opened the doors, we’ve widened the liberal debate to hundreds of people who previously would have had no access to a mass audience.” This is partly about good journalism, Rusbridger said, and partly about not acting like a monopoly and not watching readers desert you because they are not heard. To date, CiF has played host to 6,000 blog posts and 240,000 response.

The paper performs a survey of its staff and find good and bad news there (I would love to see the same survey taken in American news organizations, for comparison): 91 percent are proud to work for the Guardian, 79 percent enjoy work, but a substantial number believe the selection process for internal jobs is unfair. And, of course, it surveys readers.

“Why do newspapers find this stuff so hard to do?” Rusbridger asked. He acknowledged that newspapers feel beseiged and do not want to “give them, the baying mob, more meat to attack us… But I think that’s simply not going to work in the future, whatever our business model. The benefits of opening up in these kinds of ways outweighs the pain.”

He ended quoting David Broder from a book in which he said that newspapers are not exercises in perfection but in imperfection, “a complete reversal of the story we always tell about ourselves.” If we make our imperfections clear to people, he said, they will trust us more, not less.

Amen.

Transparency is about being human.

: One interesting part of the audit addresses the Guardian’s effort to find its proper voice:

We were aware that the increasingly competitive nature of the media sector had, over time, led to a drift away from traditional standards of reporting across the industry as papers sought to grab the attention of potential readers. We were not exempt from the charge of sometimes stepping across the line in terms of exaggerating stories to make them appear as strong and interesting as possible.

To counter this, we looked at the US model of journalism, which has an institutional separation between news and comment and seeks to be completely “objective” in its news coverage.

But a number of journalists felt the Guardian would suffer if it followed the American way. One said: “I find the big American metropolitan papers excruciatingly boring… We have to tread carefully not to lose the exuberance that makes our papers fun.” A former US correspondent added: “I would hate it if the Guardian became so passive and ponderous.”

The result of this debate was to find a Third Way. In a presentation to his senior editors, Rusbridger introduced his vision for the paper’s journalism saying that it was not realistic to be completely objective, but that we should strive to be fair: “There are such things as verifiable objective facts; they are the building blocks of any story. Beyond that, there are numerous complications of the sort they teach in the better sort of journalism school. We accept that, from the moment reporters write an intro, they
are introducing an element of subjectivity into an article… We want good writing — including writing brimming with passion and humour and immediacy. We don’t want over-statement, hyperbole and lazy acceptance of prevailing ideas and journalistic lines.

: Disclosures: I write a new-media column for Guardian, occasionally consult, and admire the paper and its leaders.

: LATER: See also this week’s column by the Guardian’s readers’ editor on making errors.

: RELATED: Jack Shafer wonders why papers have such a problem correcting errors of judgment as well as fact.

In theory, objectivity is a terrific concept: By considering all the facts impartially and presenting them in a balanced and fair manner, you find the truth. But journalistic objectivity fractures when its practitioners get many important details right–as the Times reporters have in their Duke dispatches–but still manage to botch the essence of the story. As long as they satisfy themselves that they’ve been objective and accurate in the presentation of facts, newspapers have no elegant mechanism for saying, “Whoops!” and correcting course. Instead, newspapers tend to reinforce their mistakes in judgment or ignore them until the noise from critics forces them to confess to a kind of journalistic malpractice. This is how the Times finally extricated itself from its flawed Wen Ho Lee and WMD coverage.

Dumb money

The Online News Association just announced that Mark Cuban will be their keynoter this year. Yow. Now on the one hand, Cuban could be perfect, for he has been pushing back at reporters and making his interviews with them open, even over their wailing and whining. But on the other hand, Cuban is most decidedly imperfect, for his latest venture, Sharesleuth.com, raises no end of troubling ethical and journalistic, if not legal, questions about his media activities.

Mark Cuban has made his career and his fortune on dumb money. He sold his first company to CompuServe, a failure acquired by AOL, another failure. He sold his next company, Broadcast.com, to Yahoo, which promptly did nothing but kill it even as broadcasting came onto the internet, yet Cuban walked away with something in the billions, allowing him to have fun, buying a sports team and starring in a TV show, which was also a failure. He invested in another well-known company sold to AOL; return to Square One. Yet people still invite him to share his wisdom. That’s because he loves to be provocative and he’s good at that.

But now Cuban is making smaller killings from the dumb money of smaller players who’ve invested in bad companies. Now one could say that’s just the way the stock market works: smart wins, dumb loses. But Cuban has given himself an advantage: He started an apparently journalistic enterprise in Sharesleuth to find the bad companies . . . so he could short them first.

What’s wrong with that? That’s what a prospective student at CUNY asked and so I went to read the controversy at Sharesleuth and the defensiveness at Cuban’s blog and here’s what I come away with:

* Cuban says he is being transparent: He says he warned us that he would trade on the information Chris Carey, his editor at Sharesleuth, digs up. Except that he’s not transparent at all — not until after a story about a stock is released. He has a period of utter opaqueness when he knows a company is crap and you don’t — nya, nya, nya — and so he gets to trade on his information and take money not from the offending company but from the poor shlub on the other end of Cuban’s trade.

* Cuban tries to say that he is underwriting this journalism to do what journalism is supposed to do: help the poor shlub. Except he already took the shlub to the cleaners. Doesn’t wash.

* Cuban also has to be aware that his celebrity will have an impact here. He argues that he’s just sharing what he knows about a company after he took advantage of the information he paid to gather about it. Generous, eh? Except he has to know that a site he, Mark Cuban, underwrites and promotes — he was, after all, a TV star… for a few minutes — will have an influence on the market for that stock. Is that company insider information? No, it’s Cuban information. But he can move a stock and he acts on that knowledge before the rest of the market can.

* It becomes a bit of self-fulfilling prophecy, doesn’t it? Cuban and company find a company they think is suspect. Cuban and company investigate and find smelly fish. Cuban shorts the stock. Then his guy reports what’s what to the world. The market gets a whiff. Then the stock falls. Then Cuban profits. You have to trust Cuban and company not to use their power to manipulate. After what he does to little investors, do you trust him?

You see, it’s not just about transparency — and I like to toot the transparency horn at every opportunity. It’s about conflict of interest. Whom are you serving, Cuban? If you say you are committing acts of journalism, exposing bad companies and outdoing the business journalists you despise, then you are saying you’re serving the public and the public should be able to trust you to do that. But no, the public in this case is the aforementioned poor — now poorer — shlub. So you’re not doing journalism, you’re serving yourself. Well, that could be OK: You hire your private analyst to find turkeys to short and you short them. But then you use your public prominence to reveal what you now know and that all but assures that the stock will fall, making your short a good investment. I’d call that a virtuous circle except . . .

Is everything unfair in love, war, and Wall Street? Yes, but some things are less fair than others. And it’s hard to sit up on a journalistic high horse — to ridicule the rest of journalism — even as you take behind-the-scenes advantage of your knowledge and the impact of your prominence. This, of course, is exactly why news organizations have policies requiring either not owning a stock or revealing ownership in companies you cover or not trading on them when you write about them: so you can judge whether to trust them and so they cannot take advantage of moving the market for a stock. If a professional reporter did what Cuban did, he would be fired … and Cuban would probably write a blog post attacking him.

There has been much discussion of this online. See this excellent editorial in the Star-Telegram:

It’s too bad that Cuban couldn’t let his investment in Sharesleuth stand on its own. He had to use it as a tool in a side deal to make himself a few more bucks to add to the gigazillion that he already has.

In the process, he cast doubt on Sharesleuth’s efforts.

See Gary Weiss writing on his blog:

It’s a shame that an ethical rich guy– one with the public spirit Cuban lacks — hasn’t stepped into the breach and set up a genuine financial investigative reporting outlet to examine crummy stocks. But as a public service, not as a source of pocket money.

Of course, there is yet another alternative, which is that mainstream media outlets crank up their coverage of stock fraud.

Securities Litigation Watch, a blog, says — and others quoted here agree — that Cuban’s actions are not illegal but that Cuban…

…has found the previously unexploited Achilles’ Heel of the insider trading laws and fired an arrow deep into it. The result is that for the first time, a legal form of what most people would consider “insider trading” exists and can be replicated by anyone with (a) the resources to hire a skilled investigative journalist, (b) the ability to generate a readership on the Internet.

And see the comments on Sharesleuth itself: This poster tries to give analogies that explain why Cuban’s activity doesn’t seem right:

I see a huge contradiction in providing information on what you personally believe to be a scam (in escence, posting a “do not enter” sign) but then on the other hand potentially making a financial gain (shorting the company stock). Essentially, it seems, indirectly partaking in the named fraudulent operation and knowingly so. This is even magnified by the fact of Mr. Cuban shorting the shares PRIOR to the report that it appears he has direct input.

In the report D’Arnaud-Taylor and his wife are demonized for selling the company shares into the open market, and maybe rightly so. But how are the buyers of Mr. Cuban’s short sell any less a victim than the buyers of D’Arnaud-Taylor sells? If both are aware that the underlining business that the shares represent to be a perversion of truth are they not each participants? (though Mr. Cuban on lower level understandably so). Is not the instrument of the fraud the stock itself?

Another commenter identifying himself as a shareholder in the company that Sharesleuth pilloried — an aforementioned poor shlub — says:

On the outset, it appears that you have good intentions Mr. Mark Cuban. Your plan is to uncover the “dirt” on companies to save investors from losing out, correct?…So this might make you a “hero” to some people…and I might agree with that EXCEPT for the fact that you appear to be making a decent profit on all of this negative hype you are building up. In a sense, you are profiting off of the unsuspecting shareholders (like me), who have put their trust in the companies you are digging up “dirt” on.

The honorable thing to do would be to NOT trade on the companies that you write about, thus giving your readers a chance to exit…or if you do trade wait for 30 days after the article has been released.

If you happen to uncover true “dirt” about a company, and that company is truly an “evil” company, than the shareholders are victims, correct? So, in essence, what you are doing now is profiting off of victims before they have an opportunity to escape.

Another shareholder:

So this is suppose to “help” people avoid investing in poorly managed companies or just plain bad companies…unfortunately the average investor got the info too late. I was down over $1200 by the time I was “informed”. Mr. Cuban I appreciate your work, but a little heads up for the little guy would have been nice. I know $1200 may only be lunch for you, but it is a lot more than that for most people. I love the Mavs, I love you, but this hurts. That’s just $1200 less I have to spend on Mavs tickets this year.

You see, journalism is, in the end, about trust and credibility and this is what Cuban is doing to his. Mind you, Cuban is right to ridicule the trust and credibility of stock analysts and much financial journalism that just sucks up what those analysts and company flacks feed them. They, too, don’t protect the public. But just because they’re bad, does that mean you need to be? Two wrongs, etc.

Cuban is, of course, unrepentant. He goes off on a rant that, as near as I can tell, reasons that news organizations make profits so why shouldn’t he? He says:

Every media outlet has an agenda. Given that almost all are public entities, the primary agenda is Earnings Per Share. When was the last time you read the New York Times say they were going to proactively choose to lower their earnings this quarter and for the next several quarters so they can invest in doing a better job of reporting ? Or that they planned on expanding the number of pages dedicated to their journalistic endeavors at the expense of shareholder return ? Anyone ?

Well, actually, I’ve sat in public meetings with Times editors as they talk about the cost of maintaining a Baghdad bureau and that is not a financially motivated decision. I’ve watched papers add pages to cover big news — as an editor, I’ve done it myself — when those pages came with no advertising and thus only brought loss. I’ve sent reporters on trips to cover stories that would bring no revenue. Why do journalists do these things? To serve the public. Haughty but true.

And what this brings out is the equally haughty question: What is the nature and mission of journalism? Is it an effort to serve the public over oneself ; is that a key element in the definiton? That’s where the Cuban case would lead us, I think. Is journalism now about getting any information from any source with any agenda? Well, I’ve argued that we all do have agendas and the worst thing is for them to be hidden. Is journalism about trust and credibility? And can we trust and believe Cuban when he’s making money on the information he can afford to gather and disseminate?

I sure as hell hope there will be ample opportunity to discuss this and challenge Cuban at the Online News Association. Are they presenting him as some paragon of journalism? Some new kind of media mogul? Some opponent of journalism’s old ways? Or a circus act? I’m bringing popcorn.

If Cuban had just started a new journalistic endeavor to show the way and shame the business press into reporting and investigating — not to mention to create jobs for reporters — he might have been welcomed with open arms. I’ll bet that there are plenty of ripped-off shareholders out there who’d have gladly contributed to make this a success. And advertisers would want to talk to an audience of smart investors. But by turning this into a personal and shady profit center, by trying to play the bad boy in this arena as he does in the basketball arena, he harmed his endeavor, his reputation, and even the nascent movement in independent journalism. Just so he could make a few bucks. Now that’s what I call dumb money.

: LATER: Mark Cuban responds on his blog. He digs up every snarky thing I’ve said about him and that’s fine. My view of Cuban is encapsulated in what I said at the start of this post. He doesn’t really respond to the ethical question about reporting on the company from a position that can move the market for it while having an interest in that market. I would very much like to see him explore that more. He lists the stocks he has shorted and their status so we can judge whether he has had an influence. I do think that Sharesleuth is bigger — and, in so many ways, better — than a blog comment and so its influence will surely be different. Cuban says that trust is built with getting the facts right. Amen, brother, amen. It is also built, in this age of transparency, with both revealing and avoiding, when possible and when necessary, conflicts of interest. You see, I’m a big fan of Sharesleuth and Cuban starting it in every aspect except that conflict, which does undermine trust.

See the comments on his post and this one; lots of good discussion. And I’ll repeat that I hope there is this sort of discussion at ONA. There are a few vital debates here. One is about reporting on companies and protecting the public and how we find better ways to do that than relying on newspaper business writers who are good at nothing so much as retyping press releases and quoting analysts who are good at nothing so much as spitting up company lines. The other is about journalism and what expectations and standards the trusted will operate under, whether that journalism is performed by a big, old, professional institution or by a renegade upstart company or by individuals or networks of all of the above. I’m not sure what the answers are in either case but I think we need to explore them through these debates.

: LATER STILL: Mark Glaser writes a very good summary of the good, the bad, and the ugly of Cuban and Sharesleuth. See also Gary Weiss’ next post.