This week on Street Talking in NEXT, I highlight the importance of financial journalism in forming public opinion about the market and the need for its practitioners to live up to their responsibility.
The delivery of company results to investors on the Nigerian Stock Exchange shares a lot in common with processes on an assembly line. The chain begins with the faceless managers who feed inputs to management information systems and the nameless accountants who diligently key in unsexy numbers into sleep-inducing spreadsheets. Then it passes on to the perennially harassed laborers in the financial control department. These termites then push it on to auditors for quality checks before it is certified for transfer to the final inspection room of the stock exchange. If the bourse gives its nod, the product is put in bright shiny packs by those responsible for investor communications at the company and sent as press releases to media houses. These media houses, think of them as wholesalers, then tear open the packet and dice its palatable contents into consumable chunks to be served in the morning paper.
True to form, the next day, headlines in the business section duly announce that ‘Company A Beats Expectations.’ With this, the manufacturing loop is closed to be repeated during the next reporting period. And this is exactly the problem. The near-verbatim transfer of financial PR copy sent to newspapers often gets regurgitated for readers with only a modicum of analysis.
In his widely cited paper, ‘What is Financial Journalism For? Ethics and Responsibility in a Time of Crisis and Change,’ Professor Damian Tambini has given an excellent treatment of the potential of captive financial journalism to reinforce ‘capital market dysfunctionality.’ This condition gives investors, especially those at the retail end, a false sense of security and magnifies their distrust of the markets when the carefully crafted spin edifice comes crashing down.
The scale of permissiveness and passive acquiescence by financial journalists who are either too lazy, too ignorant or too compromised to move away from the Kool-Aid fountain to ask hard questions is imperiling the foundation of faith that readers place in the press and by extension, the efficiency of markets. Participants at a seminar organized by City University, London on the role of the media in the financial crisis were unanimous in their verdict that financial journalists must ‘quit cheerleading to become industry watchdogs.’
Returning to the factory floor illustration, I would say that the financial journalist is the weakest link in that chain. She is not there to serve the companies she reports on but her readers.
Speaking at the Covering the Crisis conference organized by the European Journalism Centre in December 2009, Dean Starkman, editor of The Audit at Columbia Journalism Review damned the sellout: ‘Journalists have become embedded in elite structures, in the culture of Wall Street.’
While equity analysts author more in-depth reports, their very quality of technical prose intimidates the man-in-the-street. In fact, one may argue that the financial journalist wields more influence than many very talented equity analysts. After all, for how many individual investors do the names of star analysts like Kato Mukuru of Renaissance Capital, Muyiwa Oni of Stanbic IBTC, Saeed Bashir of Meristem, Abimbola Smith of Chapel Hill Denham and Kemi Owonubi of Vetiva ring a bell? Besides, if a couple of influential analysts get it wrong, that is not so bad as when a few influential financial journalists lose the plot. Like the big money center banks, these journalists are systemically important and ‘too big to fail.’
We are now fully aware of the impact that a failed financial system can have on our lives. This has raised the responsibility of financial journalists to keep the public informed on salient issues about the markets and wider economy. In a real sense, they are the guardians of the new financial republic.
Therefore, the announcement in June by Diamond Bank, the upper-midsize bank, that it has created an award for Excellence in Financial Reporting is to be welcomed. According to the bank, the annual prize ‘would go a long way towards motivating these exceptional individuals to continuously aspire to give their utmost best in pursuance of excellence in their chosen profession; and by extension help improve the standard of journalism in Nigeria.’ By bringing the output of these reporters into the arena of contest, Diamond Bank is sending a strong message on what objective financial reporting should aspire to be.
My only comment is that the prize’s limit to pecuniary rewards does not offer enough. Sponsors of awards of this nature, like the Marjorie Deane Financial Journalism Foundation, always include a training or study component at a leading global paper or academy to help these reporters raise the quality of their production and cascade the knowledge transfer within their organizations.
Current fears of a double dip recession have pushed financial reporting to the forefront again. Readers are counting on these reporters to be more than copper conductors for releases drafted by companies and sent to them by the wire services. If they missed the crisis and its effects the first time, they better not miss it the second time around. As Richard Rescigno, managing editor, Barron’s, the finance magazine, has noted, this crisis is ‘too important to entrust to the bankers. So we need financial journalists.’
The original article can be read here on the NEXT website.
The paper below published in March 2009 by Weihua Huang, an assistant professor at the University of Maastricht, is pertinent to the debate on the perverse role that bad eggs in the financial journalism profession can play in reinforcing the dysfunctionality of markets.
In the video below, Juliane Reppert von Bismarck discusses the role of the financial media in the crisis at the Covering the Crisis Conference convened by the European Journalism Centre, Brussels, Belgium in December 2009.
Transcript of Jon Stewart’s infamous March 12, 2009 interview with Jim Cramer, host of CNBC’s Mad Money.
One cannot help noticing how Niyi Meka Olowola, Oando's Head of Corp Comms, is nodding in approval. Maybe Goldman Sachs can learn lessons.04:47:49 PM January 25, 2012from HootSuite
It's at times like these companies praise heaven for media-savvy CEOs.Among Nigerian business leaders,Wale Tinubu, is easily among the best.04:46:01 PM January 25, 2012from HootSuite
Twitter: CustomsStreet
