The Wall Street Journal has been leading the way in uncovering yet another corporate scandal: stock-option cheating in which corporate CEOs have apparently been rigging the dates of options grants to give themselves what amounts to free money. Imagine that you could enter a lottery the day after the winning numbers were announced, and you have the general idea of what these people have been doing.
It’s nothing less than stealing from shareholders to the tune of millions of dollars. The guilty among these folks should be doing time, not riding their corporate jets.
While other media have begun to get serious about this story (see these Google News search results), the Journal has done by far the most outstanding work on this story since its first scoop, with the knife-edged title of “The Perfect Payday,” appeared on Page One back in March. Not a week goes by without more revelations of yet more probable (or confirmed) boardroom thievery.
(Here is a round-up page, and a clever scorecard on the public part of the site; unfortunately, the best stuff, like most of the news organization’s content, is trapped behind a subscription pay-wall, so many of you will have to take my word for it when I offer such praise.)
Fine as the coverage has been, this story is too big even for the Journal. There are thousands of publicly held corporations in America, and only a few reporters, however excellent, assiduously turning over the rocks.
True, some stock analysts are now racing to determine whether the people running companies they follow have engaged this financial trickery. But again, there aren’t enough analysts, either, to discover just how deep this rot goes into corporate America.
Now, it’s not entirely simple to figure out whether there’s been funny business with stock grants. I don’t know, moreover, whether the Journal has a well-developed system for compiling and analyzing vast numbers of cases simultaneously. All I can say from reading the stories is that the Journal is apparently using methodology mostly of its own creation, vouched for by some (unnamed?) academic experts, to figure out whether a given company’s managers have been pulling a fast one.
So here’s what I’d like to see the Journal do now: Embark on a national effort in which the paper “deputizes” the shareholders and other interested readers to help with the research.
This is made to order as a computer-assisted project with a major online component. How? The Journal could create an online tool into which any self-appointed citizen journalist could:
- Look up the relevant data for a given company, using the Securities & Exchange Commission’s database of corporate filings and other public data sources;
- Plug the correct numbers, along with the URLs of the SEC filings from which the data came, into a calculator that determines, based on the researchers’ methodology, whether the odds suggest that the executives in question are either the luckiest people on the planet or, more likely, engaged in chicanery;
- And, finally, upload the results to 1) a Journal database, which should be made public so that others looking at the same companies will either not bother or, better yet, doublecheck the results; 2) the SEC; 3) federal prosecutors in relevant jurisdictions; and 4) regulators in the state where the company was based (especially including New York, which has the toughest state laws against corporate wrongdoing).
This Web-based toolset should include some serious teaching materials, such as an easy-to-understand explanation of how to find the data, likely to be buried deep in a corporate report or even a footnote. (This alone — helping investors and potential investors better understand the arcania of corporate filings — might be worth the effort all by itself, given its educational value.)
In relatively short order, I predict, the Journal and the cops on the financial beat would be well on their way to determining whether this is a scandal of limited scope or, as some fear, an all-too-common rigging of the system by the insiders against their purported bosses, the shareholders.
I’d want the public database to show all companies, not just ones where the options dates are suspicious. I’m a shareholder in several public companies, and would like very much to know that the people running them are honorable, at least in this regard. I’d like even more to learn that we’ve already learned about the worst of this scandal, that it doesn’t go as deep as we might suspect.
I suspect the Journal, which has a terrific collection of online resources already devoted to this story, will balk at the idea of putting the data online before the paper’s own journalists have vetted the data that comes in. In today’s litigious world, that would be understandable.
But if so, I hope some other entity — perhaps a foundation or even another publication — will step up and do create this public database. It might be a good Wiki project, with some controls to prevent gaming by people who want to make unfair accusations or delete fair ones.
Whatever the hurdles or flaws in what I’m suggesting — please point them out — we need something like this. I’ll do what I can to help if someone wants to put it together. (If the Journal doesn’t want to consider it, maybe the New York Times — which is so far behind on this story as to be almost invisible — would be interested in using this method as a way of catching up and even going ahead.)
Some kinds of big projects lend themselves to what I’ve called “distributed journalism” by citizens. This is one, and it would work well as a a collaboration among the professionals and the members of the former audience who care enough to join in a valuable effort.
Newspapers and other traditional media organizations need to involve their audiences in the journalism. But the professionals can’t assume that everyone else knows the techniques and principles that become second nature to those of us in the business.
In the future of journalism where we work together in a more diverse and robust ecosystem, the professionals need to be teachers, too. Here’s one of those moments when we could help each other, and do some genuine good.