From AJR,   December 1994

Dealing With a Conflict of Interest   

Editorial writers must be aware of their paper's corporate holdings.

By John Morton
John Morton (mortoninc@msn.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.     

Let me acknowledge at the outset that I have an ongoing financial relationship with companies that own 69 newspapers. Further, I have periodic financial arrangements with other companies that own 82 newspapers.

Finally, over the last 15 years or so I have worked with companies that own an additional 326 newspapers. Moreover, some of the companies mentioned above own interests in radio and television stations, television networks, cable systems, newsprint plants, cellular telephone companies, electronic information transfer systems, entertainment programming, syndicated cartoons, book publishers, magazines, media operations in foreign countries, and numerous other enterprises too various to mention or even to remember.

Welcome to modern corporate America. All this springs to mind because of a contretemps in which the Washington Post (with which I have had no financial ties) found itself involved recently because of an editorial it published favoring quick passage of the GATT world trade agreement.

Now, to understand what this column is about--conflicts of interest--you must explore some of the arcane maneuverings that ultimately ended with the Washington Post being accused of, well, a conflict of interest.

A number of companies, including one largely owned by the Post's parent company, had sought Federal Communications Commission "pioneer" licenses to develop wireless telephone systems. These systems would directly compete with existing cellular telephone operators.

In 1992, the FCC granted three companies pioneer licenses without charge in return for spending many millions on research and development for the new wireless systems. There was fierce competition for the licenses, one of which was won by the Washington Post Co. subsidiary.

After the three licensed companies invested heavily in research and development, Congress decided that all future pioneer licenses must be bought at an FCC auction. Bell Atlantic and Pacific Telesis--which were denied licenses in the initial bidding--and others contended that the three original licensees should be required to pay as well. The FCC agreed, decreeing it would charge the first three companies fees that could total more than $1 billion.

The three license-holders cried foul and Donald Graham, chief executive of the Washington Post Co., said that had the company known the licenses would cost so much it would not have sought one. The complaints reached sympathetic ears in the White House and in Congress, and a compromise was struck under which the original three license-holders would pay 85 percent of the average price of licenses in future auctions and no less than $400 million. To achieve this, Congress attached legislation to the GATT bill, since it seemed headed for early approval.

The Washington Post's editorial writers, apparently unaware of these developments, continued to editorialize for passage of the GATT measure. After learning of the legislative compromise, Pacific Telesis bought full page advertisements in the Washington newspapers in early October accusing the three winners of slipping in "a billion-dollar loophole" and the Washington Post of neglecting to note its special interest in its editorials.

Thus were opponents of two disparate issues--the pioneer license companies and the GATT bill--handed ammunition that successfully delayed everything. Ross Perot, Pat Buchanan and other purveyors of extravagant criticism railed about backdoor deals and giveaways. Said Perot, "This makes Whitewater look small."

The Washington Post, of course, should have mentioned the tacked-on compromise in its GATT editorials and it did apologize for its omission in a subsequent editorial. But the episode illustrates how complicated it has become for newspapers to avoid the appearance of interest conflicts as their corporate owners invest in increasingly diverse and far-flung operations.

Every newspaper newsroom probably should post an updated list of corporate holdings, because there are so many possibilities for conflict in legislation, court decisions, administrative rulings, policy statements and the like. As ownership complexity grows, one can envision editorials and even some news stories awkwardly potholed with conflict confessions.

Is all this really necessary? I suspect publishers in most other countries think our sensitivity about interest conflicts is overwrought, that a newspaper's reputation for standing up for what it believes in should be sufficient unto itself.

But yes, it is necessary. Our sensitivity about such things is one of the reasons our newspapers do a better job, in my opinion, than newspapers elsewhere in informing the citizenry about the complexities of public life.