By: Joe Strupp
When AES Corp. of Virginia bought the Indianapolis Power and Light Co. last year, The Indianapolis Star gave the purchase routine local business coverage. But that routine is changing. After the Enron Corp. scandal broke last fall, Star editors stepped up reporting on AES, with closer scrutiny of the company’s falling stock price, efforts by city officials to intervene in the growing troubles, and tips for readers about avoiding pitfalls of energy company investment.
“Enron raised awareness that if it can happen to them, it can happen to anyone,” said Mark Land, the Star‘s assistant managing editor for business.
This may be a watershed moment for business reporting. The Star is just one of many newspapers nationwide that have altered or expanded business coverage in the wake of the Enron bankruptcy (and subsequent finger-pointing of blame). Realigning beats and increasing training of business writers, editors said the Enron debacle has shown the need for papers to keep a closer eye on local companies and approach business reporting with greater scrutiny from now on.
“It is a good time for us to be skeptical,” said Mark Braykovich, business editor at The Atlanta Journal-Constitution, which last month assigned a reporter to review financial statements from major Georgia companies, such as Coca-Cola and The Home Depot — on a full-time basis. The AJC also used the Enron fallout as a spur to review the status of Mirant Corp., a local energy trader that reportedly used some Enronlike accounting tactics in the past year. One story described Mirant’s actions as a type of “Enron-envy.”
Business coverage by most major media outlets came under fire after Enron filed for bankruptcy last fall, as it followed years of glowing reports on the company in newspapers, business magazines, and online financial sites. In one case, Fortune compared Enron to a young Elvis livening up a boring country-club dance.
While many business editors argue that finding Enron’s faults was made difficult because the company took great measures to hide negative information (even from the government), they admit the company’s fall has sparked them to make significant efforts to improve coverage — and encourage company whistle-blowers to speak to them.
“We have the periscope up a little bit more,” said Bill Choyke, business editor at The Tennessean in Nashville, which is sending more business reporters to financial seminars and seeking an accounting firm to review financial documents of local companies. Business writers at The Plain Dealer in Cleveland, meanwhile, will soon be attending quarterly seminars in business coverage taught by instructors from nearby colleges and the Cleveland Society of Security Analysts. “It will be mandatory,” Plain Dealer Business Editor Debbie Van Tassel told E&P.
At the Pittsburgh Post-Gazette, business writers are adding deeper reviews of specific companies to their chores, and a new beat focusing in part on the accounting industry has been created. The Milwaukee Journal Sentinel also is covering local accounting firms, while the paper works with a consultant to review the earnings of 10 locally based companies, including the Harley-Davidson Motor Co. and Kohl’s department stores. Kohl’s has raised eyebrows with a heavy emphasis on expansion, prompting stories focused on those developments — the kind that might not have been written prior to Enron’s fall, said Gary D. Miller, Journal Sentinel senior business editor. “We are also hammering away at getting more sources inside companies,” Miller told E&P.
And Don Smith, business editor at the Seattle Post-Intelligencer, affirmed, “We need to go beyond the public-relations people.” Other business journalists have advocated less reliance on sources with vested interests, going as far as saying that business reporters should not quote analysts at all.
Even papers that have not made major changes since Enron’s collapse admit the company’s troubles have caused them to beef up scrutiny of corporations and show more skepticism about wildly rising stock prices — and analysts’ rosy predictions. “It makes you call a lot of things into question,” said Jeff Taylor, senior business editor at the Chicago Tribune, which has boosted coverage of the locally based Andersen (Enron’s former accounting firm), “especially the pressures to produce ever-growing stock earnings.”