THE INFLUENCE OF THE NEWS MEDIA ON THE CORPORATE GOVERNANCE

THE INFLUENCE OF THE NEWS MEDIA ON THE CORPORATE

GOVERNANCE PRACTICES OF ANGLO-AMERICAN LISTED PLCS

Louise Gorman, Theo Lynn and Mark Mulgrew

Dublin City University Business School,

Dublin City University,

Glasnevin,

Dublin 9.

Tel: 01 7007573

Email: [email protected]

Third Biennial Conference of the European Consortium on Political Research Standing

Group on Regulatory Governance

University College Dublin, 17-19 June 2010

THE INFLUENCE OF THE NEWS MEDIA ON THE CORPORATE

GOVERNANCE PRACTICES OF IRISH AND UK LISTED PLCS

Working Paper

Louise Gorman1, Theo Lynn

2, Mark Mulgrew

3

June 2010

KEYWORDS: Corporate Governance, Media, Irish and UK Listed Public Limited Companies,

New Methods in Regulatory Research.

ABSTRACT

Corporate governance literature has largely converged upon internal monitoring and shareholder

activist strategies as methods of shareholder protection following the decline of the market for

corporate control. Commentators and activists alike have generally neglected the opportunity for

an independent party, which watches over the management of companies, to guard shareholders’

interests. Ireland and the UK are two countries where the value of media coverage of corporate

governance violations to a number of key company stakeholders has not been assessed. This

paper considers the various reactions to media coverage of corporate governance violations and

proposes that the news media influences the corporate governance practices of public limited

companies (plcs) listed on Stock Exchanges in Ireland and the UK. Using a range of sources,

media coverage of corporate governance violations may be analysed and measured and the

relationships between this activity and the actions of (i) company directors and management, (ii)

policymakers and (iii) investors examined through interviews and analysis of company

documents, government reports and stock market data.

Emerging evidence suggests that the Irish media influences (i) the boards of directors of

Irish listed plcs, in that reformatory measures are taken by the boards in the vast majority of

violating companies studied; (ii) the government authorities who are responsible for the

1Dublin City University Learning Innovation and Knowledge Research Centre,

2Dublin City University Learning Innovation and Knowledge Research Centre.

3 Dublin City University Business School.

legislative and regulatory infrastructure in which they operate, with statistical evidence of

increases in government attention to corporate governance issues following increased newspaper

coverage of theses issues and (iii) the investing decisions of investors in Irish listed plcs, with

statistical verification of a relationship between movements in share price and volumes of

newspaper articles relating to violations by listed companies providing avenues for more

exploratory research into how news from print, broadcast and online media influences corporate

governance in Anglo-American jurisdictions, particularly Ireland and the UK.

1. INTRODUCTION

As a fundamental consequence of the separation of ownership from control of the firm (Berle

and Means, 1932; Fama and Jensen, 1983), conflicts of interest which exist between shareholders

and management have given rise to agency costs (Jensen and Meckling, 1976), the reduction of

which has long dominated the research agenda in the field of corporate governance (Fama and

Jensen, 1983; Hermalin and Weisbach, 1991; Westphal and Zajac, 1998; Marino and Matsusaka,

2005; Anderson, Duru and Reeb, 2009). The information asymmetry which exists between the

company and its stakeholders, most notably shareholders, is one such cost (Jensen and Meckling

1976; Gordon and Pound, 1993; Bushman and Smith, 2001; Gompers, Ishii and Metrick, 2003;

Bushman, Chen, Engel and Smith, 2004) and a means of information alignment has led a distinct

line of inquiry in the academic literature for decades (Fama, 1980; Gordon and Pound, 1993; La

Porta, Lopez-de-Silanes, Schleifer and Vishny, 1998, 2000; Jensen, 2005). Despite this scholarly

interest and the range of legal and regulatory provisions implemented to protect shareholders and

curtail managerial opportunism (La Porta, Lopez-de- Silanes, Schleifer and Vishny, 2000;

Anand, 2005) losses incurred by misinformed shareholders continue to be documented in both

the corporate governance literature (Dedman, 2002; Healy and Palepu, 2003) and the news

media, indicating that an optimal solution to agency problems remains to devised. Studies

concerning the agency information problem have considered both flow of company information

in the market (Jensen, 1986; Healy and Palepu, 2001; Bailey, Li, Mao and Zhong, 2003; Ferreira

and Laux, 2007; Fang and Peress, 2009) and that released directly by the company to it’s

shareholders (Gordon and Pound, 1993; La Porta, Lopez-de-Silanes, Shleifer and Vishny, 2000;

Bushman and Smith, 2001; Bushman, et al, 2004; Bushman, Piotroski and Smith, 2004),

however recently documented cases of mismanaged shareholder interests indicate the persistence

of information asymmetries in the corporate environment (Enron, Hollinger International, Anglo

Irish Bank).

A myriad of studies have appraised the various means through which shareholders

receive information regarding managerial activities. Such studies have been concerned with the

information contained in company share price by proponents of the market for corporate control

(Manne, 1965; Jensen and Meckling, 1976; Gompers, et al, 2003), information transmitted

through the board of directors (Coffee, 1984; Baysinger and Butler, 1985; Hermalin and

Weisbach, 1998), institutional investment funds (Coffee, 1991; Gillan and Starks, 2003; Hartzell

and Starks, 2003) and information circulated at company meetings (Lipton and Lorsch, 1992;

Gordon and Pound, 1993; Gillian and Starks, 2000; Edkins and Bush, 2002) under the broad

theme of monitoring, information released by the company in annual reports in relation to issues

of financial disclosure and transparency (Lowenstein, 1996; La Porta, et al, 2000; Bushman and

Smith, 2001), and information provided through jurisdictional legislative and regulatory bodies

(La Porta, Lopez-de-Silanes, Shleifer and Vishny, 1998, 2000); few, however have specifically

focused on information made available by more peripheral parties in the corporate environment.

The news media is one such party which reaches throughout the general public, (Dyck,

Volchkova and Zingales, 2008) accessing a range of corporate stakeholders not least

shareholders (Davis, 2005; Tetlock, 2007; Dyck et al, 2008) and many of the parties involved in

the dissemination of company information through the aforementioned means, such as board

members (Joe, Louis and Robinson, 2009) and corporate policymakers (Dyck, Moss and

Zingales, 2005). In addition to this, the media exhibits a unique efficiency vis-à-vis timeliness

and ability to reduce information costs through its reach to dispersed shareholders. Bearing in

mind this eclectic audience of activist shareholders, directors, legislators and regulators the

media may be regarded as an information intermediary between a range of stakeholders in the

corporate environment and one might then argue that news media information may, in fact, have

a significant influence on the corporate governance practices of the companies on which it

reports

Companies which follow the Anglo-American model of corporate governance are either

legally required to comply with certain standards of corporate governance or follow a principles-

based approach. While the latter mandates disclosure of non-compliance with standards,

stakeholders may seek assurance about the quality of firms’ governance from information

circulated by third parties, such as the business media (Healy and Palepu, 2001). While the

influence of the news media on corporate governance has been considered in the US context,

which follows a mandatory system (the Sarbanes-Oxley Act, 2002), a similar study remains to be

performed in a setting where a principle based approach, such as the Combined Code on

Corporate Governance, is taken.

The remainder of the paper is organised as follows; Section 2 presents an integrative model

which illustrates the hypothesised process through which the news media influences the

corporate governance practices of violating companies, progressing from the occurrence of a

violation to the corporate governance outcome or effect of news media coverage of the violation

on the company’s governance practices. The process is depicted in terms of three specific groups

of stakeholders in the company; the shareholders, corporate policymakers and the board of

directors. The conceptualised process will initially be described in terms of each stakeholder

group, allowing for the introduction of three theoretical propositions. The corporate governance

literature framing the propositions is reviewed in Section 3. Section 4 provides a commentary on

the functioning of the news media as an information intermediary in the company environment

and discusses the rationale for news reporting of corporate governance violations. Section 5

develops this analysis to consider the various responses of stakeholders following news media

coverage of corporate governance violations. Section 7 addresses the effects of such actions on

the violating company and considers the remedial actions the company may chose to take in

response to news media coverage so as to conceptualise an ultimate influence of the news media

on corporate governance practices of the violating firms it targets. Section 8 concludes and

evaluates avenues for future research.

2. FRAMEWORK AND THEORETICAL PROPOSITIONS

The framework outlined in Figure 1 summarises the hypothesised process through which the

news media influences the corporate governance practices of violating companies. The model

incorporates the immediate company environment and considers the interaction between the key

stakeholder groups but also accounts for the broader setting to include general stakeholder

groups. While it is probable that any news media influence on corporate governance would be an

ambiguous occurrence, for the purposes of a structured discussion and exploration, five

individual stages are considered, these are outlined in Table 1 and the participants envisaged to

be involved are included in Table 2

Table 1 Stages of News Media Influence on Corporate Governance Practices of PLCs

1. Occurrence of a corporate governance violation by a listed public company in the UK or Ireland

2. News media communication of the violation to company stakeholders

3. The actions of company stakeholders in response to news media coverage of the violation

4. The effects of stakeholder actions on the violating company

5. The response of the company or corporate governance outcome

Table 2 Model Participants

1. The violating company A public company listed on a stock exchange in the UK or Ireland

2. UK, Irish and international

news media

1. Print media

2. Broadcast media

3. Online media

3. Key stakeholders in the

violating company

1. Company Shareholders

2. Corporate Policymakers

3. Company Directors

4. The violating company’s

broader stakeholder base

Includes customers, suppliers, partners, future employers, peer companies

and the voting public

A number of relationships or interactions between the participants are also indicated in the

framework, Figure 2 summarises these interactions. The proposed framework has theoretical

underpinnings in the four main Anglo-American models of corporate governance (Hawley and

Williams, 1996) and the utilization of news media information by each stakeholder group in their

corporate governance roles may be regarded in the context of a number of these models. The

next section surveys the academic literature surrounding each Anglo-American model. The

models which pertain to each group are indicated within the framework and are summarise in

Table 3. As the framework and Table 3 indicate, no one model exclusively applies to any group,

conceptualization of the news media’s influence on stakeholders relies primarily on one or a

combination of models however all models affect all groups to some extent.

Table 3. Anglo-American Corporate Governance Models Concerning Key

Stakeholder Groups

Primary Contextual Model(s) Influencing Models

Shareholders in the violating Financial Model, Political Model Stewardship Model, Stakeholder

company Model

Corporate policymakers Political Model, Stakeholder Model

Stewardship Model, Financial Model

Company Directors Stewardship Model, Stakeholder

Model

Political Model

Should one or more of the stakeholder groups take action following the revelation of a corporate

governance violation, it is expected that the news media will also provide coverage of these

actions and their consequences for the violating company, that is to say that the news media

provides ex-post analysis and coverage (Dyck, et al, 2008). Moreover, the effects of

stakeholders’ actions will have implications for themselves and the other stakeholder groups, as

will the outcomes of these effects. Figure 3 illustrates the cyclical or reciprocating nature of news

media coverage of corporate governance violations.

In their consideration of the capacity of the business media to reduce information

asymmetries, Bushee, Core, Guay and Hamm (2010) advocate that:

“The business press is perhaps the broadest and most widely disseminated of all potential

information intermediaries, reaching both sophisticated and unsophisticated investors, as well as

managers, regulators and other market participants.”

This line of reasoning could be extended to argue that the news media may well influence

corporate governance practices, through its diffusion throughout communities of (i) shareholders

and investors, (ii) corporate policymakers and regulators and (iii) company management and

directors. Three theoretical propositions follow from this rationale:

P1. By notifying shareholders of managerial misconduct, the news media significantly

influences (i) shareholder activist activity and (ii) shareholders’ decisions to sell shares;

P2. By publicising corporate behaviour which requires intervention in the form of

legislative amendment or regulatory action, the news media significantly influences (i)

the occurrence of corporate legislative debate in Parliament and (ii) the incidence of

corporate regulatory action;

P3. The news media significantly influences the actions of the board of directors by

notifying stakeholders of corporate behaviour which may damage corporate reputation.

Both corporate governance theory and empirical evidence are incorporated in the impending

sections to discuss these propositions.

Figure 1. Conceptualised Model Framework 4 Stakeholders Other factors

Action

1. Buy/sell shares, Vote at and attend

meetings

2. Parliamentary debate

Create/amend corporate legislation

Appoint corporate regulators

Aim to upkeep country’s corporate

reputation

3. Work to repair corporate reputation

4. Buy/stop buying products and

services,

Supply/stop supplying materials and

services,

Continue/cease to be potential future

employers

Vote for and influence corporate

policymakers

Effect

1. Share price change- market value

change/Increase in shareholder activism

2. Corporate legislative/regulatory

change/

Regulatory intervention in company

3. Satisfy shareholders’ requests,

Manage the firm more efficiently so as

to restore stock market value

Repair professional reputations

Legal and regulatory compliance

/ Become a takeover target,

Ignore regulatory and legislative

guidance.

4. Failing financial

performance/strategic, efficiency issues

due to relations with suppliers, partners,

etc/management and director turnover

very low- entrenched boards, difficult to

attract managerial talent/ Policymaker

action

Newspaper,

online and

broadcast

news media

coverage

1 Shareholders

2

Policymakerss

3

Directors

Outcome: CG Reform/ Reversal of Violation/ Compensation/Nothing (Takeover/prosecution/delisting/other

penalties).

Occurrence

of a CG

violation

Financial Model, Political Model,

Stewardship Model, Stakeholder Model

Stakeholder Model, Political Model,

Stewardship Model, Financial Model

Stewardship

Model

Stakeholder

Model

Financial

Model

Political Model

Direct Influence

Indirect Influence

Wider Environment

Between-party

relationship

Figure 2: Interactions between participants effected by news media coverage of a corporate governance

violation.

The Violating Company

The News Media

The Violating Company’s

Broader Stakeholder Base:

Customers, Suppliers,

Partners, Future employers,

Peer companies and the

Voting public

Company

Directors

Corporate

Policymakers

Company Shareholders

The News Media

Stakeholders

1Occurance

of Corporate

Governance

Violation

The Violating Company

1Coverage of Corporate

Governance Violation

1Response/

action

2 Outcome

in response

to

stakeholder

action 2 Outcome

in response

to

stakeholder

action

3 Coverage of Outcome in

response to stakeholder

action

2 Coverage of Stakeholder

Response/action

Figure 3. The Cyclical/Reciprocal Nature of News Media Coverage of Corporate Governance Violations and its

Influence

3. ANGLO-AMERICAN CORPORATE GOVERNANCE

Evolving from the separation of ownership from control of the firm (Berle and Means, 1932;

Fama and Jensen, 1983), the problem of managerial opportunism and mechanisms of its

curtailment have been deliberated upon from a range of viewpoints. This section provides an

overview of four principle lines of argument, taking each as a basis of a consideration of the

news media as an aid in achieving control of management.

3.1.The Simple Finance Model

From a market perspective, the finance model is deeply rooted in Manne’s theory that

shareholders, who are dissatisfied with management, exit the firm resulting in an excess share

supply and a corresponding decline in share price. Consequently, bidders who believe they may

operate the company more efficiently purchase company shares at a discount and replace under

performing management. The threat of takeover thus acts to incentivise management to operate

the company efficiently. The finance model assumes shareholders have the primary goal of

wealth maximisation, however, Jensen and Meckling (1976) vindicate that management

decisions may not be aligned to this goal, leading shareholders to incur agency costs associated

with monitoring managerial behaviour and bonding or aligning interests with those of

management. Agency costs also have an associated residual loss, arising from managerial

opportunism which occurs regardless of shareholders efforts to curtail it. Fama and Jensen

(1983) contend that in the absence of effective control procedures within the firm, managers are

more likely to take actions that deviate from the interests of shareholders, thereby increasing

agency costs. In addition to control exerted by the market, the principal may personally attempt

to minimise the agency costs by incentivizing management through remuneration or the granting

of share options. However, to effectively limit agency costs, Fama and Jensen (1983) claim that

firms need a system which limits agency costs by controlling the power of management to

expropriate the interests of shareholders. Corporate governance may be seen as one such system

of aligning the interests of management with those of shareholders (Fama, 1980; Fama and

Jensen, 1983; Williamson, 1985). Should management remain in pursuit of their own goals,

shareholders would be expected to exit the firm. However, commentators have pointed out that

shareholders may only exit when they are aware of management inefficiencies (Easterbrook and

Fischel, 1980) and this may not always occur due to information asymmetries (Bushman and

Smith, 2001; Bushman, Chen Engel and Smith, 2004; Gompers, et al, 2003). Despite much

academic research into the information flow in the stock markets (Jensen, 1986; Healy and

Palepu, 2001; Bailey, et al, 2003; Ferreira and Laux, 2007) and the effect of news information on

share price (Fang and Peress, 2009), only recently has the effect of news media coverage of

violations of corporate governance on share price and ultimately on the behaviour of

management been considered (Joe, et al, 2009).

3.2.The Political Model

The political model evolved from a questioning of the predominantly financial view adopted by

seminal corporate governance theorists, in line with a drift from individual share ownership

toward ownership mediated by investment institutions, mainly pension funds, mutual funds and

insurance companies (Hawley and Williams, 1996, 2003). The growingly pervasive influence of

investment funds is a common characteristic of the modern capital market and the political

model of corporate governance represents a movement of thought from the austere principle-

agent perspective of the firm toward a more fluid two-tier structure where fund managers are an

important intermediary between owners and company management (Black, 1997) and a owe a

duty of loyalty and care to the shareholder (Hawley and Williams, 1996, 2003). The rise of

fiduciary capitalism marked a movement toward active ownership or shareholder activism

(Nesbitt, 1994; Smith, 1996; Gillan and Starks, 2000; Becht, Franks, Mayer, and Rossi, 2009),

whereby control is achieved through non-market approaches such shareholders’ use of lobbying

and voting rights to monitor management (Pound, 1993; Grundfest, 1993), engagement with

management on occasions such as company meetings (Edkins and Bush, 2002; Becht, et al,

2009) and co-ordinated shareholder intervention in cases of poor company performance (Gillan

and Starks, 2000; Edkins and Bush, 2002; 2005; Zetzsche, 2005). However, much of empirical

evidence on such strategies indicates there are barriers to their successful implementation, with

information costs and collective action problems being commonly cited (Black, 1991; Black and

Coffee, 1994; Black, 1997; Lynn, 2007; Lynn and Mulgrew, 2008). This has led to a

consideration of means through which dispersed shareholders may communicate and readily

access company information (Yaron, 2005). Moreover, recent evidence shows that by attracting

news media attention to their campaigns, the value of strategies of activist investment funds is

increased (Dyck, et al, 2008).

Jensen and Meckling (1976) submit that corporate policies make contracts

between shareholders and management a statutory obligation. La Porta, Lopez-de-Silanes,

Shleifer and Vishny (2000) echo this, proposing that shareholders require court or government

protection from expropriation by management. Hawley and Williams (2003) express a similar

view from the prospective of institutional ownership asserting that “since active ownership

carries with it the need for certain shareholder rights, it follows that they will seek global

standards that will enable them to fulfil their fiduciary duty at any company in which they own

shares”, they maintain “standards also involve national or regional government agencies and/or

legislatures”. Members of government have a duty to formulate, enforce and oversee policy and

must identify the conditions under which to deploy appropriate configurations of regulatory

institutions, standards and enforcement practices (Coglianese, Healey, Keating and Michael,

2004); specifically, departments responsible for corporate policy must promote trust in the

markets by implementing frameworks which provide confidence to participate and invest in

business in that country, in a manner that delivers prosperity to all stakeholders (Spivey, 2004).

Market trust and confident investment appreciably requires legal and regulatory frameworks and

contractual agreements which ensure complete shareholder protection, the effectiveness of which

relies upon corporate policy objectives being fully aligned with shareholders’ interests and the

willingness of policymakers to intervene when management fail to comply. Corporate policy

which protects shareholders is encouraged by the OECD which recommends that policymakers

“examine and develop the legal and regulatory frameworks for corporate governance that reflect

their own economic, social, legal and cultural circumstances” (OECD Principles of Corporate

Governance, 2004). The success of national policymakers at achieving effective corporate

governance frameworks is certainly questionable. Governments have afforded management with

employee rights protecting them from dismissal, regardless of performance (Jensen and Murphy,

1990; La Porta, et al, 1998, Roe, 2003). Moreover, policymakers who do implement stringent

corporate governance legislation or regulatory provisions have been accused of stifling

entrepreneurship (La Porta, et al, 2000). Internationally, there is a marked variation in the legal

protection of shareholders along with a divergence in ability and readiness of governments to

invest in the resources needed to achieve corporate oversight (La Porta, et al, 1998, 2000). The

shortcomings and inconsistencies of corporate legislative action suggest potential for an

information intermediary to alert corporate policymakers of a need for legislative and regulatory

protection for shareholders, thereby aiding the creation and amendment of effective corporate

policy and enhancing standards of corporate governance on national.

3.3.The Stakeholder Model

Hirschman (1970) positions the stakeholder theory of the firm somewhere between economic

and political theories and the stakeholder model of Anglo-American corporate governance

(Freeman, 1984; Blair, 1995; Heath and Norman, 2004) extends the literature to consider broader

economic and societal concerns (Slinger and Deakin, 1999). In a broad sense, this view of

corporate governance argues that the company is responsible to a wide range of stakeholders in

addition to its shareholders and that socially responsible goals may take preference to that of

profit-maximization. Hawley and Williams (1996) offer a narrower definition of the stakeholder

model as one based on “the fragmentation or 'stripping' of 'ownership' into capital's equity,

idiosyncratic equity, debt and other non-equity claims, such that these claimants all have

concrete and financial stakes as a function of their participation in the firm's activities”. Such

claimants may be customers, suppliers, partners, peer companies and the voting public, and

while this list is not exhaustive these are the main stakeholders which are considered in this

discussion.

While corporate governance research has been predominantly framed within finance and

political theories and the stakeholder model criticized for lacking theoretical rigor (Blair, 1995),

it has been argued that organizational development and hence shareholder returns may only be

achieved if companies ensure a level of accountability to all of its stakeholders (Stoney and

Winstanley, 2001). Evidence of the influence of the stakeholder model is evident in a practical

sense. The activist investment fund the California Public Employees Retirement System

acknowledges that effective governance relies upon and is expected by a diverse range of parties,

advising that companies “engage stakeholders in a manner that is ongoing, in-depth, timely and

involves all appropriate parts of the business” (Ceres Roadmap for Sustainability, 2010). It

would appear then that scope exists for further application of the stakeholder model in corporate

governance research.

The stakeholder model is pertinent to the current discussion in two respects, firstly in the

context of a democratic society, Grundfest (1990) posits that national governments may use

agency problems to further political agendas; a rational extension of this argument would be that

corporate governance issues which are in the public eye are likely to be subject to regulatory and

legislative debate by policymakers. There is much theoretical support to substantiate this.

Hawley and Williams (2003) advise that sustainable corporate governance requires both legal

rules and local customs to be supportive of shareholders. McCombs and Reynolds (2002)

contend that negative publicity alerts the local voting public to problems which call for political

action, that is to say that negative publicity sets public agendas. Carroll and McCombs (2003)

find a similar agenda-setting effect in cases of corporate issues. Consequently, policymakers

would be expected to intervene in cases of corporate governance violations through regulatory

action or legislative amendment. Dyck, et al (2005) submit that such action represents political

desire to maintain reputations with the voting population. Ergo, publicly available information

regarding violations of corporate governance may affect democratic processes, spurring political

action (Dyck, et al, 2008; Gorman, Lynn and Mulgrew, 2010).

Voting for corporate policymakers is one means through which stakeholders might

influence corporate governance practices. While the stakeholder model applies to society in

general, the narrower view argues that a number of groups have direct interests in the company.

Such claimants include customers, partners, suppliers, competitors and other peer companies. It

follows that a violation of corporate governance may not necessarily be an action which affects

the pre-eminent stakeholder group, the shareholders, but some other party with an interest in the

firm (Heath and Norman, 2004). While shareholders may use certain rights in response to

violations of corporate governance, there are few options open to stakeholders other than to

withdraw their interests in the firm. Considering that many such stakes in the firm are financially

related, it is likely that such responses to governance violations will ultimately have

consequences for the violating company’s capital, cash flow, revenues, profits or some other

element of the balance sheet (Stoney and Winstanley, 2001) thereby motivating directors to

ensure that management are aligned with profit-maximisation work to repair reputations with

stakeholders and improve the performance of the company. (Fombrun and Shanley, 1990; Hall,

1992).

3.4.The Stewardship Model

The board of directors, has traditionally been seen as internal monitors of management

internally (Coffee, 1984; Baysinger and Butler, 1985), having a fiduciary duty to ensure that a

company is run in shareholders’ best interests. Critics of the board, however highlight inefficient

monitoring due to directors not being considered as truly independent from management

(Hermalin and Weissbach, 1998) and neglect of fiduciary duties arising from multiple

directorships (Ferris, Jagannathan and Pritchard, 2003). From an alternative perspective, the

stewardship model (Donaldson and Davis, 1991; Lorsch, 1995; Davis, Schoorman and

Donaldson, 1997) takes a sociological, pro-organisational approach to corporate governance and

essentially contests agency theory (Roberts, McNulty and Stiles, 2005). Within this framework,

it is assumed that management, being “good stewards” are motivated by their responsibility to

maximise profits and will thus work to earn returns for shareholders (Donaldson and Davis,

1991). The stewardship model argues that shareholders’ interests are best served through a

shared incumbency of managerial and director roles (Donaldson and Davis, 1991).

Sundaramurthy and Lewis (2003) explain that when moving from the agency theoretical lens to

that of stewardship theory, managerial behaviour is viewed as cooperative as opposed to

opportunistic; intrinsic motivation replaces extrinsic motivation, the board take on an advisory

role rather than one were they are excepted to monitor and discipline management and the

market for corporate control curbs psychological commitment instead of constraining

opportunism. While there has been dominant encouragement of independent board monitoring

both in academic literature (Coffee, 1984; Baysinger and Butler, 1985) and corporate policy

construction (OECD Principles of Corporate Governance, 2004; The Combined Code, 2008),

accounting for the low incidence executive-dominated boards thereby inhibiting the model’s full

practical application, its emphasis on trust and co-operation has received a good deal of support.

Many commentators recommend that elements of stewardship theory may be practiced in

harmony with governance approaches devised from the finance, political and stakeholder models

(Sundaramurthy and Lewis, 2003; Roberts, et al, 2005; Anderson, Melanson and Maly, 2007;

Ward, Brown and Rodiguez, 2009; Elsayed, 2007; 2010). Anderson, et al (2007) propose that

the board of directors may act as a “strategic partner” to management. The authors advocate

adoption of elements of stewardship theory explaining that:

“For the modern public firm, owners can be a diffuse group possessing widely varying

goals. The manager as a steward responds to these diffuse interests of multiple owners by

focusing on the firm and maximising organisational success, reflecting the majority interest.”

Elsayed (2010) concludes that the degree of trust in management varies with contextual

variables including firm size and ownership structure. In an environment where the board of

directors and management operate collectively as stewards of shareholders’ interests, criticism of

their performance would be expected to encourage both parties to work with greater diligence

and take actions which would repair any reputational damage caused (Fombrun and Shanley,

1990). Corrective actions may involve shareholders or other stakeholders being compensated,

managerial practices being reformed or replacement of some members of management or the

board (Dyck et al, 2008). That is to say that information which undermines managers’ and

directors’ reputations may result in increased shareholder protection.

This section has presented a brief overview of the four theoretical models which

predominantly frame Anglo-American corporate governance, each with distinct and, at times,

conflicting principles, concepts and arguments. As one would expect, their practical application

varies, with determinants including financial market structure, legal environment, economic

circumstances and societal norms and values of key significance (Hawley and Williams, 2003).

The remainder of the paper concerns a multifaceted consideration of the influence of news media

on Anglo-American corporate governance. Accordingly, conceptualisations are grounded within

these theories to various extents; the next section however departs slightly from corporate

governance theory and discretely considers the relevant literature on the news media, and in

particular, evaluates existing theories regarding the news media as an information intermediary.

4. THE NEWS MEDIA

McQuail (1983) refers to the mass media as an “organised means of communicating openly, at a

distance, and to many at a short space of time”, noting its significance in:

• politics: as an arena for debate and a channels for making policies, relevant facts and

ideas more widely known,

• culture: as a channel of cultural representation and a primary source of images of social

reality,

• daily social life: by offering models of behaviour,

• economics: by providing much of the information on which economic sectors are based.

Chen and Meindl (1991) describe business news as reported information regarding organisations

and their functioning. The media then exerts a certain degree of power in the company

environment.

Much research has been devoted to the factors attention media attention to corporate

issues and to the effects of business media coverage. It has been noted that the presence of

gatekeepers of company information, such as public relations agents, who have a great deal of

control over whether or not an issue is newsworthy, thereby restricting the media in reporting

negative news such as improper conduct by management or negligence of the board of directors

(Shaw and McCombs, 1977; Carroll and McCombs, 2003). Other gatekeepers such as auditors

may not always make available information which gives a true and fair view of the firm’s

financial position (Agrawal and Chadha, 2005). Attention has been placed on the responsibility

of the media to report on corporate wrongdoings (Miller, 2006; Brickley, 2008), which are

considered newsworthy by parties outside the company and this imposes an obligation on media

members to investigate and enquire about practices of companies.

Members of the business news media collect, select, organise and deliver corporate news

to public audiences. Investigation is one media function which makes it a valuable resource to

company stakeholders and the media also perform a role rebroadcasting information which is

already public knowledge; that is, providing coverage of ongoing issues and events (Miller,

2006). While the former is valuable in the sense that negative coverage surrounding companies

increases general awareness of and shapes opinions on issues and possibly drives reform by

management who have reputation concerns, investigative journalism is vital for early detection

of corporate malpractice and it is in this capacity that the media is considered to have a watchdog

function. Because so much is often demanded from the media, its resources and expertise is best

used developing news once it has been uncovered (Lloyd and Watson, 1999).

News which is collected either by investigation or by monitoring issues and events which

are already public knowledge is selected and organised on the basis of newsworthiness and

delivered to both general and specific targeted audiences. General audiences may have an

interest in news media coverage of a company as members of its broader stakeholder base

(Deephouse, 2000). By providing news coverage of companies, the media may also target

specific audiences such as company shareholders, corporate policymakers or directors of the

company. Since these audiences all have fundamental interests in the corporate governance

practices of the companies in which they have interests, news media coverage of corporate

governance issues may cause them to take actions which would bring about the ultimate effect of

improved corporate governance practices (Dyck, et al, 2008; Joe, et al 2009).

Firstly, as was noted in the previous section, when informed of managerial negligence,

shareholders may chose to exit the company by selling their shares. Empirically, Barber and

Odean (2002) observe that investors on stock markets spend much time gathering data so as to

make informed decisions when trading. In a qualitative study of trading behaviour on the London

Stock Exchange, Davis (2005) detects strong media effects. Tetlock (2007) notes that high media

pessimism exerts downward pressure on stock prices and Fang and Peress (2009) find that stocks

with no media coverage earn higher returns. Focusing specifically on media coverage of

corporate governance violations, Joe, et al (2009) find results to suggest that individual and

institutional investors respond differently in that individuals tend to sell their shares, having lost

faith in management, whereas institutional investors buy shares in the violating company

anticipating reform. The conclusions drawn by Joe, et al, while based solely upon the effects of a

single media publication on US exchange data, indicate much scope to further investigate the

media effects in the stock markets in regions outside the US. Consequently, Gorman, Lynn and

Mulgrew (2010) have verified a relationship between movements in share price and volumes of

articles from five newspaper publications relating to corporate governance violations by public

companies listed on the Irish Stock Exchange, noting an intention for future research which

would control for alternative drivers of share price, such as company events such as

announcement of dividends or economic events and to explore the effects of the growing wealth

of online media, much of which is available in real-time.

Evidently, share trading information is just one indicator of shareholder responses to

media coverage and scrutiny of corporate governance; Dyck et al (2008) investigate the

relationship from an alternative perspective. Through a study of a prominent investment fund in

Russia, the authors find that shareholders use news media campaigns as part of activist strategies,

expanding the horizons for a study of how shareholders use the media as an aid to protect their

interests in targeting and gaining influence underperforming management in attempts to increase

the value of the firm.

As has been noted, corporate policymakers also play a significant corporate governance

role. Studies on the media’s role in corporate legislative and regulatory intervention, by and

large, tend to consider policymaker activity with respect to the voting public (Altschull, 1995;

Dyck and Zingales, 2002; Dyck, et al, 2005). Ergo, the role of the media in informing voters

throughout society in general, takes precedence and much of this commentary is grounded in the

agenda setting theory of the media (McCombs and Shaw, 1972), which holds that the issues

construed to be important by the media take priority on policy agendas vis-à-vis the concerns of

voters, the broader audience of the general media. The presence of the media has an additional

effect in compelling policymakers to take action in cases of corporate governance violations.

Dyck and Zingales (2002) contend that when a violation is criticized by the international press,

politicians feel obligated to condemn it in order to preserve their international political

reputation. Dyck and Zingales conclude that “the media are important in shaping corporate

policy and should not be ignored in any analysis of a country’s corporate governance system”.

Central to the firm and its management is corporate reputation (Frombrun and Shanley,

1990; Deephouse, 2000). Adverse media reports on a business entity will incur ‘reputation costs’

(Dyck, et al, 2008) which the firm would hope to avoid as they can be highly damaging both

financially and strategically. For example, shareholders would be displeased with an investment

in a business exposed by the news media as having engaged in financial fraud and may in all

likelihood sell their investment or seek other forms of remedial action. These reputation costs are

dependent on the probability of the news being received and believed by the relevant audiences

and will vary with the media vehicle. It follows that by reporting news of management

underperformance to company stakeholders, the media may propel the board of directors to

monitor management or assist them in bringing about reform (Joe, et al, 2009).

5. STAKEHOLDER ACTIONS IN RESPONSE TO NEWS MEDIA

COVERAGE OF CORPORATE GOVERNANCE VIOLATIONS

5.1.Shareholders

The theory of the market for corporate control vindicates that shareholders in inefficiently

managed companies may dispose of their shares whereby, the threat of takeover is a means of

disciplining management (Manne, 1965). If shareholders learn that management have failed to

safeguard their interests in pursuit of their own objectives, they may choose to exit the firm and

sell their shares (Black, 1997). Empirical evidence indicates that the news media is one means

through which shareholders may receive such information; Tetlock (2007) notes downward

movements in share price following media pessimism regarding firm performance. Investor

behaviour may not be so predictable however; recent findings by Joe et al (2009) indicate that

individual investors tend to ‘overreact’ to media scrutiny of the corporate governance practices

of companies, quickly disposing of shares, while more sophisticated institutional investors, who

account for a greater proportion of firm ownership, tend to buy shares in violating firms

anticipating dismissal of underperforming management or a reform in governance practices.

Share price movements in either direction may potentially impact upon the company

management leading to corporate governance reform.

There are alternative options available to shareholders who receive news of management

negligence. Coffee (1991) and Black (1997) point out that those who are more active owners as

opposed to active traders, namely indexed institutional investors may become more effective

monitors were they able to reduce their information costs. As has been proposed herein, the news

media is one means of achieving such efficiency and there are a range of strategies which

informed, activist shareholders might take to target underperforming or opportunistic

management. Pound (1993) argues that collectively, investors may seek to change corporate

policy and campaign for improved governance through the use of ‘more sophisticated

communication strategies’. Specifically, coordinated groups of shareholders may improve the

standard of monitoring, using proxy contests to make changes to the board (Pound, 1993). By

making use of their right to vote in an organised manner, institutional investors may initiate

debate over policies, replacing existing policies with ones endorsed by shareholders and address

concerns relating to more specific facets of the company’s governance such as the independence

of the board or the structure of committees (Pound, 1993; Grundfest, 1993). The right to vote is

just one afforded to shareholders various activist strategies through which shareholders make use

of further rights have been mapped out in the corporate governance literature. Pound (1993)

applies the notion of political lobbying to the corporate setting. Such a movement may involve a

‘shadow board’ being coordinated by shareholders, direct communication and negotiations

between shareholders and management and shareholder attendance at annual general meetings.

Edkins and Bush (2002) describe this approach under the heading of engagement and advise that

shareholders use company meetings to discuss issues related to strategy, board structure and

performance. It is quite probable that shareholders become of such issues through news media

coverage (Joe et al, 2009). Edkins and Bush further recommend that shareholders intervene when

they become aware of violations of corporate governance. Intervention is a more proactive

measure than engagement and may involve research into reasons for poor performance,

submitting proposals for change, and coordinating and communicating with other shareholders.

Evidently news media information may potentially be a valuable resource to shareholders in such

situations.

5.2.Policymakers

As mentioned in Section 3, the political model of corporate governance indicates that

shareholders may require court or governmental protection (La Porta et al, 2000). As a debating

forum for political affairs, policymakers evaluate the efficacy of corporate policy in parliament

as part of their professional duties. Having identified a problem in a given environment, which

for the purposes of this discussion is assumed to be the corporate environment, members of

government formulate policy through parliamentary debate, following this, laws and regulations

are passed, implemented and evaluated (Brooks, 1998). The media may not necessarily initially

alert the policymaker to a violation of corporate governance, however the level of media

coverage of the issue allows legislators to gauge the extent of its effects, that is the number of

shareholders or general stakeholders whose interests have been neglected. The degree of effort

and attention with which the policymaker intervenes depends on a number of factors including

political objectives, political reputation with the voting public and international political

reputation. As noted by Grundfest, national governments may use agency problems to further

political agendas. In the wake of corporate governance scandals, political parties opposing the

governing party may use the issue as an opportunity to criticise the performance of the principle

legislators, thereby coercing them to increase the stringency of corporate legislation or approve

regulatory intervention.

The stakeholder model further points toward how the media potentially influences

corporate governance practices through by way of corporate policymaking activity. The media

has traditionally been referred to as the fourth branch or ‘fourth estate’ of the government in the

UK (Carlyle, 1841, Baron, 2003). That is to say that by informing the voting public, the media

facilitates the functioning of a democracy. As was outlined in Section 4, the public agenda is

thought by communications theorists to transfer from the media’s agenda (Shaw and McCombs,

1977), News media coverage alerts a greater amount of voters of an issue which must be

regulated (McCombs, 2004). The intensity of public responses may be influenced by the tone

with which the issue is addressed or the ‘spin’ put on the story (Fombrun, 1996; Deephouse,

2000). Ergo, when news media reports condemning corporate governance violations are

circulated, policymakers are obliged to intervene in some way to maintain their reputation with

the voting population (Dyck and Zingales, 2002, Dyck, et al, 2005). Corporate policymaking

activity would be expected to be prevalent at times when corporate misconduct is an issue of

public concern. This agenda-setting effect therefore depends on the amount of media exposure

politically sophisticated audiences receive (Fiske, Lau and Smith, 1990, Guo and Moy, 1998).

It is also important to consider the international dimension. Policymakers’ concerns with

reputation overseas further propel corporate policy and regulatory activity (Dyck, et al 2005;

Dyck et al, 2008). When a corporate governance violation is criticized by the international press,

politicians must be seen to take action it in order to preserve their international political

reputation. Policymaker responses to violations of the gravity to attract international attention

should be effective, involving measures to bring management to account and prevent future

occurrence in other companies. In doing so the policymaker upholds their own reputation with

international counterparts along with signalling that the country is one in which companies are

managed with integrity. In this sense, it is thought the media further influences the corporate

governance practices of companies by pressurising policymakers to ensure an operational legal

and regulatory infrastructure is in place the jurisdiction in which they do business.

5.3.The Board of Directors

From the perspective of the stakeholder model of corporate governance, it may be argued that

while shareholders may express their concerns with management through voting or by exercising

some of the other rights afforded to them; other company stakeholders, namely claimants such as

customers, suppliers or partners must find alternative means of action in the wake of media

scrutiny of the company’s governance. These responses would be expected to involve the

withdrawal of finance, custom or a service necessary for the company to operate profitably,

thereby causing some degree of financial concern and hindering wealth maximisation (Hawley

and Williams, 1996). The board of directors, it its capacity as a monitor of shareholders’

interests, has a responsibility to take appropriate action so as to discipline underperforming or

opportunistic management (Coffee, 1993). This may require dismissal or amending

compensation. Directors would also be expected to ensure that future performance of the

company will not be jeopardised by inappropriate managerial behaviour.

Alternatively, in accordance with the stewardship approach to corporate governance,

media criticism of management may alert directors, be they executive or non-executive, to a need

to encourage management to work towards organisational goals (Davis, et al 1997). Working

collaboratively and realising the long-term utility of the company’s reputation, directors and

management may work to remedy a situation caused by management misconduct. It may then be

argued that sufficient press coverage on a corporate governance violation by a firm may

pressurise and lead directors and management to institute reform within the business (Dyck et al,

2008). This effect is related to the power of the press to control corporate reputation, a valuable

firm resource (Frombrun and Shanley, 1990; Deephouse, 2000). Hall (1992) notes that

“Reputation, which is usually the product of years of demonstrated superior competence, is a

fragile resource; it takes time to create, it cannot be bought, and it can be damaged easily.” The

management and directors of companies which receive negative media coverage due to the

occurrence of a corporate governance violation would therefore be expected to repair any

damage done to company reputation by compensating shareholders and implementing reforms.

6. THE INFLUENCE OF THE NEWS MEDIA ON CORPORATE

GOVERNANCE PRACTICES: Towards an Investigative Framework

Section 5 has shed some insight into a number of avenues open to key stakeholders in the

company environment following coverage of corporate governance violations in the news media.

This section considers the final stage of the conceptualised framework that is how the actions of

(i) shareholders, (ii) corporate policymakers and (iii) the board of directors may affect violating

companies and their corporate governance practices.

6.1.The Influence of the News Media on Corporate Governance via Shareholders

The theories of both the finance model and the political model of corporate governance

suggest that shareholders who actively consume news media information may effectually

minimise agency costs and ensure managerial accountability. As predicted by the theory of the

market for corporate control, by disposing of company shares upon learning of violations of

corporate governance through the news media, dissatisfied shareholders impose the threat of

takeover, which may compel management to act within the interests of shareholders in future or

face a situation where more diligent management would be instituted by new owners. It would be

expected that under new management, better standards of corporate governance would be

practiced in the firm. Using this rationale, one might argue that through the market, the news

media influences corporate governance practices of violating firms.

The discussion of the political model of corporate governance in this paper has

considered the actions shareholders who chose voice over exit take following news media

criticism of the governance of the companies in which they have interests. The activist strategies

outlined provide viable means through which coordinated shareholders may discipline

management and lobby for improved corporate governance practices. Outcomes of shareholder

voting may include institution of a more competent board of directors (Grundfest, 1990) or a

change in corporate policy (Pound, 1993). Moreover, engagement or intervention may lead to

greater alignment of corporate strategy, improvements in board structure or enhanced managerial

performance (Edkins and Bush, 2002).

6.2.The Influence of the News Media on Corporate Governance via Corporate

Policymakers.

Consideration of corporate governance through both the political and stakeholder theoretical

lenses indicates that as an information intermediary between the company, corporate

policymakers, their political counterparts and the voting public, the news media influences

corporate policymaking and regulatory activity. News media criticism of companies’ governance

practices leads various groups to question the ability of policymakers to preserve an effective

corporate legal and regulatory environment. It follows that policymakers intervene by increasing

the stringency of corporate legal instruments and regulatory provisions (Dyck and Zingales,

2002; Dyck, et al, 2005). Consequently violating companies must follow guidelines which curtail

their behaviour more extensively or potentially face imposition of penalties by regulators or the

judicial system. The threat of increased corporate legislative and regulatory control and the

potential financial and repuational consequences associated with non-compliance would be

expected to encourage improved corporate governance practices in companies vulnerable to

opportunistic managerial behaviour or director complacency.

6.3.The Influence of the News Media on Corporate Governance via The Board of

Directors

As many commentators on stewardship theory indicate, the balance directors strike between

monitoring and stewardship is a matter of contingency. Nevertheless, should a company receive

negative coverage in the news media regarding the way its standards of corporate governance,

directors and management would be expected to take actions to repair the reputation of the

company. Measures may include parties affected by misconduct within the company through a

realignment of goals or financial reimbursement. Management accountability, financial

transparency and active board oversight and/or stewardship would also be expected from the

board of directors in future, that is to say that if reputation is considered an important company

resource, one would envisage that the board of directors would take steps to implement corporate

governance reform.

7. CONCLUSIONS AND AVENUES FOR FUTURE RESEARCH

Since the introduction of the Cadbury Report (1992) corporate governance has experienced a

renaissance as a topic of both academic inquiry and practitioner concern. However, with the

emergence of a range of corporate governance guidelines to improve shareholder protection (The

Combined Code on Corporate Governance, 1998, 2003, 2006, 2008; Irish Association of

Investment Managers, Corporate Governance, Share Option and Other Incentive Scheme

Guidelines, 1999; The Sarbanes-Oxely Act, 2002), so too have reports of self-serving behaviour

by management, many of which resulted from high-profile scandals (Maxwell Communications,

Enron), it appears that ample accountability in the Anglo-American corporate environment

remains to be achieved (Hollinger International, Royal Dutch Shell, News Corp, DCC, Anglo

Irish Bank). Recent corporate governance research has been consumed with the development of

controls inside the firm and regulatory prescriptions. It appears to be commonly assumed that

when internal oversight fails, standards in corporate governance may only be achieved through

state regulation, much of which has been critiqued for over-restricting management and stifling

entrepreneurship and innovation.

An emerging body of research considers the potential for an actor in the broader company

in environment to act as a watchdog of corporate behaviour. Recent evidence indicates that

corporate governance violations tend to be addressed following coverage in publications

circulated within the business community (Dyck, et al, 2008; Joe, et al; 2009; Gorman et al,

2010). As an independent, accessible, low-cost and far-reaching information intermediary

(Bushee, et al, 2010), the news media may well facilitate corporate oversight and control

misconduct.

As an area of research which remains very much in its infancy, a number of avenues for

future research exist. The conceptualised model framework proposed herein provides a

preliminary map to guide further validation of the role of the media as a monitor of corporate

governance practices in Anglo-American jurisdictions. Corporate governance violations studied

will also depend upon country-specific corporate legal and regulatory environments and while

the media’s influence has been studied in the US context, in which standards of corporate

governance are legally enforced. A similar investigation remains to be conducted in Ireland or

the UK, two countries in which corporate governance standards are adopted through a principles-

based approach. Moreover, while evidence exits to suggest that the media informs and influences

the actions of policymakers (Dyck, et al, 2005), no research exists to date on the media’s specific

influence on policymakers’ decisions regarding the maintenance of a country’s corporate legal

and regulatory environment. This is an interesting avenue to explore at a time of growing

pressure on policymakers to ensure corporate governance guidelines heeded by the management

and directors of companies. The influence of broadcast and online media vehicles is a further

facet of this topic which has yet to be examined.

The remainder of this section considers potential investigative and analytical methods

which may be employed in future research. All approaches suggested require that news reports

and coverage of violations of corporate governance from various media vehicles first be studied.

This preliminary analysis is empirically viable as archived news media data is readily available

in electronic form and may be accessed online.

Investigation of P1:An examination of the news media’s influence couched within this theory

could employ data on share price changes in violating companies. Statistical correlation analysis

may be used to test for evidence of significant relationships between frequency of negative

media coverage and share price and thus test on aspect of the hypothesis H1, that media coverage

of corporate governance violations instigates trading of shares in violating companies. Variance

testing may also be conducted to draw inferences on the basis of media vehicle, country, industry

and violation type. There are obvious caveats to such an approach not least the existence of

additional market factors at play, which would necessitate robust control measures to be applied

to exclude the influence of additional noise in the market. Moreover, share price analysis alone

could not confirm an improvement in standards of governance, such an effect could only be

assumed from an increase in share price. It is envisaged that findings be triangulated with

qualitative data identifying corporate governance reform.

A full test of the hypothesis H1 would require levels of shareholder activism to be

evaluated through institutional voting statistics, the minutes of company meetings or through

records of investment institutions which actively target underperforming companies through

engagement and intervention. Alternatively, Davis (2005) points towards interviews as the most

appropriate investigative method when studying investors as a news media audience.

Institutional investors’ perceptions of the media’s role and reactions to media scrutiny of

governance may be investigated and assessed through interview or survey. Findings will be

coded quantitatively in order to test for significant relationships between volumes of media

coverage of governance violations and shareholders’ actions using correlation analysis. In this

way qualitative findings could be evaluated in conjunction with stock market data to confirm the

first proposition of the framework proposed in this paper, that by informing shareholders of

violations of corporate governance, the news media influences the corporate governance

practices of Anglo-American companies.

Investigation of P2:A comprehensive investigation of the power of the news media to influence

corporate governance practices through propelling corporate policymaking activity would

initially involve a qualitative appraisal of parliamentary debate following the occurrence of

specific violations. Archived parliamentary reports may be studied for evidence of political

intentions to enforce more stringent legislation or regulation in the area in which the violation

occurred. Parliamentary references to media coverage of corporate governance violations may be

recorded and quantified accommodating for the greater legislative authority of upper houses of

government than lower ones. Developments in company law and regulatory reports and

documents may be also be studied to capture the extent to which measured debated upon are

implemented. Observations may be categorised numerically and correlated with media coverage

statistics so as to establish a link between news media coverage of corporate governance

violations and legislative and regulatory oversight of corporate governance practices.

Investigation of P3:Ex-post actions within the company may be studied through documents used

in previous phases of the study, including media or regulatory reports. The extent to which it

provides an unbiased and accurate view of the companies’ response to media scrutiny is

questionable and more robust findings may be achieved through a series of interviews with past

or present board members of violating companies. Such an approach would however depend on

the potentially difficult task of gaining access to interviewees. Findings from the most viable

method of qualitative enquiry would also be coded quantitatively to facilitate analysis of

potential relationships with levels of news media coverage of violations by sample firms.

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