Friday, June 29, 2007

The Media as Enforcers

I wrote earlier about the role of the Wall Street Journal in exposing the first few options backdating cases. The threat of media ridicule has also resulted in other clean-ups and corporate reorganizations, notably the increasing tendency to dismiss badly behaving CEOs and top executives. This is not restricted to the USA.

Prof. Alexander Dyck of the University of Toronto and two co-authors are studying the role of the media as enforcers of good governance standards in their paper: "The Corporate Governance role of the media: Evidence from Russia". The background, described in more detail here, is the story of how Bill Browder of the Hermitage Fund, which invests in Russian companies, was instrumental in getting the WSJ, FT and Business Week to write articles about serious governance issues at Gazprom, the Russian oil company. The media attention resulted in corporate reforms and the firing of the CEO. Very heartening. (Bill Browder has his own selfish reasons in exposing Gazprom, well described in the article. Still, heartening.)

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