Reuters Scores a Big Win on its Chesapeake Coverage

Reuters can take a well-earned bow for its coverage of Chesapeake Energy and its CEO, Aubrey McClendon.  The news service has broken several major stories in the past three weeks that brought to light McClendon’s questionable financial dealings, including his borrowings against stakes in the company’s wells and investments in a hedge fund.  The reports forced the board to strip McClendon of his chairmanship and led to an investigation by the SEC.  Chesapeake shares are down nearly 19 percent.

Reuters stood by its initial report about McClendon’s loans as Chesapeake made a strident denial of any impropriety.  The company was forced to backtrack after it issued an embarrassing statement that said the company’s board was not “fully aware” of McClendon’s finances. (See my earlier post on this issue for details.)

Reuters has been relentless, filing about 20 articles on Chesapeake over the past three weeks, including a 2,700-word gusher today on the company’s complex deals with Wall Street banks.  (See the full catalog of the coverage here.)

The multiple scoops and their aftershocks are a vindication for Reuters’ strategy of bulking up and pushing for high impact business news.  For much of the past year, Reuters has been scooping up talent from The Wall Street Journal and elsewhere, even coaxing a few seasoned reporters out of retirement.   A piece in the Huffington Post last September captures the scale of Reuters’ ambitions:

“Reuters’ recent hiring spree — including a handful of Pulitzer Prize-winners – has quickly gotten the media world’s attention. At the same time, Reuters has relaunched its website to better showcase its vast reporting in a more consumer-friendly way, stepped up social media efforts and increased analysis, opinion and enterprise reporting — all elements that may play better on the web than in straight wire copy.

“Reuters isn’t giving up on breaking financial news that paying subscribers want or reporting international wire stories that cash-strapped newspapers, lacking foreign budgets, increasingly need. However, Deputy Editor-in-Chief Paul Ingrassia says the company wants to go beyond breaking news. ‘I think what we’re making a bigger effort to do is not only be first with events,’ Ingrassia said, ‘but very quickly and analytically … report the meaning and impact of those events.'”

The big issue for Reuters is whether it can really make the impact it wants without a major print publication.  As old-fashioned as it sounds in today’s digital age, a print title can complement other media properties.  Look at how Newsweek has helped the Daily Beast and how Bloomberg has taken BusinessWeek to new heights.

Reuters enjoys a strong position among traders, fund mangers, corporate chiefs and policy makers, but that’s a small audience compared to that of, say, the New York Times.   The Reuters website doesn’t even place in the top 50 news sites, according to ComScore data released last fall.

I’d expect Reuters to look for a way to get a bigger payoff for its great journalism.

So don’t be surprised if Forbes becomes a purchase target.   Its private-equity investor Elevation Partners might be open to selling after enduring a horror show of red ink since buying a stake in 2006.

At Barclays, Inaction Speaks Louder than Words

The Barclays annual shareholder meeting last week was a loud and lively affair, with howls of protest directed at CEO Bob Diamond and Chairman Marcus Agius over the bank’s pay practices.  Here’s how it was reported by the New York Times:

“The atmosphere at the meeting was hostile from the start, and the speeches were repeatedly interrupted by hecklers. Mr. Diamond was booed as soon as he stepped on the stage to take his seat, and when Mr. Agius said Barclays had “made progress” over the last two years in accepting that “remuneration levels across the industry have to adjust to the new reality,” the audience burst into laughter.”

Shaken by the ordeal, Mr. Agius said poor communication was the root of the problem:

Mr. Agius said Friday that he was sorry that some shareholders felt their views on executive pay had not been taken into consideration. “What we’ve not done well this year — and I admit it and I apologize for it — is handle communication,” he said.

If only that were true.  Mr. Agius has spoken about compensation in a clear and consistent manner.  Here is what he said about it in the 2011 annual report (emphasis added):

Remuneration continues to be the subject of considerable discussion. It remains our policy that we only pay for performance, not failure, and that we only pay the minimum necessary to be competitive. Historically, there has been intense competition for talent, particularly in the investment banking industry. The difficult economic environment and the impact of regulation on the profitability of investment banking lessened this competition in 2011 and, as a consequence, performance related pay across the Group reduced significantly. We recognise that compensation has to adjust to the new reality of lower returns for the sector and we will continue to ensure that our remuneration policies and practices are aligned with the long-term interests of our shareholders.

Those are fine, brave words; they are music to shareholders’ ears.  Except when you realize the pay reduction to which Mr. Agius refers was only in the aggregate and that Mr. Diamond was exempt from it.

A year ago, in the 2010 annual report, Mr. Agius gave shareholders similar assurances about pay restraint (again, emphasis added):

“As Chairman, I am acutely aware of the public disquiet over remuneration in the industry. Barclays is committed to acting responsibly in this area. We are fully compliant with all regulatory requirements and our remuneration systems are designed to reward success, not failure.”

In fact, you can look back at Mr. Agius’s remarks on pay in any year and see strong, purposeful words, carefully crafted and oozing sincerity.  Here’s the 2008 vintage (once again, emphasis added):

“As a Board, we very much regret what has happened to the banking sector in general and to Barclays share price in particular. We fully recognise that banks must review their internal governance systems and remuneration structures to ensure there can be no repeat of the turmoil that has impacted the industry, and the wider economy, over the last 18 months. The Board HR and Remuneration Committee is reviewing compensation policy and structures across the Group to ensure maximum alignment both with the interests of our shareholders and with best practice. The Board is also committed to ensuring that Barclays plays its full part in contributing to the restoration of the health of the global economy and, with that, the reputation of the industry.”

Saying the right thing hasn’t been Mr. Agius’s problem.  But effective communication involves actions, not words, and that’s where Agius and the Board have failed.  That is why shareholders – and the public – are so irate.   Despite all of the nice language about “aligning shareholder interests,” pay for Mr. Diamond and other senior executives went up while shareholder returns went down.

No amount of communication can change those facts.

Five years of lovely, meaningless words.  No wonder shareholders are in revolt.

Waiting for Bob Diamond’s Bonus, Part 3: The Reckoning

Barclays announced Bob Diamond’s pay package this morning when it filed its annual report.  As expected, the news media is pouncing on not only the bonus, but the bank’s poor performance and regulatory woes. Here’s the FT’s take:

“While overall pay is lower this year – largely because of a sharp fall in profits at Barclays’ investment banking division – it is nevertheless likely to stir up the debate around banker bonuses.

“The revelations follow a difficult few weeks for Barclays, which was blocked from implementing two “highly abusive” tax schemes that could have cost the Treasury £500m.

“Mr Diamond was also forced to admit that the bank’s performance in 2011 – his first year as chief executive – was “unacceptable”. He delayed key profitability targets amid tough economic conditions and higher than expected regulatory costs.”

And a harsher piece from the Daily Mail:

“Diamond’s huge pay comes despite a fall the bank’s profits, a row over tax avoidance schemes, and a vicious outcry over excessive salaries at a time when many families are struggling with their bills and mortgages.”

The Barclays board can set compensation however it wishes.  I’m not making a judgement about their decision, but pointing out that by stringing this news along, Barclays has endured a nearly constant drubbing in the press and the bogosphere.   That’s simply not good business.

(See my earlier comment on Barclays’ woeful communication strategy here.)