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.

Waiting for Bob Diamond’s Bonus

We don’t yet know how much Bob Diamond was paid for running Barclays last year.  We do know the bank will cap cash bonuses at £65,000 (about $100,000), joining a growing list of banks that have bowed to shareholder and public pressure to curb payouts.

Barclays could have reported Diamond’s compensation yesterday, but it decided to stick with the tradition of announcing it when the bank’s annual report is released next month.  By waiting, Barclays missed a chance to underscore its commitment to shareholder value, and it left Diamond himself in the awkward position of deflecting questions about his pay.

He looked uncomfortable and defensive.  It didn’t have to be so.  The bank could have made both announcements simultaneously.

Now Barclays is sure to face another media swarm in a few weeks when it announces Diamond’s compensation.  It won’t be fun for him or the bank.  Because even if Diamond’s pay is cut, he won’t be hailed a hero (no banker would today), and the media will be sure to replay all the unpleasant issues – the bank’s weak performance, its unhappy shareholders and the public outcry over the industry’s bonus practices.

It won’t be surprising if Barclays looks back a month from now and realizes, too late, that it should have made both announcements on the same day.  By doing so, it could have addressed all the issues at once, and given Diamond a chance to speak openly about risk, reward and retention.  He hasn’t been shy about defending the need to “celebrate the rewards of success.

In today’s world, every bank will take its turn getting slammed on bonuses.  But they should take pains to avoid being slammed twice.

 

 

 

 

 

Friday Risk Reading: Shackleton

I was catching up on holiday reading and came across this excellent New York Times piece on Ernest Shackleton written by Harvard Business School professor Nancy Koehn.

Shackleton’s ambitious journey to reach the South Pole ended in failure but became a triumph of leadership, courage and determination as he brought his entire crew safely home after a nearly two-year ordeal in the most difficult conditions on the planet.  (It’s an astonishing story, and for a complete account of the saga, Endurance, by Alfred Lansing, is superb.)

Shackleton is a rich source for lessons in leadership, ambition, planning, risk-taking and human behavior, and Koehn draws many parallels to recent crises, from the BP oil spill to the financial crisis.   (I had the pleasure of attending Koehn’s course when she taught the case on Shackleton’s voyage.)   Few leaders today are as visible and accessible as Shackleton, whose daily actions and words shaped the lives of his crew.  Koehn writes:

After the Endurance sank, leaving the men stranded on the ice with three small lifeboats, several tents and supplies, Shackleton realized that he himself had to embody the new survival mission — not only in what he said and did, but also in his physical bearing and the energy he exuded.

He knew that each day, his presence had huge impact on the men’s mind-sets. He managed his own emotional intelligence — to use a modern term — to keep his own courage and confidence high; when these flagged, he never let his men know.

Today, an embattled chief executive is more likely to be on a sailboat (BP’s Tony Hayward) than on the front lines.    Surrounded off by protective advisors and walled inside boardrooms, crisis-wracked CEOs today rarely see the people they lead – even though their actions and attitudes are vital in responding to the crisis and ensuring the company’s success.

Firing the CEO, Part 5: Glocer out at Thomson Reuters

Tom Glocer today became the latest CEO to be fired, in a year that has seen a score of corporate chiefs get the boot.   Glocer, who has led Thomson Reuters since 2001, lost the confidence of the Thomson family, the company’s largest shareholder.

Although billed as a retirement, it’s clear that Glocer was forced out after the Thomson family grew impatient with the slow pace of the company’s turnaround.  Glocer will be replaced by the COO, Jim Smith, who has a long relationship with the family.

Firing the CEO is never an easy thing to communicate, and missteps earlier this year by Yahoo, Bank of New York Mellon and HP illustrate just how messy it can get.  But Thomson Reuters deserves high marks for handling it well.  The company issued a detailed news release outside market-trading hours, and it was generous with its praise of Glocer’s tenure.  And Glocer was given a quote in the release in which he was allowed to declare victory, however contrary the facts:

“By the end of this year, the organizational, strategy and budget work I have been leading will be complete, and the transition plan I launched last summer will have achieved its objectives,” said Mr. Glocer.

The proof of good communication is in the response it produces, and it looks pretty good for Thomson Reuters today, The stock price is up, analysts are nonplussed, blogs are restrained – all fairly bloodless.

The company has yet to disclose Glocer’s retirement compensation and benefits, but they are likely to be generous.  When they are disclosed, however, it will make headlines and bring predictable cries over excessive executive pay.  Adding a line to yesterday’s news release summarizing Glocer’s retirement benefits could have avoided that attention.

Olympus: Where were the auditors?

The hole is getting deeper for Olympus and its chairman, Tsuyoshi Kikukawa. And his outside auditor, Ernst & Young, might find itself alongside him.

A day after denying allegations by its former CEO, Michael Woodford, that it paid advisory fees of $687 million on a $2 billion acquisition, the company reversed itself and acknowledged that Woodward’s figures were correct.

Analysts have downgraded the shares, and Goldman Sachs suspended its rating over doubts about the company’s accounting, calling into question the accuracy of Olympus’s books over the past several years.

It hasn’t helped that three different company officials are speaking on the matter – Chairman Kikukawa, Executive Vice President Hisashi Mori and press spokesman Yoshiaki Yamada.  All have made contradictory statements, further undercutting Olympus’s credibility.

There has not yet been much focus on the Japan affiliate of Ernst & Young, the independent auditor for Olympus.  Presumably, it would have reviewed the accounts for the acquisitions in question at the time it prepared the company’s financial reports.  E&Y could face scrutiny for its role, especially if Olympus must restate its accounts.

The story shows also no sign of falling from the headlines, with the Financial Times and other business publications giving it intensive coverage.   Attention seems certain to shift to learning the identity of the firms that received the advisory fees and whether other acquisitions were done properly.  A Bloomberg report said:

“One of the advisers receiving the fees, Cayman Islands- incorporated AXAM Investments Ltd., was removed from the local registry in 2010, according to an official filing. PwC said they were unable to identify the owners of AXAM Investments.”

It also will be interesting to watch the actions of Olympus shareholders in Japan.  With the stock off some 40%, there will be growing pressure on Kikukawa to resign.  Even in Japan’s insular corporate world, this crisis is too big for shareholders to ignore.

Firing the CEO: Olympus in focus

The messy firing of Olympus CEO Michael Woodford provides another example of the challenges in communicating an executive exit.

The Japanese camera and medical-imaging company last week fired Woodford, its first non-Japanese CEO, after less than a year.  In announcing his dismissal, Olympus cited Woodford’s inability to work effectively with Japanese managers and chairman Tsuyoshi Kikukawa, the former CEO.  Woodford countered today, saying he was fired for raising questions about advisory fees paid by Olympus when it bought Gyrus Group, a UK company, three years ago.

It’s been a rough few months for CEOs.   Since the beginning of the year, 922 CEOs have left their posts, according to data from Challenger, Gray & Christmas.  September saw the departure of 108 CEOs, a 12-month high that included high-profile oustings at HP, Yahoo and Bank of New York Mellon.

But what makes the Olympus situation different from the norm is Woodford’s allegations of wrongdoing when Kikukawa was at the helm and the existence of an independent report by PriceWaterhouseCoopers that appears to support Woodford’s assertions.  Woodford has reported the matter to UK regulators.

For Olympus, which as seen its stock plunge by more than a third since the announcement of Woodford’s departure, the crisis shows no sign of easing.  It was unable to answer analyst and investor questions satisfactorily in a private call, so pressure on the stock will continue.  And the clash between an entrenched Japanese chairman and a brash outsider is a familiar narrative that will keep the story in the news.  Olympus probably will need to communicate more, not less, to end the crisis – a course seldom taken by Japanese companies.

Friday Risk Reading: Fostering a healthy risk culture

Lately I’ve been thinking a lot about risk and corporate cultures.  Some cultures produce disasters, like the massive, concealed trading loss at UBS – the most recent in a long streak of debacles for the bank.  Other environments, however, seem consistently to produce good things – valued products and great experiences.  Apple of course comes to mind in this category; Starbucks, too.   Both have cultures that nurture and sustain healthy risk-taking, and I am offering two quick items about them for this week’s Risk Reading.

I’ve written before about Steve Jobs and his attitude toward risk.  Fortunately for us, Jobs was at work on a biography before his death, bringing in Walter Isaacson, a former Time and CNN executive to write it.  Isaacson wrote well regarded biographies of Henry Kissinger, Benjamin Franklin and Albert Einstein, and his biography of Jobs promises to shed new light on an intensely private man who, despite his acclaim, was a mystery.

In an essay this week by Isaacson, he hints at what he learned:

But I later realized that he had called me just before he was going to be operated on for cancer for the first time. As I watched him battle that disease, with an awesome intensity combined with an astonishing emotional romanticism, I came to find him deeply compelling, and I realized how much his personality was ingrained in the products he created. His passions, demons, desires, artistry, devilry and obsession for control were integrally connected to his approach to business, so I decided to try to write his tale as a case study in creativity.

It sounds like it will be a terrific book.

Apple and Starbucks share several traits.  They were founded by people with a passionate desire to find new ways of doing things (having coffee and using a computer).  Both founders left and later returned to revive their companies after they’d slipped into crisis.  And both Apple and Starbucks have cultures that encourage creative, constructive risk-taking that energizes their people and produces great results for customers and shareholders.

Starbucks CEO Howard Schultz reflected on the company’s culture in an interview with the Harvard Business School last summer.  He spoke candidly about facing the company’s problems head-on:

The past two years have been transformational for the company and, candidly, for me personally. When I returned, in January 2008, things were actually worse than I’d thought. The decisions we had to make were very difficult, but first there had to be a time when we stood up in front of the entire company as leaders and made almost a confession—that the leadership had failed the 180,000 Starbucks people and their families. And even though I wasn’t the CEO, I had been around as chairman; I should have known more. I am responsible. We had to admit to ourselves and to the people of this company that we owned the mistakes that were made. Once we did, it was a powerful turning point. It’s like when you have a secret and get it out: The burden is off your shoulders.

It seems the UBS board and its executives could learn a thing or two from Schultz.