Thursday, February 21, 2002

End Runs

Prediction: Disclosure fever prompted by the Enron scandal will subside.

Posted By on Thu, Feb 21, 2002 at 4:00 AM

Now that Enron has gone bankrupt and is having its dirty linen aired before Congress, disclosure is all the rage.

Disclosure will expose the secret dealings of corporate executives. Disclosure will prevent future Enrons. Disclosure will make corporate accounting and financial statements "transparent" so that investors can prosper. Disclosure will make public corporations and their boards of directors more accountable.


Message to any corporate executive who is actually sweating this stuff: Relax. The fever will subside. Your salaries, stock options, and sweetheart deals are safe. Everything will be pretty much as it was.

All disclosure, like all politics, is local. What matters in Memphis is not what The New York Times, The Washington Post, or CBS Evening News says. What matters is what appears in the pages and programs of our local news outlets.

On that score, consider a few of the local financial stories that have not made the daily news.

There was the Edward S. Lampert story. Lampert is a money manager. You would think that a nice-looking 39-year-old guy who acquires almost one-third of the stock in AutoZone (our second-largest corporation), bullies his way onto the board of directors, forces the board to bring in new management (which jacks the stock price from $28 to $75 in one year), puts on a red sweater (good visuals), and sits in front of a roomful of employees and stockholders at the open-to-the-public annual meeting on Front Street, Memphis, U.S.A., might be news. But you would be wrong.

A couple of years ago, Tom Garrott and some other executives at National Commerce Bancorporation fixed themselves a nice little $26 million compensation package when the bank merged with another in North Carolina. It was known as a golden bungee cord, because, unlike a golden parachute, the execs got to keep their jobs. All the details were spelled out in the proxy statement. Some stockholders and old geezers at the North Carolina bank were pretty upset. But barely a word of it appeared in the daily news or the local business press.

Nonprofit organizations play a huge role in Memphis. Nonprofits are not just about widows and orphans and floods and food baskets for the needy. Memphis Country Club is a nonprofit. Rhodes College is a nonprofit. The Memphis Development Foundation which runs The Orpheum is a nonprofit. The Memphis Redbirds Baseball Foundation is a nonprofit.

Congress and IRS make nonprofits disclose their tax forms. It says so right on the front page: This form shall be open to public inspection. If you're a respectable news organization, you're supposed to take a look once in a while. But don't tell our local news hawks. It isn't news that a nonprofit can spend nearly twice as much on two salaries as it does on program services or that a nonprofit executive can make twice as much as the mayor of Memphis for running a theater or that a small-college president can make more than any of his peers or that nonprofit boards can be as chock-full of friends and neighbors and cronies and buddies as the boards of some of our local corporations.

Every year public corporations publish something called a proxy statement. It lists the salaries, stock options, and lots of other interesting stuff about the top executives and the way they run the business. Any local news organization that devotes time or space to the Enron story without giving equal or greater time to trying to clearly summarize and present the same details about local executives and corporations should have its press pass revoked.

Tunica is about to celebrate the 10th anniversary of riverboat gaming in Mississippi. This week one local television station weighed in with a breathless feature about the wonderful things that happened to Tunica. Gosh, you wouldn't think $4 million a month in casino taxes for a county with a stable population of 10,000 people would do that, would you? Was there one word about anything besides jobs and new buildings? In a word, no.

Disclosure is only part of the story. What really matters is agenda-setting, which is a fancy way of saying you're supposed to put the good stuff out where people can see it. That goes for corporations, nonprofits, and the Memphis media. CEOs can be candid and up-front about their financials or they can couch information in jargon or gibberish or bury it in the back of a proxy statement or footnote. The media can dig it out or demand it or opt for pablum and national stories. No one is excused. Weeklies and monthlies have the luxury of time. Dailies and broadcasters have the benefit of immediacy and hours of air time.

The Internet has done wonders for disclosure. Documents are easier to access. Experts and soreheads are easier to find. Message boards are full of scuttlebutt. National papers like The New York Times and The Washington Post are free and full of great stories.

But you, readers and viewers, shouldn't have to go there. You should eat at home and demand some meat in your diet.

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