Holman Jenkins on Gretchen Morgenson

For almost seven months now I have been chronicling the travesties of the NYT's Gretchen Morgenson – every single column, as well as most of her stories the NYT presents as "news." I have found a lamentable string of distorted, disingenuous and sometimes downright ignorant writing all designed to stir reader anger against her targets -- mutual fund managers, CEOs board members and the like.

Morgenson knows she can keep a lot of consumers of mainstream news dropping coins in those slots by playing to her readers' prejudices. The Times, for whatever reason, does not seem to care that Morgenson's writing falls far below the measure of the Times' historic franchise. Morgenson's columns also damage the public interest by preparing fertile soil for misguided regulation attacking executive pay, regulating hedge funds, mandating "shareholder democracy."

It's been a lonely job. My posts are sometimes linked by other blogs, but even with that I'm reaching a few hundred readers while millions read Morgenson.

At last, some help, and the source doesn't surprise me – the WSJ's Holman Jenkins. As I've written many times over the years, Jenkins has not been afraid to challenge his colleagues' conventional wisdom, including most recently over backdating, the story his own paper has been riding to death.

Today, Jenkins takes on Gretchen Morgenson. He begins with Morgenson's story from December 18, 2005, "The Boss Actually Said This: Pay Me Less" (from before my weekly fiskings began). Here Morgenson talks about a CEO who turned down stock options because his father told him "'don't ever feel that you are worth it.' I don't want him to say that to me again."

It turns out that Jenkins had been offered the story, but passed on it when he learned some additional facts -- the executive has a big stake in a privately held company and so doesn't need the options as an incentive, and the "father" was a Tyco board member and mentor of Dennis Kozlowski who suffered in that debacle. These facts surely muddy the story's general message about excessive executive pay.

Jenkins "waved the story off -- knowing the source's next stop was the Times." He notes that "[n]ot a word about any of this made it into the Times's lengthy rendition, which simply quoted from the letter at length, treating it as a deus ex machina from the corporate world, a CEO spontaneously decrying the greed of his kind. "One Wall Street executive atop a fast-growing firm is saying no to the piles of pay that make corporate America's world spin so splendidly," said the piece."

[Jenkins doesn't mention the additional tidbit from the Times story that "Arthur Levitt, the former chairman of the Securities and Exchange Commission and the head of the compensation committee at RiskMetrics, found it notable enough to send to me, a sharp critic of runaway executive pay." The former SEC Chair is, of course, part of the stable of corporate governance reformers for whom Morgenson is a convenient and uncritical outlet.]

Jenkins adds:

It was no surprise when the same byline turned up again a few weeks ago above a front-page story airing allegations that John Mack, now the head of Morgan Stanley, had helped a hedge fund engage in insider trading. Many paragraphs down, the story acknowledged there was no evidence that Mr. Mack had possessed insider information, or that insider trading had occurred. Rather, the story was apparently justified simply because an ex-SEC attorney, positioning himself a "whistleblower," claimed he had lost his job because his superiors were afraid of antagonizing the prominent Mr. Mack by allowing the attorney to question him. The attorney, the older brother of a rabblerousing San Diego politician and lawyer, had once achieved modest fame suing developers and contractors on behalf of homeowners. At the improbable age of 64, he sought a job as an SEC staff attorney enforcing the securities laws, from whence he brainstormed up the Mack allegations and then lost his job, all in 12 months.

Jenkins notes that the story has all the earmarks of a "whistleblower" using an enforcement agency "to pursue a private agenda."

There's an additional problem with this story Jenkins doesn't mention. The Times ran Morgenson's Mack story as a "news" story, though it obviously was closely connected to her opinion stories on hedge funds and the SEC’s supposed failure to prosecute insider trading. As I noted at the time, "Morgenson's editors are complicit in boosting her credibility by cross-posting her between opinion and reporting."

Finally, Jenkins applauds the efforts of Hassan Elmasry, a mutual fund manager who led a fight to withhold votes from Times directors and is proposing to end the Times' dual class voting system that gives the Sulzberger family control with less than a 5% equity stake. Jenkins notes (something that Morgenson in a similar situation would not) that Elmasry manages a Morgan Stanley fund. But Jenkins adds that the campaign began the Mack allegations came out, and that the fund has held the Times for a decade.

Elmasry's strategy is to police companies that don't protect the reputations that led him to invest in them. And surely that strategy is relevant here. Jenkins wonders why

Times editors allow such stuff into the paper? Do they wave it through because it might prove personally inconvenient to try to stop it? Do they believe they have more pressing things to worry about than what appears in the newspaper?

And of course, Elmasry's campaign is precisely the sort of story about "shareholder democracy" that Morgenson would pounce on.  Apparently it's too close to home -- not part of the news that's "fit to print."

One big thing is missing from Jenkins story: he nowhere mentions the name of the Pulitzer Prize winning columnist who is responsible for the stunts he describes.

It's time for the reputable press to pull off the gloves and give us bloggers a hand in exposing their colleagues. The mainstream press's only chance to survive in a digital era is to leverage their resources into the production of a higher quality product, one that amateurs like me can't match. Letting their franchises be tarnished by the likes of Gretchen Morgenson cannot be the future of a successful New York Times. Maybe Elmasry can make this happen by freeing the grey lady from the cold hands of the Sulzberger family.

Comments

[AMac]

Where is the NYT's franchise holding? There's John Burns in Baghdad, and Nicholas Wade, the best reporter on the science beat.

But examples like the one cited in the post here are too common. For another instance, see the Times' extensive and misleading coverage of the Duke Lacrosse Rape Case. Arguments and references at KC Johnson's blog:
http://durhamwonderland.blogspot.com/2006/08/times-open-letter.html

[jack]

Your blog was the first thing I thought of when I read the Jenkins piece. It's very nice to see some of your efforts rubbing off!

[Mary Ashby Morrison]

Another great posting. Glad to see someone not bowing at the feet of Arthur Levitt as a "corporate governance reformer".

Arthur Levitt was Chairman of the SEC in 1997, when the SEC granted Enron an exemption from investor protection laws. The SEC exemption allowed Enron to set up an unlimited number of off-balance sheet partnerships (SPEs) where Fastow committed his frauds. Arthur Levitt's SEC granted the Enron exemption at the urging of the House Energy & Commerce Committee under the leadership of Rep. Billy Tauzin (R-LA), Rep. Jim Greenwood (R-PA) & Rep. John Dingell (D-MI).

Although Andersen was never the auditor of any of these SPEs, court testimony shows that Andersen required Enron to obtain advance SEC approval for individual SPEs before allowing Enron to utilize the SPEs. Court testimony further indicates that in many cases, the SEC agreed with Enron's more aggressive accounting rather than Andersen's more conservative accounting.

Arthur Levitt was chairman of the SEC during this period and he, along with the House Energy & Commerce Committee, after enabling the Enron fraud, led the attack on Andersen. They did this despite their knowledge that Andersen was never the auditor where the frauds were committed. Now Levitt & politicians posture as "reformers".