Should journalists and IPOs mix?

A San Jose Mercury News columnist's suspension reveals less about ethics than about the newsroom's changing balance of power.

Published July 27, 1999 4:00PM (EDT)

Most of the time Chris Nolan, who writes the San Jose Mercury News' Silicon Valley gossip column, gathers the buzz from the technology industry and serves it up to her readers with a hard-bitten edge worthy of her profession's "Front Page" tradition. But this past week she has become an object of newsroom conversation herself: Her paper suspended her because she'd participated in an Internet initial public offering and pocketed around $9,000.

What Nolan did was "flip" some shares in AutoWeb's IPO, shares she had bought on "friends and family" terms offered to her by the company's CEO, who, she has said, is an old friend. In other words, she got an insider's opportunity to buy the AutoWeb shares at their initial offering price -- and when the stock price soared, as Internet stocks have been known to do, she sold for a profit.

In the annals of Silicon Valley finance, $9,000 isn't exactly a sum to e-mail home about -- it is, for example, less than the market value of venture capitalist John Doerr's tie, as determined by cash-flush Net entrepreneurs at a recent charity auction. But among journalists, $9,000 is significant; $9,000 is something to ponder, and question, and weigh, and maybe lose your job over.

At first glance, the issue in Nolan's case seems pretty straightforward: Conflict of interest is a bad thing. Journalists shouldn't invest in companies or industries they write about. Editors need to enforce ethics in the newsroom. Nolan got nailed for violating the basic rules of her profession. End of story.

But is that the right story here? First of all, there are some details that just don't jibe: Nolan -- along with friends who have set up a Web page to make her case -- maintains that she never wrote about AutoWeb in her column, and that she fully disclosed her investment to the editorial powers-that-be at the Merc. Furthermore, she intended to write about the experience of participation in IPO frenzy in a piece for Fortune magazine, which she says Mercury editors knew about. One aspect of the Mercury's ethics policy that Nolan is charged with violating covers investments in "local" firms -- but on the Web aren't all businesses local?

As conflicts of interest go, Nolan's is a murky one -- there are clearly some troubling aspects, but it's hardly an open-and-shut case. One can't help thinking that what really got the Mercury News brass upset wasn't Nolan's transaction itself but the Wall Street Journal gossip item that first reported it. What might have remained an internal matter suddenly became a matter of credibility for the newspaper and a public-relations black eye. Heads must roll!

Nolan's punishment makes a lot more sense if you think of it not as a conflict-of-interest story but as a conflict-of-cultures tale. Sure, there are ethical issues here -- but what really gets people worked up are the emotional issues.

A quote from Nolan in the Journal's item provides a neon pointer to why this story has touched a nerve in newsrooms everywhere: "We don't take vows of poverty and chastity when we go into the newspaper business," the columnist declared.

In truth, going into the newspaper business as a writer or editor has long been the functional equivalent of taking a vow of poverty. You wrote your articles, collected your salary and stayed "pure" enough to write about whatever story came along -- unless, of course, you wanted to write an investigative exposé of a powerful local advertiser.

Employers in print journalism have long inculcated a sense of vulnerability in their staffs: Be grateful for your job -- if you make trouble, there's a dozen journalism school grads panting for your desk. That psychology works just fine as long as writers and editors don't have somewhere else to go.

Now that the Net has become a "somewhere else" for restless journalists looking for alternatives to lifetime tenure in the city room, newspaper companies are in a tough spot. On one side, they are being threatened by a new medium that has already begun to seize their classified ad revenues and their role of providing raw information like stock quotes, sports scores and weather; on the other side, their talent pool is being drained by a new industry that invites greater risk from its workers and promises greater potential rewards.

This is the backdrop to Chris Nolan's little stock deal. Whatever the specific rights and wrongs of her AutoWeb escapade, it's a sign of the new prosperity some technology reporters enjoy, and that really gets under some observers' skin. Maybe Nolan did everything by the book, maybe she didn't; either way, she serves as a whipping boy for the tut-tutting of old-line news hounds who resent the changes that the Internet is bringing to their business.

None of which is to say that conflict of interest rules are a tired relic that should be thrown on the trash heap with the old linotypes and lead slugs. The Web is rife with new kinds of ethical conflicts. At a recent industry conference, former exec Lisa Crane quoted a colleague: "The Internet's all about conflict of interest -- that's how we do business." Portal sites sell link space; content sites partner with merchants; everyone's in bed with everyone else. Typically, however, these conflicts aren't the sort easily covered by policies about reporters' personal finances -- they're woven into the essence of Internet business plans.

The good news is that the dynamic of information flow on the Net makes it very hard to hide such conflicts for long. Rather than try to hide them, smarter institutions are learning to protect their credibility by disclosing early and often.

My own disclosure here: I write as a 10-year veteran of a newspaper (the San Francisco Examiner) that competes (sort of) with the Mercury News. I left the newsroom nearly four years ago for Salon and the Net, so you know which horse I've bet on. I think it's a good thing for writers and editors to have an ownership stake in the new companies that are growing on the Net (as I and others here at Salon do): It gives them more power and more opportunity to plant their professional values in this new turf. Is that my self-interest speaking? You can judge that for yourself.

As Salon moves to cover the business of technology more fully we are formulating our own ethics policy to cover the investments of writers and editors. Such rules need to be firm but realistic: Journalists who cover the Internet economy are going to participate in it, though you may not want them investing in specific companies they report on -- just as journalists who cover politics are going to have their own opinions and vote, even though you may not want them contributing to specific candidates. Ethical rules are for protecting the trust between writers and readers; to pretend that journalists aren't human beings with their own lives and interests only makes such rules unenforceable and faintly ridiculous.

In fact, the journalistic "vow of poverty" serves nobody except big media corporations: It doesn't so much keep writers honest as leave them helpless. Journalists who are afraid of losing their jobs are at least as likely to make ethical compromises as those who play the stock market -- but the lapses of the former are likely to be those dictated by the interests of their employer. It's only when journalists as individuals begin to make choices that the newspaper management suddenly gets the ethics religion, as with Chris Nolan.

The irony in Nolan's story is that if the Mercury News decides to fire her -- or, say, permanently reassign her to the Milpitas night desk -- she will probably have six good job offers waiting the next day. Any reporter with her Silicon Valley Rolodex is in heavy demand right now. That's why, despite all the noise Mercury editors have made, I won't be surprised to see her back on her beat after some face-saving compromise before too long.

What galls newspaper executives about the Nolan affair is that they have lost some of the leverage they used to have over individual journalists, at least in Nolan's field and any other that the Net touches. We formerly ink-stained wretches now have a lot more power and freedom. That means we have more responsibility to our readers, too -- and if we screw up, they will use the Net itself to expose our missteps. In the meantime, the Knight Ridders and Gannetts and News Corporations of the world are sleeping a little less soundly, and that can't be all bad.

By Scott Rosenberg

Salon co-founder Scott Rosenberg is director of He is the author of "Say Everything" and Dreaming in Code and blogs at

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