New ethics for the new economy?

Technology journalists aren't supposed to own stock in the companies they cover. But to participate in the high-flying tech sector, some are writing a new definition of "conflict of interest."

Published August 6, 1999 4:00PM (EDT)

Full disclosure: Two weeks ago, I watched go public and it pained
me. It was one of the hottest IPOs of the year, from a company I'd been
following for more than a year, and I couldn't buy even one share of the stock. Why? Because I abide by that holy grail of journalism, the church-and-state law of my profession: Avoid conflict of interest. Personally, I don't believe that ownership of stock would prevent me from writing scathing reports about the company or affect my reporting on other technology companies, but that argument just doesn't float in journalism. Just look at what happened to Chris Nolan.

The former Silicon Valley gossip queen for the San Jose Mercury News has
been sent into exile, stripped of
her popular "Talk is Cheap" column and moved to the newspaper's outlying
Peninsula Bureau. Her cardinal sin: accepting discounted friends-and-family
stock from the CEO of AutoWeb and selling it for a tidy profit of $9,000.
The CEO is an old friend of hers, she says, and she had never mentioned
AutoWeb in her column; still, she is paying dearly for that $9,000. Her
editors, who failed to advise her against accepting the stock when she
asked for their guidance, have also been reprimanded.

Nolan's predicament has the technology journalism industry abuzz -- and not
just about whether it was right or wrong for her to accept the stock. Like
Nolan, many people in technology journalism have poked a finger into the
entrepreneurial pie -- some own technology stocks or Internet-oriented
mutual funds; others have moonlighted for tech companies, as consultants
or writers of technical "white papers"; a few sit on the boards of tech companies, or of
their own start-ups.

Journalism, after all, is not where the big money is, and many technology
writers would like to afford a life not too different from the lives of the
entrepreneurs and technologists they write about. Some have begun to ask
themselves if journalists must be barred from the profits the rest of
society is making by investing in tech stocks. What if, they ask, the
stocks are only tangentially related to their reporter's turf of Silicon Valley? As tech journalists dabble in entrepreneurship and investing, some are reinterpreting the traditional rules governing conflict of interest. What was once a matter of black-and-white ethics has lately turned a murky shade of gray.

"There are a handful of time-honored principles that we all learn in Journalism 101. They aren't part of some policy. They're expected to be in our blood," David Yarnold, the executive editor of the San Jose Mercury News, recently wrote in an editorial defending Nolan's dismissal. "It's only human for a journalist covering technology to be tempted by the vast wealth in this valley, and that's an argument for ongoing and clear discussion about what's permissible and what's not."

It's a valiant ideal, to think that ethical behavior is in every
journalist's blood. In fact, this principle that lives so close to the heart of the profession is not governed by any formal creed or law. Avoiding the appearance of conflict of interest is, of course, of paramount concern to any publication that wants to maintain credibility with its readers -- and most journalists understand that they shouldn't cover any subject that might have an impact on their personal life. Movie critics shouldn't review their friend's films, and tech or business journalists shouldn't report on companies in which they hold stock. But since there's no professional qualifying exam or oath you take to become a journalist, it's pretty much up to the journalists themselves and the publications they work for to define the rules.

The ethical guidelines for journalists' investments are far from
standardized among newspapers, magazines and online services. Some publications merely forbid journalists from investing in "local companies," or companies that they write about, or companies in the industry that the journalist covers; others forbid their writers from owning any individual stocks at all. Some prohibit their writers from doing consulting work for companies in the industry they work for; others merely ask for disclosure.
Some publications don't even have an ethics policy. The lack of
standards means that when you ask technology journalists what they think is
proper, you get some divergent opinions.

Compare, for example, these two definitions of ethics from two different
technology journalists. The first, a freelancer, believed that "Anyone who covers business shouldn't invest in anything but mutual funds, or it's unethical." Another, a magazine editor who owned technology stocks, felt that "It's all right as long as there's no crossover -- and what I would invest in has nothing to do with what I write about."

Some tech journalists certainly don't feel compelled to steer clear of investing. Take Joey Anuff, who makes no attempt to hide his day-trading practice -- he is co-authoring a book about it, even as he is editor-in-chief of the snarky industry meta-commentary site Suck. Then, there's Michael Behar, an editor at Wired magazine who primarily covers science issues, but says he
owns a handful of long-term technology stocks. There's James. J. Cramer,
the founder and lead columnist of, who often writes
commentary about the stocks that his fund invests in -- and therefore
includes a lengthy disclosure notice at the end of each column. There's
Marshall Loeb, currently the editor of the Columbia Journalism Review but soon to depart
for a job as a personal finance columnist for CBS Marketwatch, who sits on the
board of the Internet company Priceline. Each of these people would argue
that there's no conflict of interest in what they are doing.

Viewed through the lens of journalism's traditional ethics, some of these
practices sure look fuzzy. But the old rules are hard to apply to the new
economy. Take, for example, the old ethics standby of "don't invest in
companies that are in the industry that you cover." For technology
journalists, this can be tricky -- just consider how many "non-Internet"
companies now have prominent Internet plays. Is Disney a technology
company? AT&T? Viacom? And what about online publications which are also
public companies, like CBS Marketwatch,, Wired News (owned by Lycos), and CNet , not to mention; they are both members and chroniclers of the Internet economy. If journalists like myself who work for these companies own stock or have options in these companies, can we claim to have no conflicts of interest? The most stringent interpretation of journalistic ethics would argue that, as participants in the sector, we shouldn't write about the Internet -- or that if we write about the Internet, we shouldn't participate in our companies' incentive stock option programs.

It's no wonder that the industry is questioning -- and revising -- its approach to ethics.

"You're in the thick of Silicon Valley. This isn't 1925, when nobody owned stock but the owners and wealthy capitalists," says Michael Malone, the editor of Forbes ASAP. "Now it's almost impossible to remain completely chaste on this. Even with your 401(k) you make choices," says Malone, the proud owner of some very valuable eBay and Seybold founding shareholder stock -- stock that he was granted during consulting and freelance work before his time at Forbes ASAP. Is this a conflict of interest? Nope, says
Malone -- he simply refrains from writing about either company unless it's from a first-person, full-disclosure perspective.

Besides personal holdings, Malone adds, there's the issue of journalists with spouses who work in the industry or own their own technology stocks. He points out that one contributing editor at Forbes is the wife of Jim Clark, who not only founded Netscape and is chairman of Healtheon, but reportedly has invested much of
his $435 million net worth in Net stocks. "It's so messy right now that the
only viable solution is absolute full disclosure," says Malone. Forbes' ethics policy, he says, is "no speculation -- no friends and family, no flipping, no day trading." But owning long-term stocks is just fine, as long as you haven't written about the company.

The safest investment routes for journalists have long been mutual funds and "blind trusts" managed by independent outsiders. Reporters at, for example, are only allowed to invest in these kinds of funds. But the current crop of index funds -- which disclose that a large percentage of their holdings include America Online, Microsoft and Cisco Systems, for example -- don't always get you around the "don't invest in your sector" rule.

"Even newspapers which sometimes have very rigid policies that you can't own individual stocks would let reporters invest in mutual funds," says
Peter Petre, the executive editor of Fortune magazine. "Do you let them buy a Net fund? An infotech fund? You could say there are conflicts there."

Fortune's own ethics policy, he says, merely instructs reporters to avoid individual stocks in companies they write about and to "always ask your editor" when other situations arise; reporters also aren't allowed to change their position in companies that the magazine is currently featuring.

Fortune, incidentally, wasn't concerned about newspaper ethics when it
assigned Chris Nolan to write about trading her AutoWeb stock; this story
assignment -- when reported by the Wall Street Journal -- is what cost Nolan her job.

Judy Lewenthal, managing editor of Business 2.0, says that her company's
ethics policy is particularly muddy on these issues, and she's organizing
meetings to clarify what reporters can and can't do. But, she says, she's sensitive to the concerns of writers who want to participate in the hottest investment sectors of decade. She hypothesizes: "If I had
liquid money, where would I put it? The place where I get the best returns. But by essence of being an editor at a computer magazine I can't invest in my future?"

Beyond the sticky question of owning stocks, there's the issue of work that journalists do outside of their day jobs -- writing technical "white
papers," consulting, even starting their own companies. More and more
journalists are being wooed towards the more lucrative business path --
sharing the sentiments of former Wired editor Todd Lappin, now working at, who
says he "was tired of writing about business
plans; I wanted to execute one. You feel you know as much about this as
anybody -- these people you encounter are certainly no smarter than you.
Our access to information as journalists is about as good as anybody's."

Rebecca Eisenberg, a columnist at CBS Marketwatch and the San Francisco
Examiner, also works as a consultant and owns a few technology stocks --
although not in companies, she says, that she has ever written about. She
also is the president and CEO of a brand-new start-up called Chemis -- a
fact she has prominently promoted in her Examiner column. "If I, as a
columnist covering the Internet industry, know so much, why am I living on
columnist wages?" she wrote in June, griping about ex-boyfriends driving sports
cars bought from IPO riches before explaining that she was going to "break
from the writerly mold" and embark on her own start-up.

But is the very mention of her company in her column a conflict of
interest? Free press would certainly appear to give Eisenberg's start-up a
leg up over the competition. But Eisenberg says she has no conflict of interest; her column, she points out, is supposed to be an insider's view of
the industry, much the way Cramer's columns at are intended to
be from a investor's point of view. "My column has always been marketing for
the brand called me; in that respect, nothing has changed," says Eisenberg.
"On one hand, I need to disclose that I'm back in the business world; on
the other hand, I need to not overdisclose so that it looks like I'm being
a marketer."

Freelancers, like Eisenberg, are in the trickiest of positions: There is no
company ethics policy to which they must adhere; they have only their own morals and
principles to guide them. It is rare that an editor will ask a freelancer about
investments; it is up to the freelancer to disclose them. As a result,
this question has journalists like Po Bronson in a quandary.

"I don't know what the rules are and I don't want to do anything wrong. I
have no one here to tell me," Bronson says. "I used to trade this stuff --
I know what to do. I just can't do it anymore; my money is now parked in
index funds. I wish the laws were clearer so I could be advised."

There are probably plenty of freelancers who are quietly investing in tech
companies they are writing about; some may not even know they shouldn't.
One technology journalist I spoke with said he had bought stocks in
companies like Microsoft and AOL while on staff at a prominent technology
magazine that didn't have a written ethics policy. While he knew it was a
dubious practice, "there was no explicit rule against it," he says. "I
didn't think it was a good idea not to have a policy, but there was none.
Having sat on the sidelines for years watching pretty predictable things
happen to the stock market, I thought I would do something about it."

Of course, he is hardly alone. "I've had lots of discussions with
journalist friends who cover technology in the valley who have said that 'so-and-so day trades on the job,'" says Stephen Buel, a former journalist
at the San Jose Mercury News who recently departed for a technology
start-up. "I have heard those types of stories from a multitude of
organizations throughout the valley."

Perhaps the clearest indication of how fuzzy the principles of ethics in
journalism have become is the range of responses to Chris Nolan's
predicament. Among the more than a dozen technology editors and journalists
I spoke with, there was no consensus about whether she violated any ethical
code by accepting the friends-and-family stock. Many in the industry feel
that she did something questionable, but that fault also lies with the
editors, who didn't immediately prevent her from going ahead with her plan.
Others see no conflict as long as Nolan hadn't written about the company. And others, like one writer I spoke to, are adamant that she committed an act of wrongdoing: "When you do become a journalist you have to make a decision that if you want to have credibility you shouldn't be trading stock in the industry that you write about, period."

Meanwhile, Nolan is fighting for her column and compensation through her
union, the Newspaper Guild; she insists that she did nothing wrong. "I
didn't think it was going to be an issue because it's a longtime friend,
not a source," says Nolan, who says the AutoWeb incident was the first time
she had ever even opened a brokerage account. "This was an unusual set of
circumstances -- the intersection of my business life and personal life.
And to make sure it was fine I went to my editors ... You run a fine line
because you want to say, let your conscience be your guide, but in many
cases that's not enough. You need editors to guide you."

Several current and former Mercury News reporters told me that the ethics policy of
the San Jose Mercury News is a dust-covered document that is rarely
mentioned. The newspaper's policy hasn't been updated since 1984 and might not have been looked at any time soon if the Journal hadn't reported on Nolan's stock holdings.

But the onus is on these publications, says Columbia Journalism Review
editor Marshall Loeb, to update ethics policies once or twice a year to
address these kinds of situations -- potential conflicts that no one could
have envisioned 10 years ago. As he explains, "The world of business and
the economy is so dynamic and rapidly changing these days that codes have
to be established and, in addition, have to be reexamined with some
frequency to make sure that they are current and fulfilling their function."

Almost everyone agrees that for journalistic ethics to work, there must be
rules that everyone understands, signs and agrees to. Of the magazines and
news services that I polled, several had ethics policies that were out of
date, rarely discussed or simply nonexistent -- riding instead on
principles that are "understood." Some, including, are writing
their own ethics policies in the wake of the Nolan incident. The question
is whether those rules will be flexible enough to anticipate new issues
that will surely arise in this fast-paced industry, where the
lives of journalists are increasingly entwined with the people whom they
write about and the companies that they cover. Or must all technology
journalists simply accept that by joining the writer corps they are
taking an oath to disavow the temptations of technology riches?

"The only solution to all this is absolute full disclosure. It's so huge,
it's so vast, the stock market so interpenetrates all parts of daily life,
that the only way we can deal with this thing in an honest way is to
disclose it, put it all out there," sighs Forbes ASAP's Michael Malone. He
envisions a database of the investments and projects of every reporter in
the industry: "If someone would want to publish everyone's stock holdings
in the press, I'd participate."

By Janelle Brown

Janelle Brown is a contributing writer for Salon.

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