Partisan Journalism at Fox News: Stockholders and Democracy

Roger Ailes “is the most successful executive in television by a wide margin, and he has been so for more than a decade. He is also, in a sense, the head of the Republican Party, having employed five prospective presidential candidates and done perhaps more than anyone to alter the balance of power in the national media in favor of the Republicans. ‘Because of his political work’—Ailes was a media strategist for Nixon, Reagan, and George H. W. Bush—‘he understood there was an audience,’ Ed Rollins, the veteran GOP consultant, [said in 2011]. [Ailes] knew there were a couple million conservatives who were a potential audience, and he built Fox to reach them.’ For most of his tenure, the roles of network chief and GOP kingmaker have been in perfect synergy. Ailes’s network has dominated the cable news race for most of the past decade, and for much of that time, Fox News attracted more viewers than CNN and MSNBC combined. Throughout the George W. Bush years, the network’s patriotic cheerleading helped to marginalize the Democrats. . . . The problem wasn’t that ratings had been slipping that much— [Glenn] Beck’s show declined by 30 percent from record highs, but the ratings were still nearly double those from before he joined the network. It was that, with an actual presidential election on the horizon, the Fox candidates’ poll numbers remain dismally low (Sarah Palin is polling 12 percent; Newt Gingrich and Rick Santorum, 10 percent and 2 percent, respectively). Ailes’s ­candidates-in-­waiting were coming up small. And, for all his programming genius, he was more interested in a real narrative than a television narrative—he wanted to elect a president.”[1] The last sentence of the quoted passage is particularly revealing: “(H)e wanted to elect a president.”  With Beck’s 30% drop in ratings still leaving him with a profitable rating, Ailes’ motive was not commercial, neither was it to improve the network’s journalism. Typically, news networks are criticized for sacrificing good journalism for commercial interests. Here, journalistic integrity and profit played second fiddle to partisan objectives. 

To be sure, this case can be used to illustrate a point regarding stockholder (property) rights. Were Ailes’ political strategy that of his network's stockholders, this case could be used to point out that the default that profit enjoys in corporate governance can be nudged aside as another use of the wealth is given preference.  A corporation’s owners can legally and ethically decide that their collective corporate wealth can be used in the service of political or social objectives. The owners of Ben & Jerry’s, for example, made selling ice cream not just about profits. Theoretically, a company could limit profit to that which is necessary for the company to continue—with the remaining profits to be spend on whatever aims the stockholders choose. Even "sustenance" profits could be held in abeyance as non-economic objectives are pressed--for example, at Fox News during a U.S. presidential election season. 

In terms of journalistic ethics, however, Ailes' claim to "fair and balanced reporting" even as the editor wants to use the news network to elect a president is internally inconsistent. To the extent that the American media became partisan (e.g., MSNBC as liberal and Fox as conservative), the mission of journalism to report the news in an unbiased way so views and readers can make up their own minds has been compromised in the United States. This can be seen by contrasting American news coverage with its European counterparts in the E.U. 

The trajectory in the American case since Ailes' comments in 2011 had admittedly been so gradual and without the perspective of a Walter Cronkite or Harry Reasoner that Americans could be left with taking the new normal as journalism itself rather than as containing a subtle decadence. Put another way, if a viable republic must have a virtuous and informed/educated citizenry of the self-governed to be viable over the long term as Thomas Jefferson and John Adams agreed, then the onslaught of ideological demigods in journalistic seats ostensibly informing the public can be regarded as the proverbial canary in the coal mine. "Bad air!", Nietzsche would say of the feckless, self-serving instinctual urges running rampantly under the subterfuge of objectivity.  

1, Gabriel Sherman, “The Elephant in the Green Room,” New York Magazine, May 22, 2011.

Rating Moody’s and S & P: A Structural Conflict of Interest

For years, banks and other issuers have paid rating agencies to rate their securities. This is a bit like restaurants paying food critics to write on their food.  In the wake of the SEC’s charge that  people at Goldman Sachs built the Abacus investment to fall apart so a hedge fund manager, John A. Paulson, could bet against it, the Senate’s Permanent Subcommittee on Investigations questioned representatives from Moody’s and Standard & Poor’s about how they rate risky securities. Carl M. Levin, the Michigan Democrat who heads the Senate panel, said in a statement: “A conveyor belt of high-risk securities, backed by toxic mortgages, got AAA ratings that turned out not to be worth the paper they were printed on.” Throughout the testimony, the institutional conflict of interest was salient whereby credit-rating agencies put market-share considerations foremost in rating securities presented by the banks that are paying the agencies.

The full essay is at Institutional Conflicts of Interest, available at Amazon. 

The E.U.'s Membership in the U.N.'s General Assembly: An Oxymoron or Reality Catching Up?

On May 3, 2011, the United Nations’ General Assembly passed Resolution 65/276 by a vote of 120 to 0 (with two abstentions—countries subject to E.U. sanction). The resolution makes the European Union a non-voting member of the General Assembly. As such, the E.U. can “be inscribed on the list of speakers among representatives of major groups and be invited to participate in the Assembly’s general debate, in accordance with the order of precedence and the level of representation.” The E.U. is also “able to present oral proposals and amendments, which, however, would be put to a vote only at the request of [a voting member].” Hence, the E.U. membership is without the right to vote, co-sponsor resolutions or decisions, and put forward candidates. In other words, the E.U. has been granted a sort of “quasi” status commensurate with the world’s notion of the E.U. as a “regional organization”—whatever that means.  I contend that this misunderstanding of what the E.U. is has led to the resolution giving the union a quasi-status in the General Assembly even as another such union, the U.S., enjoys not only voting membership in the General Assembly, but also a veto on the Security Council. In short, the world is confused on the E.U. and the resolution bespeaks this condition.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

Government Debt and Deficits: The U.S. and E.U. Federal Systems Compared

The willingness of U.S. Government officials to print money rather than tackle tough debt-cutting measures is in sharp contrast to the approaches to relieving the public debts in the E.U.  The state of Ireland, for example, nearly doubled its package of spending cuts and tax increases in 2010 to rein in its huge deficit.  Even so, borrowing costs in the states of Spain, Portugal and Greece spiked upward again in late 2010 and in 2011 amid bailouts by the E.U. via contributions from the state governments. The issues are as much political as economic.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

The E.U. States on Bailouts and Immigration: Where Lies the Vulnerability?

The history of the E.U. and its predecessor, the EEC, can be characterized as a series of fits and starts. For example, at one point France vetoed the accession of the U.K. as a state. Before long, Britain was in and the EEC could step forward. At another point, the proposed “constitutional treaty” was voted down in referendums in two states. A few years later, the Lisbon amendment was ratified and the E.U. could adjust, albeit piecemeal, to being larger. Without knowing the overall pattern in this history, one could easily take one of the backward steps for the demise of the union. Even an awareness of the pattern is not sufficient to arrest doubts. Moreover, a back step can be of sufficient symbolic value that it breaks even the “fit and start” pattern with truly dire consequences. Given the overall pattern, however, it is difficult to discern such a baleful symbolic move back.

The full essay is at Essays on the E.U. Political Economy, available at Amazon.

Wall St. Bonuses and TARP: A Tale of Two Cities

Wall Street profits totaled $21.4 billion during the first three quarters of 2010. The prior year's record of $61.4 billion was fueled by the bailout financed by American taxpayers. Wall Street paid out $20.3 billion in bonuses on the 2009 profits. According to New York City Comptroller John Liu, "The astounding recovery of financial firm profitability in 2009 has been followed by a mixed year in 2010, yet total compensation in the industry is expected to be up modestly once year-end bonuses are paid." Goldman Sachs’ CEO Lloyd C. Blankfein and his top subordinate executives collected about $111.3 million in stock in January 2011. It was a delayed payoff from 2009 and the bank’s record-setting 2007 bonuses, according to a Bloomberg News report. Within a year after the bonuses had been approved, Goldman Sachs took $10 billion from the U.S. Treasury, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs, Bloomberg reported. In 2010, the bank paid $550 million to settle U.S. regulators’ fraud charges related to a mortgage-security company sold in 2007.

The full essay is at "Bonuses and TARP."

When the Campaign Eclipses Governing: A Matter of Values

In the mix of politics and government in any republic, stretches of governance are marked off by much shorter electoral seasons.  As decision-points, election campaigns are not designed to be of a considerable duration, particularly relative to that of governing.  In other words, the point of elections is governance, whereas the objective of governance is not (and thus should not be) elections. The reason is that the function of elected representatives is to govern rather than to run yet again. When the interstices become the long lines, and the long lines are reduced to interstices, one can expect popular fatigue from incessant fighting and frustration from a lack of attention on governing.

In April of 2011, American news networks were claiming, “2012 has officially begun.” There was a conflict of interest in the assertion because the media stood to gain viewers from brewing controversies among the candidates for president. Both the candidates and the journalists stood to gain from the increased attention.  In early May, for example, The Huffington Post attempted to turn the story of Obama’s killing of Osama into one of electoral politics in the “upcoming” 2012 election. “The daring nighttime raid that killed Osama bin Laden in Pakistan draws a sharp contrast between President Barack Obama and a field of potential Republican challengers who have comparatively scant foreign policy experience.”[1] The key word here is potential. Might it be more prudent to wait for the challengers to officially announce and start actively campaigning before analysis of a “determined” set of candidates is commenced?

Moreover, the attempt to steer the foreign policy story into the field of electoral politics implicitly suffers the opportunity cost of attention being diverted from other foreign policy questions that are related to the death of bin Laden, such as whether Pakistan knew of his compound and whether U.S. foreign aid should continue. The otherwise greater intensity of coverage on Pakistan's role might have made the difference in upping the pressure to the point at which someone in Pakistan with the inside scoop would have cracked and spilled the beans on what Pakistani government officials had really known.  

One of the few downsides of a free society is that media distractions can run far and wide--even snowballing without taking root. To the extent that representatives are either behind such distractions or are pressured to join them, a republic is vulnerable to excessive democracy (the bad side of the demos identified by Plato and Aristotle with the mob). The American citizenry may be too prone to vicariously enjoy the fights of a campaign (the modern day version of going to the statium to watch the gladiators?) while finding the civic responsibility of keeping attuned to the governing (or at least letting the representatives govern in peace) too boring and banal--not sufficiently stimulating in an age of "reality" shows playing out on television. Must the lowest denominator rule in a republic?

As another example of campaigning eclipsing governing in the context of governance, the health-insurance reform in 2009 and 2010 can be cited. The question of whether there should be a government alternative to private health insurance companies quickly gave rise to health-insurance-company-sourced talking points on death-panels thrown to partisans like Sarah Palin, who was not involved in the governing. Also, whether Barak Obama was a socialist was staged as a sideshow oriented to the campaigning realm. For whatever reason, it was difficult for the media (and presumably the viewers) to stay on point even when policy makers were trying to determine the merits of a public option.  In other words, even having representatives oriented to policy discussions may not be sufficient to keep a restless media and citizenry attuned. However, even some of those representatives might have believed their policy positions to be strengthened from a campaign-oriented digression. In an open society, multiple entrance points exist for self-interested distractions.

To be sure, citizen participation during the intervals of governance is not necessary in a republic; the problem is when citizens’ diversions enabled by the media (and/or government officials) eventuate in the governors turning to campaigning even without an election in sight. A crucial difference between representative and direct democracy is that in a republic governance is delegated to representatives. In other words, the citizenry is not obliged to remain engaged once governance again takes over after an election. This does not mean, however, that the citizenry must take the bait when some representatives are tempted to divert from governance by starting the next election cycle too early. Nor does it mean that elected representatives must take the bait from some journalists who suspect a wider viewership (or readership) could be obtained from stirring up campaign controversies even years before the next election.

Perhaps the underlying question is whether a representative democracy necessarily succumbs to the lowest common denominator, or whether a citizenry has the requisite impulse control to maintain the viability of the political system by refusing to distract the governors from their governing (or to take the bait from bored or campaign-oriented officials). It is essentially a matter of what the citizenry values: the duration wherein representatives govern or the titillating excitement of a childish fight at the expense of governing. The funny thing about a republic is that what we observe in our representatives can be a reflection of ourselves.  We blame them exclusively at our own folly. In other words, it takes two to tangle. If there is an adult in the house, perhaps we could get on with governing.

1. Charles Babington, “GOP Presidential Field For 2012 Maintains Foreign Policy Void,” The Huffington Post, May 5, 2011.

See Jeff Zelleny, “Obama Will Move Political Operations to Chicago,” The New York Times, January 20, 2011.

Osama Killed by Obama: What Does American Patriotism Stand For?

On the day after Osama was killed by Obama, people in the American states were united in a feeling of pride for their union. Midway through a run at sunset, I paused beneath an American flag. I was caught not out of breath but by the distinct snapping sound of lazy flapping noises as the flag rolled in the light breeze. I looked up and stared at the red, white and blue performing its series of rolls. The fabric was much more alive than that stiff, wired flag still on the surface of the moon. A flag is meant to be alive—literally carried along as troops advance on a battlefield. Today’s flags hanging off still poles next to restaurants and car dealerships can hardly capture the dynamic energy of victory. To be sure, such victory was hinted at the night before as people ran hither and dither carrying flags in celebration outside the White House. It had struck me in watching the joyous scene how rare such clear-cut victories are.  It is a pity that some enemy must die for such clarity to be celebrated in a spirit of unity.

Looking up at sunset at the American flag—a symbol that has seemingly always been around—I wondered what it really stands for. What values cling most firmly to it?—nevermind the principles that are formally entailed in it. Turning to look at the auto business sponsoring the flag, I noticed a large sign displayed high up across one of the building’s walls above the repair garage: “Free Courtesy Cars for Customers with Select Insurance Companies.” My mind instantly leapt to “Free health-care for citizens with select health insurance only”—the others don’t get any. Is monetary-based exclusion the American way? What does that flag say about those who are not among the select? Is the red, white and blue referring to people living here who have money—the others just sort of existing here as though permanent aliens?

As my eyes were about to go back up the flag pole, I noticed that between tree trunks the naked sun was just about to touch the ground. Heaven would meet earth for a split-second before the ground ate into the perfect circle. I thought of Ben Franklin’s comment at the end of the U.S. constitutional convention in 1787 as he was wondering aloud whether the sun painted on the back of the presider’s chair was rising or setting. It would be ironic if on the day after a great military victory I associated the setting orange disc with the bright colors waving above me; something about the “select insurance companies” wording on the wall of the sponsoring company was giving me a proclivity to do just that, even as I felt a sense of pride in my eyes being drawn to the power in the movements of the giant fabric above me.

After my run, I briefly spoke with an auto-plant worker visiting from Michigan. He had been watching the Detroit Tigers play the Yankees.  He was disappointed in his team because even with a $200 million payroll, they had lost to Minnesota (I think). Of course, the Yankee organization knew how to put out the money to buy talent. The Tiger fan put it more bluntly. “The Yankees buy championships.” For a fan to reduce baseball teams to their payrolls seemed odd to me. Do fans in other regions of the world reduce sport to money, or is there something distinctly American about it? Whereas in Europe player captains receive championship trophies, team owners tend to get the honor in America. Clearly, a subtle difference in the value of wealth (and money as a motivator) distinguishes the United States from the European Union. Might wealth itself be what America is known for as a society?—a people obsessed with valuing money?

Can we go so far, moreover, as to conclude that the American flag stands for money? If so, did the patriotism evinced in the wake of Osama’s death reduce to dollars and cents? The political uncertainty that comes with terrorism is unquestionably bad for business. Even so, the sense of justice achieved through the execution—we could not even risk a trial—stood on the principle of an eye for an eye. Money, it could be said, was put in the service of a normative debt to be paid for the loss of innocent lives even though they could never be retrieved. However, it is difficult to see how the patriotism evinced reduces to greed.

So what does the American flag really exude? Patriotic confidence? An in-crowd based on wealth? Perhaps some other set of values that can only be observed from a distance? What does the diverse empire of fifty republics united in an extended republic stand for? Is there a common denominator or is the patriotism of victory an artificial construction based on convenience?  I suspect that these questions will go unanswered until or unless Americans are called on to sacrifice, for it may be that the value of self-denial is too far removed from what the flag has come to represent.

See related essay involving the impact of killing Osama on Obama's ability to preside.

Leadership at Lehman: On the Failure of Richard Fuld

The failure of Lehman Brother suggests that too much power may go with formal position while non-positional leadership in organizations is not given enough of a chance to check the excesses of office. Richard Fuld could take advantage of much having to do with his formal position so he would not have to lead. In contrast, a competent subordinate, Mike Gelband, faced a considerable headwind in trying to lead through persuasion without the benefit of a position trumping Fuld’s own.

The full essay is in Essays on the Financial Crisis, which is available in print and as an ebook at Amazon.

Related Essays:

 "Fuld's Arrogance at Lehmen: Systemic Risk"

"Lehman's Dick Fuld as the Antagonist in the film, 'Too Big to Fail'"

"Fraud as Fair: Lehman as Beneficiary of Society's Pro-Business Cultural Values"

"Executive Stature: Glimpses of the Man Behind the Curtain"

"Lehman Bros: Insufficient Accountability in Corporate Governance"

Paper Tigers: Firewalls Forestalling Institutional Conflicts of Interest

Structural, or institutional, conflicts of interest are of great significance in applied ethics, even though they often play second fiddle to the conflicts centered on a person’s particular interests. An organizational or institutional conflict of interest, whether within one organization or in the arrangements between organizations, is not any less unethical than a personal conflict of interest.  Therefore, when we take the claims of vested organizational interests that their internal firewalls are more than just paper tigers at face value, our foolhardiness can really be at our detriment. I present a few cases to suggest that “firewalls” in an organization to prevent it from a conflict of interest are, in general, insufficient and thus ought not be relied on. Instead, the public (or government regulatory agencies) should insist that one of the two interests in an institutional conflict of interest be given up.

The full essay is at Institutional Conflicts of Interest, available at Amazon.