As a way of saying thank you for the Pulitzer, the Journal has opened up its backdating archives. You can read all about the scandal, starting from the very first story published thirteen months ago. (Has it only been 13-months? It seems like we’ve been writing about backdating forever. Oh, right. That’s because DealBreaker started just eleven days later.)
This video--which we found thanks to Barry Ritholtz--is actually a good introduction to backdating, and good background on how the Journal discovered the story and pursued it. In many ways, it is superb journalism, and congratulations are due to the reporters who performed it. Rather than purely old-school investigative journalism—the kind that relies on leaks, anonymous sources and (possibly) manipulation by government agents—the Journal’s backdating coverage was a new style of investigative journalism. They took the work of academics and applied it to the real world of business and individual corporations and corporate leaders. As academics increasingly note the costs of Sarbanes-Oxley and the dangers of criminalizing agency-costs, there might be hope that this kind of investigating the arguments of academic reporting may help enlighten the public rather than add more confusion and ignorance.
And there is little doubt that a lot of the reporting on backdating was poorly reasoned and misleading. The worst of it came not from the Journal but from reporters and editorialists who tried to make up for what they lacked in original findings by adding more outrage and inferring even more criminality. There still are many out there who believe that backdating somehow proves that corporate is under-criminalized.
“Much reporting has made it sound like backdating was the equivalent of executives taking erasers and white-out to their paychecks to add a couple of zeroes -- and public understanding still suffers from this bum steer. But all that backdating comes down to is a nonmaterial accounting irregularity (yes, readers, accounting rules should be obeyed!) involving a defective judgment about whether ‘in the money’ options needed to undergo expensing,” Holman Jenkins wrote in an article that all but indicted his own paper’s coverage.
Why did the backdating story get reported like this? The outcome was probably over-determined. Scandal sells papers whereas reports about nonmaterial accounting defects do not. It also wins prizes. But something more than that was in play, as well. And that something is a political agenda. It is clear from the video is that the Journal reporters see the backdating story as just a smaller part of the struggle for truth, justice and reducing executive compensation.
But don’t take our word for it. Listen to leading Wall Street Journal backdating reporter Charles Forelle.
“Besides the individual who may face jail sentences or SEC sanctions, there’s the broader issue of executive compensation being thrown into the limelight again,” Forelle says around the five minute mark in the video. “Companies are starting to show at least a glimmer of thinking more carefully and more intelligently about how they give options to CEOs since options are by far the instrument that’s caused the majority of the rise in CEO pay over the last couple decades.”
A Pulitzer for A Perfect Payday [Wall Street Journal]