A Harvard economist was invited by the New York Times to write about stock build-ups in the United States. He penned a prediction saying the stock market would crash.

Upon review, The Times did not run the article, calling it too alarmist. One year later, in 1987, the market crashed.

That economist, John Kenneth Galbraith, is among scores of sources cited in an academic treatise on financial journalism published 15 November. It’s a time-consuming read but worth the printer ink.

Galbraith’s experience with the NYT is typical of the world of financial reporting as presented in the study, What is financial journalism for? Ethics and responsibility in a time of crisis and change.

According to this POLIS report, boosterism and group think plague business sections in the United Kingdom and United States.

The “digitally driven speed” of reporting in the Internet era exacerbates this tendency, as does the proliferation of public relations professionals.

This in-depth examination of the business journalism landscape begs many questions, chief among them: Are financial journalists to blame for the credit crisis?

No. For once, the report states, we can’t blame ‘the media’. But:

“Whilst the causes of panics and corrections, like other forms of market behaviour, ultimately lie in economic fundamentals rather than media representations, reports by the media and by financial journalists do have a role, and they have come under increasing scrutiny during a succession of shocks to the financial system since 2006.”

Journalists, it seem, struggle to define the public for which they write: investors (institutional and individual) or the public at large.

There are wide implications when working for either audience, obviously, including the impact journalists may have on market behaviours.

If journalists do have an impact on markets, ethical concerns are raised: Should journalists be allowed to own stock in the companies they cover? In the sector they cover? Which disclosure policies are most appropriate – internally and externally? How transparent do journalists need to be?

Anyone who is familiar with the salary afforded journalists, though, will appreciate this anecdote from the paper:

• Interviewer: So you have to be very clean.
• Editor: One hundred percent, squeaky clean.
• Interviewer: That means you don’t own any stocks.
• Editor: No. I have only debts.

The 30-page dossier ends with a call for a UK-specific improvement to the field of financial reporting:  the problem of defamation risk facing business journalists who risk being sued in a legal system that favours the plaintiff.

“Many argue that business journalism faces particular challenges, in
part, because of the imbalance of resources between struggling media companies and
large companies with larger budgets for legal fees.”

This suggestion will no doubt be debated on 23 February in London at an evening seminar associated with this report.

Published: December 18, 2008