Media: managing corporate reputation

Last year the Enron and WorldCom scandals highlighted just how costly a damaged reputation can be. It is doubtful whether the media could have detected the wrongdoings of these companies but they were caught up in, and added to, the hype surrounding many businesses which have subsequently crashed spectacularly. Senior journalists have criticised the media's cosy relationships with analysts during the boom years as resulting in insufficient criticism of certain business practices. It is already clear that business journalism is going to be harder hitting, and less accepting, in the current economic climate. As a result, reputation management will continue to move up the corporate priority list.

Recent research from the US suggests that 43 per cent of a company's reputation is attributable to the CEO. Increasingly, protecting the reputation of a company involves protecting the reputation of its CEO. As the architects of their company's strategies, the behaviour and performance of the CEO has an enormous influence on the corporation's reputation. However, building corporate reputation around one individual can have its costs. Not surprisingly, when news broke of the extent to which Dennis Kozlowski, CEO of Tyco, had been living it up at the company's expense, Tyco's share price plummeted. There are plenty of newspapers, tabloid and broad-sheet, which will delight in titillating their readers, in the public interest of course, about the shortcomings of high-flying executives. By and large the media behave as if they have a free hand and can publish with impunity, relying on their right to freedom of expression, as enshrined in English law by virtue of the Human Rights Act 1998 (HRA). However, the courts do not always share the same view.

The media did score notable successes in fighting off the claims to privacy brought by Gary Flitcroft, Jamie Theakston and Naomi Campbell during the last year. All three tried to enforce their right to privacy, which was also introduced by the HRA. However, that right has to be balanced with the conflicting right to freedom of expression and, in these cases, freedom of expression prevailed. The English courts' approach has been to treat privacy as an expansion of the common law duty of confidence and, in these cases, they decided either that the particular information did not attract the required duty of confidence, or that the disclosure was in the public interest.

The fact that a company director has misbehaved may well be protected by a right to privacy, provided that there is the required duty of confidence and that the journalist is unable to find some acceptable explanation as to why disclosure is in the public interest.

The Times tried to rely on freedom of expression in Reynolds v The Times to defend a report which was clearly inaccurate and defamatory but which it claimed it had a duty to publish in the public interest. The case went to the House of Lords where Lord Nicholls commented: "The appellant newspaper commends reliance upon the ethics of professional journalism. The decision should be left to the editor of the newspaper. Unfortunately, in the United Kingdom, this would not generally be thought to provide a sufficient safeguard". He went on to set out ten principles to be taken into account in assessing whether a journalist has acted responsibly and can therefore truly assert that publication is in the public interest, even if it turns out to be wrong. In effect, Lord Nicholls was dictating to the media what amounted to good journalistic practice including, most importantly, seeking comment from the target of the criticism and taking proper steps to verify information.

It is disappointing that only two of Lord Nicholls' ten principles are included in the Press Complaints Commission Code of Practice and this looks unlikely to change. The press' strategy of avoiding statutory regulation by the establishment of the PCC, with its voluntary code, has been successful but has recently come under considerable attack. The PCC suffered a number of set-backs in 2002, not least the resignation of its Chairman, Lord Wakeham, due to his non-executive directorship of Enron. The PCC has also been the subject of criticism because of its lack of independence (complaints to the PCC are handled by a panel of editors) and its lack of teeth. The latter point was illustrated most recently when the Sunday World simply refused to co-operate with the PCC in the resolution of a complaint. The PCC could only uphold the complaint and admonish the publication saying it was "disappointed" by the stance taken. This all added weight to the arguments in favour of the statutory regulation of print media by Ofcom.

The Communications Act looks set to come into force later this year and to bring in sweeping changes for regulation of the media. The work of Oftel, the Broadcasting Standards Commission, the Radio Authority, the Radio Communications Agency and the Independent Television Commission will be taken over by Ofcom, to provide one unified regulator for the communications industry. Most importantly, it will have power to levy hefty fines for breach of its rules. However, print media and the PCC are not included within the remit of Ofcom. The government's Culture Secretary, Tessa Jowell, has declared there is no intention to bring the press under Ofcom, describing the press as "the grit in the oyster" which should remain free to be opinionated. Freedom of the press is essential in a democratic society, but publishing inaccurate, misleading or alarmist stories is not. It is a great pity that the press will be out of Ofcom's reach, as the power of the regulator to levy fines has great potential to stop many of the excesses and recalcitrant behaviour, such as that exhibited by the Sunday World. Complaints about radio, television and satellite will now come under the remit of Ofcom. The ability to fine for breach of Ofcom's rules gives it the teeth to police standards in broadcasting but it is too early to judge how effective it will be in practice.

For further details please contact Tim Hardy at [email protected] or tel +44 (0)20 7367 2533 or Karen Marshall at [email protected] or +44 (0)20 7367 2522.