Place Stock in Company Trading Policies

The premium Dow Jones & Company stock received last month from Rupert Murdoch's unsolicited bid to buy the parent company of The Wall Street Journal wasn't enough to dispel concerns from reporters and editors about the future of their newsrooms under Murdoch control.

But for those who owned company stock, it may have taken some of the sting out knowing that the stock was now worth 65 percent more than when the day started.

The mergers and acquisition mania affecting media companies can often send a company's stock gyrating -- up or down.

It also left me wondering how journalists who own company stock can benefit or avoid losses in a way that doesn't violate ethical standards.

Surely there are times when the steady accumulation of company stock pays off for the methodical investor. Business journalists are not barred from being investors; they just need to exercise sound judgment and adhere to company rules when it comes to buying and selling equities.

For the most part, business journalists know they can't own stock in a company they cover and any trading based on insider information could cost them their job, if not a visit from federal investigators. But what they can do with stock they've owned for the long haul is a different matter.

At Dow Jones, the policy requires that any stocks bought on the open market must be held for six months before being sold. But the policy doesn't apply to company stock acquired through employee stock purchase programs or matches made to the company 401(k) plan.

This means that employees who saw their company stock values shoot up in the wake of the News Corp. proposal were able to sell that stock the same day the deal was publicly disclosed. If they had sold or bought those stocks earlier than the public disclosure, it would have violated company policy.

"In making personal investments, all employees must avoid speculation or the appearance of speculation," the policy states. "No employee of Dow Jones may engage in short selling of securities."

The timing of when you can sell your company stock is fairly clear: never buy or sell ahead of public disclosure. But not all papers have those policies in writing.

In 2000, when Gannett was contemplating buying The Arizona Republic from the Pulliam family, the rumors, which the press had reported on, prompted some reporters and editors to build up their positions in company stock. They were anticipating the stock would rise if Gannett announced its intention to buy the paper.

They were right.

While they did make money when the stock value rose after Gannett's proposal to buy, those reporters and editors were disciplined and forced to pay back the gains. Some felt they had been unjustly punished because they were not acting based on insider information but published articles speculating a deal was in the works.

In a slightly different twist, The New York Times requires its staffers to refrain from buying or selling stocks based on stories coming out in its newspaper until noon Eastern time the day the story appears. The restriction doesn't apply to wire stories or news that originates elsewhere.

"Every member of the Times staff must be constantly vigilant against the appearance that he or she is abusing nonpublic information for financial gain," the policy states.

Therein lies the key: Use information not available to the public for financial gain and it could land you in the hot seat.

For Dow Jones employees, who saw their own company stock sink to a low of about $24 in recent years before its marvelous run-up, the sale of their stock now is well within the bounds of company policy.

Perhaps the Dow Jones policy is working. As far as we know, there have been no SEC probes into insider trading by Dow Jones employees.

If you were smart enough to build a position in your company through an employee stock purchase program or through matches to your 401(k) plan, you can now benefit from the inflated value created by Murdoch's offer.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism