Disclosure is Best

By Chris Roush
July 22, 2008

Two recent issues about the sources used by business journalists require a refresher for those who don't know proper etiquette in dealing with interviews.

First, CNBC and other media were criticized for using a consultant to talk about Freddie Mac and Fannie Mae. The network -- and other media -- failed to disclose that the consultant received part of his income from these struggling lenders.

Second, the Securities and Exchange Commission announced earlier this month that it is going after short sellers spreading rumors about companies. Sometimes these rumors make it into business stories if the reporters are talking to the shorts.

In both cases, the strategy for a business journalist is simple: Realize that everybody you interview has a vested interest in what they're talking about. It's a business story, so there's always money involved for those connected.

There are consultants in every industry, and some of them seem to do more time talking to business journalists than they do actual consulting. That's why they've earned the nickname "quote hounds." Why? They could potentially attract more business if someone else in the industry sees them quoted and they sound intelligent.

Simply put, consultants talk to business reporters because they see dollar signs.

The same rule applies for short sellers, investors who are long a stock, analysts and anyone else on Wall Street. Almost all of them are talking to business journalists about an investment because they think what they say might influence the price.

Short sellers have a negative perception because they hope the stock price will fall, but their motives are no different than other investors who talk to the media about a stock. You're calling them because they've researched the company before putting their money into it.

So, what's a business journalist to do? ALWAYS ask the interviewee whether they have any financial connection to the company. If they do have one, then disclose it the first time you mention the person. If they don't have a monetary tie, the business reporter should also mention that fact. It gives the source more credibility with the reader.

A gray area is what to do with a source who no longer is an investor -- either long or short -- in the company you're writing about. If they've sold because the price got too high or because the price fell too low, that's a disclosure that readers would gain from as well.

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