New Disclosure Rules Needed for Indonesia Media After IPO Scandal: Experts

Jakarta Globe, Ismira Lutfia | December 09, 2010

Jakarta. The full disclosure of business journalists’ stock ownership is essential for anticipating the possibility of bias in their news reporting, a media discussion group has concluded.

Lin Che Wei, a veteran capital market analyst, said on Wednesday that such a disclosure to the journalists’ media outlets and audience was necessary given the absence of protocol to deal with the issue.

“So it should be possible for journalists to own stocks in a company, even in companies whose initial public offerings they cover, as long as they disclose that in their reports and leave the readers to judge,” he said.

He was speaking at a discussion hosted by the Alliance of Independent Journalists (AJI) on lessons learned from the Krakatau Steel IPO shares-for-coverage scandal.

That controversy centered on allegations that four stock market reporters solicited bribes in the form of stock from the IPO, in exchange for positive coverage of the state-owned firm’s Nov. 2 market float.

The Press Council, which handles disputes involving the media, has since ruled there was evidence of ethical breaches and professional misconduct by the journalists in using their positions to obtain Krakatau shares.

Although the council could not determine if the journalists had eventually gotten any shares, council member Agus Sudibyo said the mere attempt to solicit payment for positive coverage was itself an ethical violation.

The journalists in question have since resigned or been fired by their respective media outlets.

Abraham Runga Mali, the online editor of the Bisnis Indonesia daily, acknowledged that no Indonesian media outlets, even the leading ones, had specific rules on journalists owning shares in publicly traded companies or moonlighting as stock brokers.

He agreed there needed to be a system of disclosure, saying journalists should at least inform their editors if they owned shares in certain companies.

“That way, the editor can decide whether the journalist in question should be allowed to report on news about the company, and if so, the editor can carefully monitor the journalist’s writing,” Abraham said.

Abdullah Alamudi, a media expert and panelist at Wednesday’s discussion, said compliance with the journalistic code of ethics should be the rule of thumb whenever there was confusion over what stories a journalist could or could not cover.

However, he said this could prove futile “since a majority of journalists have no grasp of the code of ethics.”

He cited a 2006 survey by the AJI that showed 85 percent of journalists in Indonesia had never read the ethics code handbook.

“No wonder they don’t understand or even abide by it,” Abdullah said, adding that Article 6 of the code, which prohibits journalists from abusing their profession, should be a clear enough reference to resolve any confusion over any possible ethics violations.

He suggested an amendment to the ethics code to better define the extent of journalists’ professional conduct.

“It all comes back to the journalists themselves to be honest to their editors about their family connections to or stock ownership in a company they’re covering.”

Lin said he believed the most effective way to enforce the code of ethics was to make it mandatory for journalists to take an exam on the subject and obtain professional certification.

He added that because stock market journalists in particular were privy to “materials of non-public information,” they were in a unique position to benefit from such information, which could count as an ethical violation.

“[Stock market] researchers, writers and analysts must use reasonable care and judgement to achieve and maintain their independence and objectivity.”

Lin, founder of the consulting firm Independent Research & Advisory, said ultimately stock market reporters should play it safe when they found themselves in a “gray area” such as this, in which their reputation was on the line.