3, 20. 2006
Nihon Keizai Shimbun, Inc., Japan's leading business daily commonly known as Nikkei, announced the punishment of some of its executives held responsible after it was found out that the company's employee in his 30s of advertising division had gained profit by insider trading. But its public trust as mass media was shaken considerably. A severe criticism has risen in the economic circle questioning if the newspaper could still be in a position to attack the livedoor incident.
Various newspapers being issued by Nihon Keizai Shimbun, Inc. Nikkei employee's insider deal greatly damaged the people's faith in the whole mass media.
The employee made nearly tens of millions of yen by having traded for several months until February 2006 the shares of more than 10 firms over the internet before and after the publication of statutory announcements that made public stock splitting and other information of listed firms. This constituted insider trading banned under the Securities and Exchange Law. The employee was quoted as saying that he repeated such trading as if he had been playing a game.
Ryoki Sugita, President of Nikkei, said at a press conference that he was shocked and ashamed. He said that Nikkei issued a booklet of "statutes of insider trading control of Advertising Division" when a insider trading surfaced at one of the major firms Nikkei was doing business with. He said he told the employees to carry the booklet in their pocket. The insider trading that occurred at Nikkei was nothing but an unfair practice of the responsible employee as an individual, he said.
A Matter Of Trust For Mass Media As A Whole
Japanese corporations are required of making the "statutory announcements" by the Commercial Code to make certain that the shareholders and other persons concerned are informed of the financial reports, new stock issues, dividend payments, stock splitting and other important matters concerning the management of the corporations. It is necessary that the announcements are published by dailies and official gazettes. Making the announcements on the home pages of the internet was approved recently, but Nikkei holds by far the largest share of all the dailies in carrying such announcements.
It is no wonder, therefore, that the insider trading by a Nikkei employee came as a tremendous shock in Japan's industrial world. An employee of an automobile company said
that his company put its statutory announcements on Nikkei because the newspaper is read by a large part of its shareholders. It is outrageous for an employee of Nikkei that is powerful in the reporting of business affairs to carry out an insider trading. With a Nikkei employee is doing such a thing, the newspaper's articles themselves become unreliable, he said.
The incident came under fire of criticism from major newspaper companies also. A correspondent at a national daily noted:
"People working in mass communications are certain to get information much faster than people working in other industries. The mass communications people have the chance of obtaining the contents of the statutory announcements before they are published by newspapers. So they must have stricter ethical viewpoint than those working in the firms of other industries. Nikkei even betrayed us."
Written Oath Not To Do Insider Trading
After the insider trading by its employee surfaced, Nikkei lost no time before deciding that its managing director in charge of advertising step down to take the responsibility. The company also asked the employees of its advertising, editorial and sales divisions to totally refrain from stock trading. Especially for the employees of the advertising division, the company demanded the submission of their written oath that they would not do stock trading while they were employed by the company.
An employee working for Nikkei as correspondent faced a disciplinary dismissal (though later rehired) last year for questioning the responsibility of the company's president who was in the office when the random drafting of bills was exposed at its subsidiary, TC Works. Also, the head of the sales division of Nihon Keizai Advertising Co. , Ltd. , of which Nikkei holds part of the stock, was indicted last February after he was found to be involved in an insider trading.
Thus, it is notices there are more scandals related to business activities involving Nikkei than other national newspapers. The corporate governance of business firms is a focal point of discussion today. Nikkei, as newspaper specialized in the economic affairs, has the closest access of other companies to the financial markets. Its corporate governance should thus be examined as a firm engaged in the mass media differently from other business firms in general.
Nikkei has said in it editorials and comments that a fair and transparent securities trading has to be realized. The insider trading by its employee constitutes a serious betrayal to its subscribers.