Volume 6, Number 8

VANCOUVER STOCK EXCHANGE: A Report to the Matkin Commission on Media Coverage

IN AUGUST 1993, THE NATIONAL MEDIA ARCHIVE WAS approached to conduct a study examining the media's portrayal and coverage of the Vancouver Stock Exchange. The request was made by Don Hudson, president of the VSE, as part of the Exchange's submission to the Matkin Commission--the provincial government-ordered inquiry into the role and responsibilities of the VSE and the B.C. Securities Commission. The Matkin Commission is interested in what image the public has received about the stock market from local and national media.

At issue is whether the VSE has received balanced reporting by the press. As recently as September 28, the VSE essentially black-listed their most tenacious critic, the Vancouver Sun's market reporter David Baines. The stock exchange and member companies felt that Baines unduly focused on the negative aspects of the Exchange and its listed stocks. This move by the VSE is quite remarkable when one considers that over half of sources that provide positive assessments of the VSE are in fact the VSE representatives.

However, by Baines' own admission, he refuses to do positive stories on companies listed on the exchange. In a Vancouver Sun article Baines states: "I've found that when I write positive stories, readers view them as buy recommendations, and promoters use them to lever the stock. . . . This isn't my idea of responsible journalism, especially when you consider how many VSE deals self destruct." [Hogben, David (1993) "Don't talk to reporter David Baines, VSE instructs employees," Vancouver Sun, September 28, p. A1.]

While On Balance has often noted the occupational bias journalists have in favour of reporting negative news, no reporter has so blatantly admitted their desire to consistently report the negative aspects of an institution to the exclusion of other items. In view of the fact that David Baines is responsible for over half of coverage of the exchange in the Sun his views are an important determinate of local print coverage of the VSE. However, while much attention has been paid to Mr. Baines' influence, a key question is whether his reporting differs from that of other reporters at the Sun and from those at other news organizations.

To answer this and other related questions, this study examines the Vancouver Sun and Globe and Mail attention to the performance, regulation, and reputation of the Vancouver Stock Exchange, including stocks and management, during 1992. In addition, CBC and CTV national television attention to the exchange from 1988 to 1992 is also analyzed.

TV Ignores Pineridge Collapse

WHILE ALL THE MEDIA OUTLETS ADDRESSED the scandals that have been associated with the stock exchange, television and the Sun were more likely to focus on individuals than was the Globe and Mail. Over one-quarter of CBC, one-quarter of CTV and almost one-quarter of the Vancouver Sun's total attention to the VSE examined the actions of individuals associated with stocks on the Vancouver Stock Exchange. In the Globe and Mail, individual actions and responsibilities were discussed in 17 percent of total attention to the VSE.

Click here to view Figure A: Attention to the VSE

The collapse of Pineridge Capital Group was identified in five percent of the Sun and almost one-quarter of the Globe and Mail's attention to the VSE. As David Baines reported in December 18, 1992: "Pineridge is a VSE holding company, which . . . has interest in an eclectic array of money-losing companies such as Cross Pacific Pearls and Unilens Vision. . . . For reasons not quite clear, the stock prices of Pineridge and its subsidiaries soared last year. Then, for reasons equally unclear, they began to plummet this year." Neither CBC nor CTV reported on this company's collapse. The referendum on the Charlottetown Accord was being fought during this time and consequently little else in the way of domestic issues were reported.

". . . the record lows [in the VSE index] are due to . . . the result of a rotten reputation, of weak securities rules and poor enforcement."

Probably the most significant difference in attention to the VSE between print and television news is that the print media regularly examine the performance of individual stocks. On television, the performance of stocks, i.e., how well a stock performs on the exchange, comprised only 5 and 7 percent respectively, of CBC and CTV attention. In contrast, performance of stocks constituted 15 percent of the Globe and Mail and 16 percent of the Sun's attention to the stock exchange.

Although the performance of individual stocks is not regularly reported on television, when it is reported, the coverage is balanced or predominately positive. However, performance of the stock exchange is not typically presented on televisions news. As a result of these two factors, scandals and controversies tend to be emphasized and viewers are left with a negative impression of the exchange.

The VSE's reputation was emphasized more in television than in the newspapers. One-fifth of both CBC's and CTV's attention to the VSE examined its reputation. The Globe and Mail and the Vancouver Sun discussed the VSE reputation in nine and eleven percent respectively of total attention to the VSE.

The various regulatory inquiries and agencies with control over the VSE comprised between three and six percent of all media examined. Of the coverage of the regulatory agencies, half of it in the Globe and Mail and the Vancouver Sun and on CBC was neutral, while ninety percent of CTV's coverage was neutral. Reports typically described that an agency had taken action. For example, on November 17, 1992, David Baines reported: "On Monday, the B.C. Securities Commission issued a cease trade order against company president Steven Greenwald and chief financial officer Jay Greenwald." On CBC and in the Globe and Mail the majority of assessments were unfavourable. For example, in an October 2, 1990 report Ian Hanomansing stated: "But long-time critics say the record lows [in the VSE index] are due to more than the fate of one man. They say it's the result of a rotten reputation, of weak securities rules and poor enforcement."

CTV's assessments were all favourable. In assessing the regulatory agencies, the Vancouver Sun was only slightly more unfavourable than favourable.

The administration of the VSE--specifically, their regulations of the market, investigations and surveillance, public relations efforts and halting of trading--was discussed in one-tenth of CTV's, the Globe and Mail's and the Vancouver Sun's attention. CBC identified these measures in only five percent of total attention to the VSE.

Management of VSE Stocks Comes Under Fire Only in Sun

THE MANAGEMENT OF VSE STOCKS WAS A PRIMARY theme in the reporting of administration and performance of the VSE. Between one-fifth and one-third of the discussion on the operations of the VSE assessed and described the management, ownership and reputation of stocks listed on the VSE. As figure B shows, while CTV and the Globe and Mail provided overwhelmingly positive assessments of the management of companies listed on the VSE, and the CBC provided equal number of positive and negative evaluations, the Vancouver Sun was twice as likely to present negative as positive aspects of the organization of companies listed on the VSE.

Click here to view Figure B: Management of Stocks

News ignores biggest controversy: shell stocks

Ironically, one of the biggest challenges the VSE faces in regulating stocks on the exchange was virtually ignored in media coverage of the management of stocks. While the media emphasized the management and ownership of the companies, they failed to indicate whether the companies were shell stocks. According to the B.C. Securities Commission chair Doug Hyndman "Many of the high-profile frauds and manipulations have resulted from reverse takeovers or changes in the business of shell companies." [Saenger, Ellen (1993) "A tired public relations ploy," B.C. Report, October 4, p. 24.]

Shells stocks refer to repackaged companies that acquire an existing listing on the exchange by reverse-take over instead of by applying for a new listing.

In the four media in this study combined, there were only 21 instances where the reporter described the situation where a firm that started out as the pursuer of one commodity changed to other commodities, often from resource to venture capital. Instead, the media examined general issues such as credibility, management, and promotion of stock. Coverage of these companies assumed that the reader or viewer had foreknowledge of the key element of controversy.

Performance of stocks reported in neutral manner

As previously mentioned, television did not regularly report the performance of individual stocks listed on the VSE. It did, however, comprise 16 percent of the Vancouver Sun's and 15 percent of the Globe's total attention to the VSE. As is shown in figure C, over three-quarters of the Globe's and two-thirds of the Sun's discussion of stock performance was neutral, simply describing an increase or decrease in the price. Of evaluations, the Vancouver Sun provided slightly more positive than negative evaluations. The Globe and Mail presented positive evaluations in four out of every five comments. Similarly, on the rare occasions that television news reported stock performance, they, too, provided more positive than negative evaluations.

Click here to view Figure C: Performance of Stocks

The nature of reporting stocks is that large changes are more often reported than small fluctuations. Since many of the significant changes in the exchange occurred when the VSE index increased, reporters described dramatic rises by positive verbs such as soared, jumped, or skyrocketed.

VSE credibility damaged by reporter receiving death threat

The direct reputation of the Vancouver Stock Exchange was poor in all media coverage examined (figure D). Probably the most damaging image reported in the papers came in October 1992 when David Baines, the Vancouver Sun reporter covering the exchange, received a death threat as a result of his coverage of the exchange. Although the VSE vehemently denounced the threat against Baines, the image of an institution emersed in shady dealings solidified.

Click here to view Figure D: VSE Reputation

The threat to Baines was only one of many events in which intense national and international attention was focused on the exchange. Seemingly, the most destructive and vehement international attacks launched against the VSE were from American publications.

All of the Canadian media quoted a Forbes magazine article by Joe Queenan describing the VSE as the "Scam Capital of the World." The Vancouver Sun, however, repeated the strongest charges against the VSE. For example, on October 28, 1992, Alan Abelson, the editor of Barron's magazine was quoted in the Sun: "The VSE is the kind of thing you expect from pre-emerging markets, from nascent capitalist countries." A few days earlier the Sun quoted Joe Queenan describing the VSE "as putrescent . . . the most odiferous exchange in the civilized world."

What is interesting in the assessments of the reputation of the VSE is that although all media repeated the international criticisms of the VSE, only the Sun continued to quote them years after they were first printed. The Forbes and Barron's articles were written in 1989, yet they continued to be used in stories in 1992, primarily to give added credibility to stories criticizing the VSE.

Also, it is an interesting question as to the role which the Sun's local coverage of the exchange plays in determining the context of international coverage, which in turn is a central focus of Sun coverage.

TV and the Sun Focused on Scandals and Flamboyant Personalities

ONE-QUARTER OF CTV, OVER ONE-QUARTER OF CBC and almost one-quarter of the Vancouver Sun's total attention to the VSE examined the actions of individuals associated with stocks on the Vancouver Stock Exchange. In the Globe and Mail, individual actions and responsibilities were discussed in 17 percent of total attention to the VSE.

As figure E shows, assessments of individuals associated with the VSE on CBC and in the Globe and Mail were twice as likely to be negative as positive. Ninety-five percent of the Vancouver Sun's assessments of managers, promoters or insiders of stocks listed on the VSE were negative. Only CTV presented equal numbers of positive and negative evaluations of individuals associated with the VSE. An example of the positive coverage occurred on CBC's Venture on April 17 1988: "Peter Brown, the Czar of Howe street, also known as Peter the Rabbit, lives like he expects to see his name in the paper. As the flamboyant chairman of Canarim Investments, he built his Vancouver company from nothing to the biggest player on the Vancouver Stock Exchange. And at times the largest grossing brokerage house in Canada. He also built notoriety as a wheeler-dealer, who takes corners a little faster than most. A guy with 70 pairs of Gucci loafers knows he makes great copy. Living up to his image as the driven deal-maker, Brown wants more territory. He's got plans that are too big for Vancouver."

Click here to view Figure E: Actions of Individuals Associated with the VSE

Similarly, on 9 July 1990, CTV's Henry Kowalski reported: "He is arguably Canada's most flamboyant stock promoter. Murray Pezim does everything in a big way. He builds big mansions. He throws big weddings and goes through big divorces. He's big on the sports scene and he's very big on the Vancouver Stock Exchange."

While television painted these individuals as exciting entrepreneurs, the Vancouver Sun was more likely to report whether an individual broke stock exchange and securities regulations.

METHODOLOGY

Results are based on a census sample of 401 Vancouver Sun and 71 Globe and Mail stories for a year period commencing January 1, 1992 and ending December 31. In addition, 5 National, 5 Journal, 1 Prime Time News, and 10 Venture stories as well as 9 CTV National News stories from January 1, 1988 to December 31, 1992. All stories appearing during that time were coded, representing a total population rather than a random sample of stories.

Two researchers coded the news stories. To assess the clarity of the research instrument and measure consistency, tests of inter-coder reliability were conducted throughout the procedure. A high level of intercoder reliability (0.90) was obtained.

Further information or details on the coding design and methods may be obtained by contacting the National Media Archive.

Reporters Present Few Sources

IN COVERING THE STOCK EXCHANGE, REPORTERS DID not quote sources very frequently. Sixty-nine percent of CBC, 70 percent of CTV, 80 percent of the Globe and Mail and 77 percent of the Vancouver Sun statements originated with the reporter. Of the sources used, the VSE administrators were able to present their position directly more often than other players.

The various regulatory agencies, such as the B.C. Securities Commission were cited in one-fifth of both the Globe and Mail and the Vancouver Sun's sources. Only six percent of CBC's and CTV's sources were from regulatory agencies. Individual corporations provided information in 18 percent of the Globe and 20 percent of the Sun's sources statements. One fifth of CBC's, but only three percent of CTV's sources were company directors.

Click here to view Figure F: Sources

David Baines' Coverage Consistent With Sun's Overall Attention to VSE

IN ITS EDITORIALS THE VANCOUVER Sun frequently praised the work of its reporter David Baines in scrutinizing the legitimacy of VSE stocks. They cite his many journalistic awards and his impact on the exchange. Baines' admission that he does not consider positive news stories about the VSE to be responsible journalism, indicates that he sees his role as a stock market cop. By definition, this role entails that Baines only reveal suspect stocks while ignoring strong stocks. However, there is an expectation that the Vancouver Sun would examine reputable companies on the VSE in other stories.

But the Sun's negative reporting of the VSE was not confined to David Baines' reports. A comparison of Baines' statements with all other statements in the Vancouver Sun reveals little difference in coverage. Over one-third of Baines' statements and those made by other reporters were neutral. But of assessments, Baines was four times as likely to be critical as supportive of the VSE and its listed stocks. All other evaluations in the Sun were more than three times as likely to present unfavourable as favourable assessments.

The difficulty with the Vancouver Sun and Baines' desire to uncover wrong-doing is that legitimate companies receive little commentary, and in fact, by association are given unbalanced, negative treatment. In consequence, the public has no way, from media accounts, of judging the number of legitimate stocks on the VSE. With Baines and the Sun emphasizing the negative, readers assume that all stocks, future and past, are suspect.

Television and the Globe and Mail frequently note that the VSE has become more reputable in recent years. The many inquiries, investigations, and criminal charges against insider traders for example, were taken by these media as an indication that efforts are being made.

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Last Modified: Wednesday, October 20, 1999.