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October 19, 2004

Sinclair, boycotts, and free speech

Matt Yglesias writes:

Sinclair's stock is falling precipitously, an entirely predictable result of the management's decision to deploy the shareholders' assets in an unrelated, controversial political cause. The question, really, is less about what kind of impact this affair will have on Sinclair's profitability (though it won't be a good one) than about what kind of a person would entrust their money to managers who are this irresponsible.

Some right wingers are complaining that the a politically motivated boycott violates Sinclair's right to free speech. In fact, the boycott undermines the right of Sinclair's management to use the company as a bully pulpit.

As legal persons, corporations have a right to free expression. However, Sinclair is also a publicly traded company. Therefore, the company's directors have a legal responsibility to the shareholders to put profits first. The directors simply have no right to knowingly sacrifice profit for any principle. As Matt points out, Sinclair's management is either unwilling or unable to follow their prime directive.

The corporate profit imperative may ultimately doom the human race, but it gives me a certain grim satisfaction to see it cut both ways.


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Geez, duh. I know our right-wing fellows are not prone to -spection, intro or extra, but a boycott of this sort doesn't violate anyone's right to free speech. "Congress shall make no law. . .", not "liberals shall shut up and watch what we tell them". If one does not care for a company's product, one does not purchase it; it doesn't get more free market than that.

I couldn't agree more.

The 'wingers seem to think it's immoral to try to bankrupt a company because you disagree with its politics. They think that we're maliciously manipulating their pure free market for our grubby political ends. Actually, we're just helping rational investors see where their true interests lie. My right to free speech includes pointing out all the reasons why Sinclair is a bad investment. If I own stock, I have the right to sell it for whatever price I want. If I'm looking to buy, I shouldn't pay much stock in a company whose directors act as if they don't care about profits.

It is the effectiveness of the campaign that interests me. As a working journalist, I have been waiting more than 40 years for media consumers to wake up and start using their considerable power. Finally the prairie fire is ignited. Now we'll see how dry the tinder is.

Wow, Steven, I guess it really does interest you.

Yeah, though, I'm curious about the same thing. If the effects are pronounced enough, and are noticed by the public at large, we may well see an interesting shift in things. It's notable, as well, that these tactics have not, in the past, worked against institutions espousing liberal viewpoints. E.g., Disney's support of gay couples hasn't noticeably hurt their bottom line any more than Eisner's mismanagement. Whether this is a quality of the different issues, Disney's prominence over Sinclair's, or the difference between a media empire and a broadcast company is something I can't answer.

Sinclair can, should, and actually IS putting principle before profit. No, I don't agree with the principle, but it is heartening whenever a corporation (or an individual for that matter) does what they feel is right rather than coddle to the fiduciary prerogatives of share holders. To say that "the company's directors have a legal responsibility to the shareholders to put profits first" is simply false. For example, the company has responsibilities which could, in certain circumstances, come first: abiding by criminal statutes, maintaining basic functionality, delivering the product, ensuring stability, etc. Further, we can only guess that Sinclair's current behavior is self-destructive. It could be a risky – but planned – strategy for long-term success. Boycotts are notoriously ineffective in the long-term, and Sinclair is probably right in their assessment that this one can be weathered. Bill Maher is back on basic cable again, after all.

If they're putting principle before profit, then their stock is worth less. The markets don't care about Sinclair's principles, they care about Sinclair's capacity to deliver return on investment. Once everyone knows that Sinclair's management cares more about ideology than about profit, rational investors will pay less for their stock. That effect is far more durable than any deliberate boycott.

Maybe they are pursing a risky strategy. But if so, they are pursuing a high risk/low return strategy. If Kerry wins, they're absolutely screwed. If Bush wins, they will win friends in high places, but they will alienate about half of a bitterly polarized country in the process, not to mention Wall Street analysts, investors, politicians, and advertisers. There's no huge payoff in this for Sinclair, even if they get large regulatory concessions.

Kelly, Sinclair's stock price is dropping like a stone, so it's pretty clearly not a winning move. They're at just over $6, down from $8 last week and $15 earlier this year.

Beyond that, company's shouldn't be doing "what's right" to influence political elections, and in particular broadcast corporations have a responsibility not to manipulate the media in order to favor one candidate over another. It's a violation of the public trust that gives them access to the airwaves, as well as, in this case, a violation of the shareholders' stake in their continued profitability.

Of course a company's only responsibility is not to their shareholders; I do believe that most companies favor their shareholders over their employees to an unconscionable extent, and you're right that they are required to follow laws (among which is the common law requiring them to act in their shareholders' interest) and ensure other aspects of their product. What makes this so deliciously ironic is that the right-wingers who so adore the free market are screaming bloody murder now that the free market is demonstrating that something that could unfairly benefit them politically is economically unviable.

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