Now hear this: When senior-level media veterans sit on
corporate boards, companies get better press, and more
favorable press, in the wake of sensational events. Thats
not conjecture but fact, according to a new research paper
entitled, Price of Publicity, by Umit Gurun, an
associate professor at the University of Texas in Dallas. Even
in the advent of new media, this edge persists.
Institutional Investor contributor Steven Mintz
spoke with Gurun recently about his research and its
1. What started you down this road?
Earlier academic literature shows that board members with
special qualifications bestow advantages. Scrutiny is more
informed and networks are more extensive. Companies with
bankers on their boards, for instance, enjoy an edge when
dealing with banks generally, from an advisory or monitoring
standpoint. Attorneys often confer beneficial effects on legal
matters before companies.
Given these correlations, I wondered if a board member with
media chops improves media slant more news coverage and
more favorable content when bad news breaks. If firms with
media experts are more successful in doing so, we should not
only see more coverage but also more favorable coverage of a
firm with a media expert on the board than one without after
one of these events.
2. How did you handle the
We identified 1,200 media experts. In that group, around 500
serve on boards of public companies. Its a finite talent
pool, which rules out filling board seats at every company with
someone savvy about media. But at the same time, its a
large enough sample to furnish statistically significant
evidence of a trend we suspected. An econometric model added
routine variables: firm size, geographic location, growth rate,
institutional ownership and analyst coverage, among others.
Then research examined media coverage in the wake of two
kinds of events that garner media attention: news pertaining to
product safety and employee safety. We looked into whether
coverage and news slant varied where media experts joined
boards more than a year before events occurred.
3. What did you find out the bottom
Public companies with a media expert on their boards
received 40 percent more media coverage, or seven more news
articles a year for an average company in the sample. The news
thats reported also includes 25 percent fewer negative
words compared with articles on control firms.
If a board of directors includes a media expert then news
coverage is more likely to follow a press release within five
days of a press release. What I found is that if you have a
board member with media expertise, your press releases are 10
percent more likely to appear in the news. That means, for an
arbitrary example, if a company does not have a media expert,
its press releases might get covered in the news 20 percent of
the time. A company with media chops on its board should see
coverage 30 percent of the time. If there is an Internet effect
after 2002, it is partially captured by sample.
4. Wouldnt you say there is a quid pro quo
element to some results?
A fraction of this effect may be quid pro quo if board
members who control media help shape a media message by
influencing their own outlets. Far more often than not, though,
an "effective press relations hypothesis" intervenes: Board
members with media expertise furnish direct and indirect links
to the media that lowers information acquisition costs for
5. So do you foresee demand for writers and editors
on corporate boards?
Journalists hoping for board appointments can stand down.
The benefits extend only to board members who are current or
former media owners, directors and top executives.