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.