Corporate Governance and Media: Supervisory Boards in Media Firms

Abstract

Media companies play an important role in the heated debate on corporate governance. A number of researchers argue that media has had an important lever function that helps all companies to comply with public expectations of good governance. In economic terms – the media selectively reduce the cost of acquiring and verifying information. This “transparency” is crucial since it gives stockholders and stakeholders access to information and shapes the reputation of board members who determine corporate policy.

In order to contribute to this under-researched topic, we focused on corporate governance of media companies. Due to constraints of time and space, we limited our sample to a comparison of two companies from two different countries. First, as representative of arguably the most developed media market, we have chosen US based TimeWarner (TWX). With 2003 revenues of US$39.5 billion and nearly 80,000 employees, TWX is the world’s largest media conglomerate. Offering a diverse range of consumer-oriented media products and services, TWX reaches globally diverse audiences in 200 countries. Second, and as a representative of one of the fastest growing markets, we have chosen Hong Kong based Phoenix Satellite Company Limited (PST). Revenue of the group in 2003 was approximately HK$709 million (US$91 million). Although launched only eight years ago, it has become the most popular TV news channel in mainland China with an audience of about 150 million people. We did not choose a mainland Chinese media organization given that most are state owned and operated and offer very little publicly available data. Furthermore, as mainland China’s TV stations are all state-owned, they do not conform to “free market” governance approaches. Therefore, we selected PST; a listed Hong Kong based TV company to study. It is comparable to TWX in terms of its international board members, market-oriented corporate governance, and global Chinese audience market.

While acknowledging the methodological shortcomings of such an approach, we found our case comparisons of two media companies useful for providing insights and conclusions. In order to control for country specific aspects, we decided to choose companies from two countries with essentially different political and social systems, i.e. the US and China. To compensate for the particularities of the two cases, we first reviewed literature on supervisory boards in China and the USA in general. This literature review provided important contextual grounding.

Prepared by: Robert Edgell, Balazs Harasta, Roland Pfyl, and Yingzi Xu

Keywords: Corporate Governance, Media Industry, Supervisory Boards, Media Firms