Bashing democracy's bulwark

A free press is the last bulwark of democracy. And Morgan Stanley is bashing away at its foundation.

On May 18th it was reported that Morgan Stanley would pull advertising from newspapers and magazines that report “objectionable” stories about the company. Of course this is not the first time a company has tried to punish a newspaper. In April, GM pulled advertising from the LA Times after it wrote a negative story about the company.

And on May 20th, it became clear that Morgan Stanley was not only trying to use its money to control the media's message, but also the actions and words of its former employees. Morgan Stanley's $13 million carrot is designed to shut down its former executives' participation in the debate over CEO Philip Purcell's future with the firm. And with their silence, these executives have clearly decided that they are willing to give up some freedom in exchange for Purcell's money.

However, Morgan Stanley and GM may find that the media is less compliant. And through their efforts to shut down debate, they are doing themselves more harm than good. Let me count the ways:

1. The advertising they pulled might have helped offset the negative impact of the stories
2. The move displays a surprising naïveté about the way newspapers separate the business and editorial sides
3. Whatever pressure the advertising side might bring to the editorial side to tone down criticism of advertisers will do nothing to minimize editors’ compulsion to scoop their competitors – and will probably annoy the editors
4. The policy reinforces investors’ perception that their management is so weak that it would rather squelch discussion of their problems than solve them – adding to downward pressure on their stock

Morgan Stanley and GM are taking a cue from other parts of our society – if you don’t like what you read about yourself in the media, twist its arm until you do.