The business - Patrick Hosking thinks reporters aren't so lazy

Dame Marjorie Scardino is wrong: the personality of the chief executive is a better guide to the cha

I hesitate to accuse Britain's most powerful businesswoman of talking hogwash, but I think Dame Marjorie Scardino has got things awry in her recent criticism of financial journalists. The chief executive of Pearson, which owns the Financial Times, has accused reporters of not working hard enough.

Commenting on Enron and other scandals in an interview with the Royal Society of Arts Journal, she says: "I do think the business press - and I include the FT in this - has not worked hard enough to ferret out these stories."

She laments: "If journalists were better at reading balance sheets, some of these things would be discovered sooner. We could have done a lot more digging. But business journalists often don't know a lot about business. It's a shame, but that's the case." Dame Marjorie then goes on to complain about journalists' obsession with the personalities of chief executives.

The National Union of Journalists has demanded an apology. Her spokesman insists her words were taken out of context and that she is proud of the FT's journalism.

Nevertheless, she raises an important question. Why aren't financial scandals exposed earlier? How is it that rogues and their scams go undetected and unreported for so long? The former FT editor Richard Lambert posed the same awkward questions at a seminar a few months ago. "Where were the media while all these scandals were brewing?" he asked, and accused journalists of "a willing suspension of disbelief".

Not being sceptical enough is a fair criticism. So is the accusation that we reporters rely too much on PRs and not enough on our own spadework. One should also mention the libel laws, which protect those with the deepest pockets.

But Dame Marjorie's view seems to be that if only we were better at reading financial accounts, the crooks would be rumbled. This is naive. The whole point about successful fraudsters is that they don't give the game away in published accounts. The crux of the Enron collapse was that all the dirty work was concealed in "off balance sheet" transactions. So the clues to the con were not there for a journalist to discover - like Holmes seizing on a discarded cigarette butt - however closely he or she peered at the numbers in the published balance sheet.

Similarly, the clues to the WorldCom collapse were not to be rooted out by a close reading of the profit and loss account, which turned out to be fiction.

Published accounts usually help to conceal frauds, not to expose them. Internal management accounts and memos are a different matter, but even the most tenacious reporter rarely gets to see them. Most scandals are ultimately exposed by whistle-blowers on the inside.

Dame Marjorie's other complaint is that financial journalists insist on focusing on the personalities of chief executives, which she seems to regard as irrelevant. Yet there is no better way of gauging the chances of fraud or shipwreck in an organisation than picking over the character of its bosses and the culture they foster at the top.

With hindsight, the bullying manner of WorldCom's boss, Bernie Ebbers, and the lavish lifestyle of the Tyco International chief executive, Dennis Kozlowski, who is accused of looting $600m from his company, gave far more clues to the ensuing scandals in those two firms than anything in the balance sheet.

One aspect of the widespread dumping of "final salary" pension schemes hasn't had much of an airing. Employers who deny these generous guaranteed pensions to new employees, while keeping the perk for existing staff, could be storing up big trouble ahead.

The Freshfields lawyer David Pollard told the recent Pensions Management Institute conference that employers could face compensation claims from staff put into inferior "money purchase" schemes on the grounds of sex, race and (from 2006) age discrimination.

But there is a wider problem brewing. Soon millions of employees will be on vastly inferior packages while in some cases doing exactly the same job as their longer-serving colleagues. The two-tier pensions system is a recipe for deeply damaging resentment. Companies and unions don't seem to have thought this through.

Suddenly, it feels like 1998 again. Then, all the talk was of "systemic risk" - a posh phrase for the world's banks toppling like a row of dominoes - after Russia defaulted on its debts and the hedge fund Long-Term Capital Management went bust.

Now, bankers are nervously watching Commerzbank, Germany's third-biggest bank. It insists that it is solvent, but the markets don't fully believe it. Anyone who holds a Commerzbank bond (in other words, anyone who has lent it money) can now sell the bond for only 71p in the pound. This is unheard of for a major western bank. How will it cope if Germany has a big economic downturn and bad debts really start to mount?

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