Opinion: A way forward for journalism? Benefit corporations

By Doug Hardy

It’s no secret these days that the news industry — which plays an absolutely crucial role in our democratic process at every level — has been badly disrupted. The cause of this is not only the rise of the Internet and the resulting destruction of print’s monopoly on distribution.

No, the news industry has been ravaged far worse by relentless corporate acquisitions and rapacious profit-taking. Across the nation, corporate-owned newspapers and newspaper chains have been repeatedly sold and stripped bare — cannibalized — by bean counters. The trend started well before the Internet and continues today. With each turn of the downward spiral they lose more staff, followed by diminished news coverage and fewer paid subscribers.

These acquisitions — too numerous to list in Connecticut — need not have occurred if the Benefit Corporation business structure outlined in SB 23 had been available sooner. Benefit Corporations provide additional layers of protection as well as a clearly defined, limited, arms-length relationship with shareholders rather than an obligation to line their pockets.

The concept — a company with a goal of providing a social benefit — also builds trust in a community.

Most casual observers don’t realize that corporations have a fiduciary responsibility to maximize profits for unknown shareholders — people who, for the most part, care nothing for the communities these newspapers cover. In nearly every instance, shareholder profits are maximized at the expense of the local news product, leaving thousands of communities without the watchdog services of a full-time, professional news reporter.

As a result and to the detriment of all, the United States has been hemorrhaging newspaper reporters, photographers, and editors. These jobs are the meat and potatoes of our industry. Local news coverage is where it all starts and the disciplined practice of thorough, unbiased news reporting is the most labor-intensive part of the industry. Reporters have gone from covering one or two towns to six or eight or more, and the impression they leave behind is accurate: my local paper doesn’t cover my town anymore.

How bad is it?

According to the Poynter Institute, full-time editorial newspaper jobs in the U.S. peaked at 56,400 in 2000. By 2012, those ranks had fallen to 38,000 nationwide, down a third. The 2012 figure also represented a 30-percent decrease in jobs just since 2006.

A high-profile example here in Connecticut is the Hartford Courant, the nation’s longest continuously published daily newspaper. A former staffer says the Courant peaked at 410 newsroom employees and is now below 100. Adding insult, those who are still on staff are now facing the hard-to-fathom reality of being cut loose by their current owner, leaving the Courant to pay rent in what had been its own newsroom because the company will no longer own the building.

Uncertainty reigns in every one of Connecticut’s legacy media newsrooms as their market shares dwindle and staff are furloughed or laid off. The survivors are simply hoping to hang on until they can begin what will likely be a meager retirement.

For the news industry, it is a once-in-a-lifetime shift. These collapsing organizations, and the people who do the work, need options. Fast. We believe the Benefit Corporation structure is one such option. It may or may not help older organizations like the Courant, but it certainly can help independent online news start-ups — which is where many unemployed reporters and editors are now setting up shop.

But while the Internet truly has democratized the distribution side of publishing, the revenue side is still catching up. We here at CTNewsJunkie and the Independent Media Network are continually researching and testing new revenue models in an effort to maintain as much news coverage as possible in Connecticut’s 169 towns.

Under the state’s current legal framework, however, we won’t be accepting investor capital any time soon because it means losing control of our product. As such, growth is slow — JOB GROWTH is slow. And we’re not alone.

As a founding partner of the Independent Media Network with LocalOnlineNews.TV, CTNewsJunkie has been sharing advertising revenue with independent publishers throughout Connecticut since 2010, working as a small business incubator to help “newly entrepreneurial” reporters get their websites and email blasts off the ground. In fact, we helped launch three new sites within the last few weeks: the HamdenTimes.com, AllAboutMonroe.com, and Milford-Now.com. More are on the way.

Our goal is to help reporters make the considerable leap from being unemployed to being their own employer.

The nonprofit model is probably the best for local news. The pioneering New Haven Independent, which generously helped fund the launch of CTNewsJunkie in 2005, proves that. NancyOnNorwalk, an IMN partner, is choosing to go that route as well. But in many smaller communities there isn’t enough support even through a nonprofit model, and a 501c3 can be limiting in other ways.

It is clear to us, and the Social Enterprise Trust in Hartford that has been lobbying for the SB 23, that a lot of new publishers would benefit directly from the establishment of the Benefit Corporation structure, as it would provide the opportunity to accept investment capital with added layers of protection, including a “legacy preservation provision” for the over-arching social mission of reporting the news.

How crucial is it for a community to have a full-time reporter whose job is supported by a sustainable enterprise?

In the 1990s, I was assigned to cover Andover, one of Connecticut’s smallest towns. It had gone for many years without anything more than limited news coverage. The First Selectman had been lobbying the paper for a reporter for quite a while because he needed to get the word out about the budget and various projects and issues. When I walked into his office for the first time, he looked at me stunned for a moment and said, “Are you the reporter from the JI?”

I said, “Yes, I’m from the JI,” and he threw his arms up and yelled “HALLELUJAH!”

I’ll never forget that. Certainly, reporters are not always that welcome in every Town Hall or Police Department, which is all the more reason that the news industry needs a viable way forward to make sure reporters are on the job. Quality news coverage builds civic engagement. Engaged citizens make for healthier communities. An investment in a Benefit Corporation whose mission is to provide professional, unbiased news reporting is an important ingredient in any recipe for a healthy community.

Lawmakers: please pass SB 23, An Act Concerning Benefit Corporations And Encouraging Social Enterprise, as soon as you can, and allow us to build sustainable local news startups as defined social enterprises with measurable goals. We’ll all be better off for it.

Doug Hardy is business manager of CTNewsJunkie, co-founder of the Independent Media Network, and a former JI reporter and associate editor.


2 responses to “Opinion: A way forward for journalism? Benefit corporations”

  1. Leslie Yager

    Doug Hardy, You nailed it! As the tally of hemorrhaged newspaper reporters, photographers and editors grows, what you’re doing is so important and Nancy on Norwalk is a vital resource for the community.

    Leslie Yager
    Greenwich Free Press
    (Former Local Editor of Norwalk and Wilton Patch)

  2. JP

    The problems you lament are likely real ones, but I am not sure you understand the benefit corporation legislation. First, only about 350 benefit corporations have been formed -across about 20 states – since the first statute was passed 4 years ago, suggesting limited demand for these forms (over 400 LLCs are formed EACH day in Delaware). Second, even benefit corporations proponents admit that LLC statutes are just as flexible as benefit corporation statutes – so these statutes are not really allowing owners to do much that is new. Third, there are no federal or state tax breaks for benefit corporations – so they aren’t going to be more sustainable than any other social business. Fourth, while there is debate on how focused on shareholders the directors of traditional corporations must be (with the majority opinion being less restrictive than you suggest), do you think shareholders are going to invest in companies where their interests are less protected? Perhaps, but the first four years of the law suggest more promises than performance.

Leave a Reply

Recent Comments