Sinclair Plays Politics, and Stakeholders React Negatively
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Sinclair Plays Politics, and Stakeholders React Negatively

There are countless examples of major corporations supporting political candidates whose policies will help them deliver greater profits to their shareholders. But what’s been going on at Sinclair Broadcasting over the past couple of weeks is something quite different.

Paul Holmes

There are countless examples of major corporations supporting political candidates whose policies will help them deliver greater profits to their shareholders. But what’s been going on at Sinclair Broadcasting over the past couple of weeks is something quite different: a corporation using shareholders’ profits to support the political beliefs of its management.

The decision by Sinclair to run Stolen Honor, a documentary critical of John Kerry’s campaign to end the Vietnam War, just days before the presidential election, has drawn a firestorm of criticism—much of it hypocritical, some of it legitimate.

Sinclair, which owns 62 broadcast stations across America, including network affiliates in key swing states such as Florida, Ohio, and Pennsylvania has a track record of overt political activity. It attracted attention earlier this year, for example, when it instructed its stations not to run an episode of Nightline honoring American soldiers who had given their lives in the invasion and occupation of Iraq—a decision Senator John McCain called “unpatriotic.”

But its decision to run Stolen Honor in the days before the election is attracting even greater controversy, because it appears to many to be an overt attempt to influence undecided voters against the Democratic candidate. Stolen Honor features interviews with Vietnam veterans, most of them former POWs, angry at Kerry’s anti-war activism on his return from service. Many of them believe his actions prolonged the war, and others believe that by criticizing Americans involved in atrocities and other illegal activities in Vietnam he besmirched their honor.

The film’s producer4, Carlton Sherwood, is best known for his 1991 work Inquisition, an expose of the U.S. government’s alleged persecution of the Reverend Sun Myung Moon.

The reaction to the decision to air Stolen Honor demonstrates the power of the Internet as an information-sharing and mobilization mechanism. Within hours, there were calls for both a boycott and legal action against Sinclair, as well as a large amount of background information on the company—including frequent mentions of the ironic fact that ultra-conservative Sinclair is the only major broadcast company with a sex offender for a CEO.

But it’s hard to escape the suspicion that those most vocal in their criticism of Sinclair would be equally vocal in their support of a station that chose to air, for example, Michael Moore’s Fahrenheit 9/11—just as many of those defending Sinclair’s first amendment rights would be venting their fury at such a decision.

Political preference notwithstanding, it seems Sinclair is within its rights to air whatever it chooses (although the fact that it has such massive influence should point to one of the unintended consequences of recent campaign finance reform measures: that as a media company, Sinclair has a right that is denied to all other corporations, and to individuals).

The only possible challenge to Sinclair’s legal right to air the show is a result of the fact that as a broadcast station, Sinclair uses the public airwaves under license, and that license carries an obligation to serve the public interest. But so far, the response of the Federal Communications Commission suggests that the regulator sees nothing improper about Sinclair’s decision.

“Don’t look to us to block the airing of a program,” FCC chief Michael Powell told reporters. “I don’t know of any precedent in which the commission could do that.”

But with the exception of a few irate bloggers, no one has asked the FCC to block the show. A group of Democratic senators has written to Powell asking him to investigate the decision, and others have suggested either that the FCC ask Sinclair to provide equal time to the other side. There has also been a suggestion that the program should be treated as an in-kind political donation to the Republican Party.

Former FCC chair Reed Hunt says Powell’s remarks, “are so far off the point, and he is so intelligent, that one must conclude that he knows what he is doing and intends the result—tacit and plain encouragement of the use of the Sinclair airwaves to pursue a smear campaign. No broadcast group in the history of America has ever committed an hour to smearing a presidential candidate, and no FCC chairman before this one would have reacted with equanimity to this radical step down in broadcasting ethics.”

Legal questions aside, however, the Sinclair decision clearly raises questions on the governance front. It seems that the company is using its shareholders’ cash to promote the political agenda of its management, in a way that puts the company’s profits at risk.

Within hours of the news that Sinclair would be using its stations to attack Kerry, a database of national and local advertisers was available on the Internet. It took a little longer, but today that database breaks out advertisers on a market-by-market basis, and provides telephone numbers and (in most cases) e-mail addresses, so that protestors can contact each advertiser in their local market and urge them to withdraw their ads from Sinclair stations. There’s even a mechanism through which protestors can blast an e-mail to every Sinclair advertiser nationwide.

It remains to be seen how effective the boycott will be. Some advertisers had announced they would pull their ads, but others are hoping to stay out of the fray. For example, the day after they announced they were pulling their ads from Portland’s WGME to avoid political controversy, officials at the Hannaford supermarket chain reversed their decision for the same reason: presumably, they found that there were just as many consumers who would boycott them for attempted neutrality as for their support of the Sinclair position.

Others have suggested that individuals in local Sinclair markets oppose the renewal of Sinclair’s licenses in those markets, on the grounds that the company has failed to live up to its obligation to operate in the public interest. While it’s unlikely that a Bush-controlled FCC would take those objections seriously, a Kerry administration could conceivably appoint an FCC chief who takes attempts to manipulate the political process as seriously as a glimpse of Janet Jackson’s nipple. At the very least, those organizing the boycott say, license challenges will cost Sinclair a fortune in legal fees.

The protests have clearly caught the eye of Wall Street. A Lehman Brothers Equity Research analyst report last week put the decision in its proper context, under the headline, “Management Chooses Politics over Shareholders.”

Says the report, “In our opinion, Sinclair’s decision to pre-empt programming to air Stolen Honor is potentially damaging—both financially and politically. In a best case scenario, we believe that this decision could result in lost ad revenues. In a worst case scenario, we believe the decision may lead to higher political risk.”

As a result, the company said, it was reducing its 12-month price target for Sinclair to $9 from $10., meanwhile, named the Sinclair decision one of “The Five Dumbest Things on Wall Street This Week.” According to the website, “Sinclair’s desire to inform the public—or what critics call an illegal, disguised political contribution to President Bush—could have some unintended economic consequences.”

Sinclair’s share price is down from about 7.8 when the decision is made to a little over $7 when trading closed on Friday.

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