Can the Financial Times protect its editorial independence?

Now the FT is in the hands of one of Japan’s biggest media groups, the vital issue of the paper’s editorial independence hangs in the balance, writes Raymond Snoddy.

Though the precise moment the deed was done, and the ultimate purchaser was a surprise, there was an inevitability about the sale of the Financial Times, with the disposal of Pearson’s 50 per cent stake in The Economist not far off.

The sale became only a matter of time when Dame Marjorie Scardino, who had won a Pulitzer Prize with her husband Albert, running a small campaigning US newspaper, stood down as Pearson chief executive in 2012.

Dame Marjorie had always said that the pink paper would be sold over her dead body.

There had been a lot of interested parties over the years – from Rupert Murdoch to Michael Bloomberg – but they were always shown the door with different degrees of politeness.

The writing was as good as on the cheque when John Fallon, whose background is in public relations, and whose previous job was running Pearson’s all-important education business in the US, took over.

Asked about Dame Marjorie’s blood-curdling oath Fallon issued the customary non-denial denial – that the FT was a central part of the Pearson business blah blah blah and there were no current plans to sell etc etc.

Its status within the group seemed to be down-graded last year when the FT was subsumed within the Pearson Professional division.
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Pandemonium broke out last week in the FT’s stylish, modern headquarters on Southwark Bridge Road when the news came through.

The paper had carried a story – accurate up to a point – that Pearson had been in advanced negotiations with Germany’s Axel Springer. But 15 minutes before the sale the paper’s managing editor didn’t know that the real purchaser was the Nikkei group, Japan’s biggest financial news organisation.

Springer had indeed been in talks with Pearson for a year – the Japanese for less than five weeks.

“Damn I’ve just spent the morning learning German,” one FT hack tweeted.

Pearson’s bankers had orchestrated a decent auction for an international trophy asset and got an excellent £844 million price for the FT.

Apart from the stake in the Economist, which should be worth more than £400 million, Pearson has also retained the FT headquarters.

The building was bought for £18 million in 1987 after the FT’s old headquarters, Bracken House, was sold to Japan’s Obayashi Corporation and went on to become the London headquarters of the Industrial Bank of Japan.

The FT’s headquarters will almost certainly be sold for well over £200 million after a one-year rental agreement with Nikkei.

So, Pearson has done a great financial deal and the Financial Times appears on the surface to have a new decent home in the hands of an ambitious Japanese media group.

Two big questions remain – the absolutely vital issue of the editorial independence of the paper and how it is going to be protected in future and what the hell is going to happen now to Pearson; a company which has the reputation of being good sellers and bad buyers.

The independence point was well illustrated by a brief letter to the paper from three former editors, Geoffrey Owen (1981-1990), Richard Lambert 1991-2001 and Andrew Gowers (2001-2005.)

As you would expect of such distinguished gentlemen the letter was polite but also very much to the point.

They wished the new owners well, but pointed out that the paper’s reputation, which had underpinned its market value, had been achieved because its previous owners had left its editors “with absolute freedom to make their own choice.”

Then came the gentle sting in the tail.

“There is nothing at present in the governance of the publication to guarantee the continued independence of the editor. Since this is the key to the FT and to what it stands for, Nikkei would do well to put this right,” the former editors concluded.

In the past it happened by a very English process that Pearson was not consulted about stories in advance, other than when a comment was required, and never sought to interfere.

A small but real example from the past: a hack finds out that Pearson is about to buy Thames Television. The then Pearson chief executive Frank Barlow is approached over drinks at an annual results meeting and gives a rather shirty “no comment.”

Story goes on the front page of the next day’s FT.

Later, when the deal was done, hack calls Lord Blakenham, the Pearson chairman, for a comment, to be told with perfect politeness that the FT story had cost Pearson around £5 million. The deal had been linked to the Thames share price which had obviously soared following the publicity.

Could a Nikkei journalist get away with such a thing and live to tell the tale?

Rather more fundamentally, Japanese journalists have a reputation for their collegiate and sometimes compliant nature. Journalists always try to slide up to business, political and social elites in the search for stories but in Japan the tribal relationships are especially strong.

As one former FT correspondent in Japan noted, Nikkei reporting has been “quite supine, especially on domestic stories.”

What would happen if a new FT editor – and there probably will be one, even though Lionel Barber has two years to run on his contract – starts to investigate a Japanese banking scandal or a new Olympus fraud?

If they are wise the new FT owners will listen to the previous editors – and perhaps also learn from how things are done at the Economist and set up a Board of Trustees which appoints the editor and protects their independence.

The new editor when one is appointed? The smart money is piling up on the FT’s illustrious US managing editor Gillian Tett who just happens to speak Japanese.

As for Pearson, what will happen when they have digested all that cash?

Dame Marjorie always complained that the public discussion and perception of Pearson was, to her mind, dominated unhelpfully by the FT, which accounted for only 7 per cent or so of the business.

She was wrong. Pearson had a story to tell and was a well-known company in the public eye only because it owned the FT.

Let’s see how it manages as a rather dull education and educational testing company based largely in the US where it has this year lost several significant educational contracts to smaller American rivals.