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BOSTON — Anyone who has used an office kitchen is familiar with the constant disarray despite notes requesting workers to clean up after themselves. Dirty cups are placed in the sink instead of the dishwasher; trash is left on countertops and no one is held responsible — because everyone is responsible. The scenario provides an unlikely parallel to journalism.
There’s a raft of groups and organizations designed to monitor the integrity of the media and members of the media to uphold well-established standards. But it could be argued that no one is taking the lead in protecting journalism’s integrity despite unprecedented attacks from powerful business people and high-ranking officials.
Like a kitchen, any activity that relies on everyone pitching in for the greater good enables a community to take part in monitoring. But it also provides participants an opportunity to escape accountability. The dynamic at play is the result of a sociopsychological phenomenon called “diffusion of responsibility.” In other words, when everyone is in charge of a task, no one has to take charge. That’s what is happening in journalism.
The litmus test for media outlets — and journalism in general — is how they react to pressure from the powerful. Do they stand up for the truth or do they back down? Buckling to censors of the truth undermines the credibility of the press and has dangerous implications. Yet standing down has become tolerated and even accepted by groups that promote themselves as noble defenders of democracy. In August, CNN reported an incident that is symptomatic of what is becoming all too common. Bloomberg News reporter Shahien Nasiripour was removed from his banking beat earlier this year after Wells Fargo CEO Timothy Sloan complained to editors.
In April, this blog recounted the details of a flagrant case of corporate censorship in Austin, Texas. In mid-2015, an Austin Business Journal manager said that while I was on vacation, Dell Technologies Inc. threatened the ABJ’s parent company, North Carolina-based American City Business Journals, over our coverage. ACBJ execs buckled under the pressure. Tweets were deleted, a story disappeared, media credentials were denied by Dell and the reporter who wrote hundreds of unvarnished stories about the company was suddenly given an unscheduled performance review stating that his job was in jeopardy despite the lack of a single human resources issue during 10 years with the company.
Dell Technologies, in collusion with a national media company, successfully targeted a reporter who had written hundreds of articles about the company and knew it well. (More than 700 stories listed under this reporter’s byline referenced Dell). Dell public relations people routinely made it clear they didn’t appreciate enterprise stories. One PR guy emailed that such pieces would hinder the ABJ’s to access Dell execs in the future.
While ACBJ and Bloomberg execs have not been held accountable for their shortsighted personnel moves under threat, other unprincipled national media executives have been exposed this year. NBC News execs, Movie mogul Harvey Weinstein, CBS Corp. CEO Les Moonves and 60 Minutes Executive Producer Jeff Fager have all been in the news for abusing their power. Weinstein has faces rape and other criminal charges in New York; Moonves and Fager both resigned their positions.
It’s noteworthy that journalism watchdog groups haven’t been involved in the revelations and subsequent fallout. Instead, it’s been New Yorker magazine and its reporter, Ronan Farrow, who was dismissed from NBC last year when he pressed to continue investigating Weinstein’s history of harassing women. Farrow’s assertion that NBC execs were cowered by Weinstein threats and covered up his abuse has been corroborated by former NBC producer Rich McHugh. NBC officials now say the results of Farrow’s reporting weren’t ready for airing.
There’s a clear difference between poor newsroom judgment and outright corruption. Such behavior is more than unprincipled; it’s illegal. In Texas, a business exec that uses his power get a worker fired can be held liable for tortious interference of employment. Regardless, it’s important that someone — whether it’s a journalism watchdog group or another news outlet — expose wrongdoing to discourage re-occurrences.
“This sort of conduct is tied to over-all climate and oftentimes to how women are seen or valued within an entire organization,” Fatima Goss Graves, the president and C.E.O. of the National Women’s Law Center, told Farrow when discussing the abuse of power. “And there’s no question that the head of the organization sets the tone for the entire organization.”
After all, someone needs to keep the kitchen clean.
Bloomberg News reporter Shahien Nasiripour was removed from his banking beat earlier this year after Wells Fargo CEO Timothy Sloan complained to editors. Nasiripour, a 14-year reporter, was transferred to cover the Trump organization after he had a heated argument with a Wells Fargo public relations person, CNN reported Aug. 27.
Of course, it would be easy for anyone to jump to conclusions and demonize Bloomberg editors for enabling corporate censorship. But that would be too easy. It’d also be unfair because there could be extenuating circumstances and other factors that haven’t been revealed to the public.
However, it’s crucial to note that in March Nasiripour reported this story about Wells Fargo financing the National Rifle Association and the gun industry, which has come under scrutiny after a several mass shootings. It wasn’t a flattering look for Wells Fargo, a company that since 2016 has taken its lumps for a string of widely reported scandals starting with the discovery that workers created fake accounts for customers to meet sales goals.
It’s not unusual for a beat reporter to have a contentious relationship with one of its subjects. Yet it’s totally out of the ordinary for a CEO to intervene in such battles. Wells Fargo is a major customer of Bloomberg’s sister company that sells terminals providing financial data. It’s unlikely Sloan called Bloomberg just to register a complaint; any senior executive could have done that. CEOs call when they want heads to roll. Or in this case, chill enterprise reporting.
Details of Wells Fargo’s influence came just days after more than 300 U.S. news organizations ran editorials supporting reporting freedom. “The press is necessary to a free society because it does not implicitly trust leaders — from the local planning board to the White House,” the Boston Globe wrote Aug. 15.
Those leaders include CEOs who naturally don’t like watchdog reporters. They want lapdogs, pawns. Sloan is probably no exception and he’s justifiably sensitive about bad press. But blaming a reporter for an unflattering story is like blaming a mirror for a bad haircut. It’s nonsensical.
A Bloomberg spokesperson explained the changing of its Wells Fargo reporter by saying: “We make decisions about how we cover those companies based purely on what is best for our readers.” If that’s true, why did Bloomberg determine Nasiripour’s suitability after Sloan’s complaint and not before?
In April, I recounted in this blog post the details of a flagrant case of corporate censorship in Austin, Texas. In mid-2015, an Austin Business Journal manager said that while I was on vacation, Dell Technologies Inc. threatened our parent company, North Carolina-based American City Business Journals, over our coverage. ACBJ execs buckled under the pressure. Tweets were deleted, a story disappeared, media credentials denied by Dell and the reporter who wrote hundreds of unvarnished stories about the company was suddenly given an unscheduled performance review stating that his job was in jeopardy despite the lack of a single human resources issue during 10 years with the company. It was blatant censorship by a bully billionaire in collusion with a national media company.
Dell Technologies had successfully targeted a reporter who had written hundreds of articles about the company and knew it well. (More than 700 stories listed under this reporter’s byline referenced Dell). Dell public relations people routinely made it clear they didn’t appreciate enterprise stories. One PR guy emailed that such stories would make it more difficult for the ABJ to access Dell execs in the future.
“There are some things worth risking everything for,” President Obama recently said when eulogizing Arizona Sen. John McCain.
However distasteful Dell’s pressure on the ABJ was, it’s important to know that it was also illegal. In Texas, there’s a tortious interference law designed to discourage such abuse of power.
A 2012 Fourth Court of Appeals (in San Antonio) ruling on a case called Strickland suggests that the Dell executive who called the ABJ’s parent company didn’t have to make an expressed demand that a reporter was fired. Just the call itself can be considered an act of interference, according to the ruling. “A defendant’s interfering conduct need only be a proximate cause of the harm to plaintiff for there to be liability.”
There’s a clear difference between poor newsroom judgment and outright corruption. The damage media execs do to journalism at large with shortsighted decisions can be incalculable.
During McCain’s eulogy, Obama also said something about the former prisoner of war that news execs — all journalists — should heed when dealing with people of power and censorship issues: “In captivity, John learned, in ways that few of us ever will … how each moment, each day, each choice is a test.”
“Newspapers should have no friends.”
— Joseph Pulitzer
Support for journalism and related organizations spiked after uber-vocal media critic President Trump was elected in 2016. Celebrities and political pundits alike professed their moral and monetary support for the media and the role it plays in counterbalancing power.
“Nonprofit journalism groups are gearing up with flood of donations,” the New York Times reported.
Such groups came up with catchy, inspirational slogans like “Democracy dies in darkness” or “The truth has power.” Instead of withering morale, the constant badgering by Trump seemed to galvanize members of the media. But it could be argued that the slogans and cheer leading did a disservice by creating the illusion of protection where little existed. The public was given a false sense of security, assuming that the Fourth Estate is safely guarded. In reality the raft of journalism groups has created a diffusion of responsibility. A dynamic in which “a person is less likely to take responsibility for action or inaction when others are present,” according to Wikipedia. In other words, everyone expects everyone else to tackle the problem.
Where’s the cavalry? It’s perplexing what the journalism organizations charged with defending credible reporting and journalists are doing with the windfall of donations and timely support. Industry watchdog groups appear to be doing just that, watching. Meanwhile, national, nefarious media executives undermine the integrity of journalism. It’s a missed opportunity to prove the haters wrong and demonstrate a commitment to the truth.
In April, I recounted in this blog post the details of a flagrant case of corporate censorship in Austin, Texas. In summary, in mid-2015, an Austin Business Journal manager said that while I was on vacation, Dell Technologies Inc. threatened North Carolina-based American City Business Journals over our coverage. It caved. Tweets were deleted, a story disappeared, media credentials denied by Dell and the reporter who wrote hundreds of unvarnished stories about the company was suddenly given an unscheduled performance review stating that his job was in jeopardy despite the lack of a single human resources issue during 10 years with the company. It was blatant censorship allowed by a media company with a national footprint.
The Dell debacle was indicative of a much larger problem. News organizations are quick to announce investigations when one of its own is accused of unethical behavior such as fabricating information or plagiarism. News execs are eager to assure readers and viewers that integrity is a paramount concern. But what happens when a media company violates basic journalistic principles? Who investigates them and reports on corrupt managers? No one because most reporters are bound by non-disclosure agreements, or NDAs. They can’t receive crucial severance packages if they reveal unflattering details about their corrupt managers. The result is any possibility of checks and balances is totally short-circuited. News orgs have gamed the system and NDAs shield corrupt managers, giving them tacit permission to abuse their power.
Just a few proposed reforms to consider in an effort to promote the integrity of journalism:
- It’s time to subject media execs to the same scrutiny as everyone else. University journalism programs could play important roles monitoring and exposing corrupt news orgs and their managers if the mainstream media is hesitant to hold each other accountable.
- Promote transparency by declaring any news outlet that operates with NDAs ineligible for all awards, state and national. NDAs shield the corrupt and enables them to escape accountability.
- Reimburse rejected severance packages to encourage journalists to report wrongdoing by media companies.
- Assign lawyers to tortious interference of employment lawsuits to shine a light on unscrupulous media executives and the bullies who take advantage of them.
In Texas, there’s a tortious interference law that provides defendants with up to four times actual damages. A 2012 Fourth Court of Appeals (in San Antonio) ruling on a case called Strickland suggests that the Dell executive who called the ABJ’s parent company didn’t have to make an expressed demand that a reporter was fired. Just the call itself can be considered an act of interference, according to the ruling. “A defendant’s interfering conduct need only be a proximate cause of the harm to plaintiff for there to be liability.”
There’s a world of difference between poor newsroom decision making and outright corruption. We all know that. Yet the patchwork of media-related groups and organizations can be confusing for a reporter attacked for practicing journalism. There’s no dominant group to turn to; what’s worse is that there’s little noticeable solidarity.
One organization, which actually has the word “protect” in its name, said it doesn’t get involved in “labor disputes” when responding to Dell’s censorship. Another group that calls itself “the voice of journalism” came down with laryngitis when briefed about Dell’s tactics.
Such disinterest can have dangerous, far-reaching implications.
Ronan Farrow, now writing for the New Yorker, tried to report on movie producer Harvey Weinstein sexually assaulting women years ago. However, Farrow’s previous employer, MSNBC and NBC, gave into Weinstein’s threats and pulled the plug on Farrow’s story. How many women were attacked by Weinstein in the intervening years? How many careers were ruined because media execs lacked moral courage?
“The question of the complicity of the media and the role the media played in keeping this quiet for as long as it was quiet, are important ones,” Farrow told Recode’s Kara Swisher. “I think there will be more to say about that as time goes on and various investigations into this unfold.”
There’s no reason to wait. Journalism groups and graduate programs need to step in and document incidents. Let news organizations and the executives leading them know that if they abuse their formidable power they’ll be held accountable. Frauds will be exposed and advertisers encouraged to withhold their precious dollars.
They call it a free press, but someone has to pay. In the Dell case, a reporter didn’t actually volunteer, but he was proud to be dumped by Dell for telling the truth. It’s time for others to step up because journalism and the crucial role it plays can’t afford indifference. It deserves better; we deserve better.
New Jersey residents Donald and Dara Mazza are seeking punitive and compensatory damages from both the college and the National Collegiate Athletic Association because the February 2016 workout was done at a campus training facility under school supervision. Their son, sophomore Michael Mazza, suffered a seizure and “probable cardiac dysrhythmia” after the training session. The lawsuit claims the session was a “covered event” described by the NCAA’s insurance benefits summary, according to the wrongful death lawsuit initially filed in February in the Superior Court of New Jersey, Monmouth County.
The claim, which names four different insurance companies and brokers as defendants, doesn’t list a specific dollar amount for damages.
Mount Ida College is a Division III school in Newton, Massachusetts, a Boston suburb. The team listed Michael Mazza as a 6-foot, 3-inch, 295-pound offensive lineman. He was 20 years old with no apparent history of heart problems when he died within 45 minutes of returning to his college dorm room after the Feb. 22, 2016, workout, the lawsuit states.
It’s not a big story, but it’s an important one. It’s just 250 words long and its content is the result of routine reporting; nothing especially remarkable.
It’s not a blockbuster. The article was written for the Austin Business Journal, a niche publication, about a relatively minor issue. Yet it’s notable because its removal from the Web represents a betrayal of public trust at time when trust is at a premium and journalism is already in a tenuous position.
The story’s disappearance should serve as a wake-up call to anyone who values the truth because its removal was done by a news company with a national reach. It also shows that some American companies won’t hesitate to put its self-interests ahead of the public’s right to know. Censorship remains an option.
The ABJ story was a follow up to a routine piece announcing that environmental group Keep America Beautiful would present CEO Michael Dell with an award in New York City. The follow-up piece highlighted the role that a $75,000 “sponsorship” by Dell may have played in the award. Was it a legitimate award, or did Dell effectively buy it? The online article was deleted more than a week after it ran when Dell Inc., the technology giant based in Round Rock, Texas, threatened the ABJ’s North Carolina-based parent company, American City Business Journals. (Here’s an early version of the deleted piece.)
In early 2016, Michael Dell revealed his opinion of the news business when urging workers to ignore reports that a proposed business deal had hit a snag: “The media business is under a lot of stress and their business model is sort of cratering,” he said. “And what they do to survive in those tough times is they create something called click bait. They create an inflammatory headline. So and so was impregnated by aliens, or whatever, click on here to read about this story, see some ads, try to get some money.”
More than 700 stories about Dell, or referring to the company, appear under this reporter’s byline. Many of them were skeptical of information released by the company and revealed issues such as employee lawsuits Dell officials probably preferred were not reported. They commented for the (deleted) award story and never disputed its accuracy or fairness after it was posted. As such, Dell’s threat more than a week after the story ran raises questions about the company’s motivations.
In April, I recounted in another blog post the details of Dell’s censorship and the series of retaliatory actions it took with the ACBJ as an apparent accomplice. To recap, an ABJ manager said that while I was on vacation in mid-2015 a Dell official threatened our parent company over our coverage. Two weeks later, I was suddenly given an unscheduled performance review that stated my job was in jeopardy despite the lack of a single human resources issue during 10 years with the company. I was then dismissed after breaking another enterprise story about Dell planning to relocate its annual users conference from Austin to Las Vegas.
In April, the ACBJ’s CEO declined to comment on the matter to Talking Biz News, unimaginatively referring to it as a “personnel issue.” He was right. But the problem doesn’t concern the ‘personnel’ a reader would be led to believe; it’s the managers not standing up to corporate bullies.
It’s important to note that the Dell debacle has national implications because the ACBJ operates news outlets in 43 metropolitan areas. Many of the outlets provide content to NPR stations assuming the reporting is unbiased. However, it’s unlikely that this was an isolated incident. How many other companies dictate news coverage in ACBJ newsrooms?
ACBJ is owned by Advance Publications Inc., a New York-based company controlled by the Newhouse family, major donors to Syracuse University’s journalism program. That ownership structure insulates the parent company from accountability, enabling it to promote its support of quality reporting while its own lower-level execs undermine reporting.
Advertisers and the politically connected have influenced news coverage since time immemorial. But such pressures are arguably at their greatest level now as news business profits shrink. As a result, it’s never been more important to guard against anything that can result in biased coverage and violate time-tested principles.
Reporters are like the truth; you have to face them sometime, no matter how much power you have.
It was the culmination of a 16-month case of thinly disguised censorship sparked by Texas-based Dell Technologies Inc. threatening the Austin Business Journal over its coverage. Dell had an unlikely accomplice, a media organization affiliated with the company that owns that paragon of journalism, New Yorker magazine, and donates millions to Syracuse University’s lauded journalism program.
I had been a reporter for North Carolina-based American City Business Journals for 11 years, covering technology for three years at its Boston-based Mass High Tech and then eight years at the Austin Business Journal. Managers dismissed me after breaking a story about Dell planning to move its annual users conference (called Dell World) from Austin to Las Vegas. We also reported that the relocation would cost Austin businesses about $8 million in annual revenue.
Two weeks after the article, ABJ managers called for an unscheduled performance review. Despite an unblemished tenure, they said my job was in jeopardy — something that had happened only once before, also two weeks after a manager said a senior Dell executive threatened our parent company after we broke a previous Dell story in mid-2015.
The 2015 threat came when we reported in a later version of this brief that Dell donated $75,000 to an environmental group after it provided CEO Michael Dell with a “Vision for America” award. The 230-word article, a follow-up to this brief based on a Dell news release, underscored the role money played in selecting its recipient, and Dell’s public relations department didn’t dispute the accuracy or fairness of the story after it was posted. However, more than a week later, an ABJ manager called me while I was on vacation and said I needed to delete a tweet about the award story because the Dell exec claimed the tweet was libelous.
When I returned to work the next week, I discovered the story was surreptitiously deleted. One manager later said ACBJ lawyers requested the story be removed because it had been “tainted” by the tweets. The libel allegation was an apparent ploy to censor enterprise reporting. Readers would never get the full story, just what Dell issued in a news release. There was no correction, clarification or letter to the editor posted because Dell didn’t care about an accurate report; it just didn’t want the report. Period.
Side note: More than 700 stories focused on Dell or referring to Dell are under my byline. Companies often prefer lapdog reporters to watchdog reporters because it gives them more control over their image. Yet most realize there’s an important American principle at stake that overshadows a need for control. Such businesses recognize that a free press and civil discourse dwarf the importance of any company’s image. Also, unbiased reporting should keep the powerful in check and counterbalance the influence their money can buy. But it’s a challenge creating any semblance of balance in Austin. There’s the Dell Children’s Medical Center, Dell Seton Medical Center, Dell (baseball) Diamond, the Dell Technologies Match Play, Dell Medical School at the University of Texas, the Michael & Susan Dell Foundation Hall, and so on. Get the picture?
Though Dell is publicly generous it’s privately petty. Dealings with executives were marked by hypersensitivity and vindictiveness. A Bloomberg BusinessWeek story highlighting Michael Dell’s quirky management style in about 2010 seems to have disappeared from the Web, and the Bloomberg reporters who wrote it didn’t explain its whereabouts. In mid-2013, Michael Dell direct messaged this reporter via Twitter at night taking issue with tweets. The next year, Chief Marketing Officer Karen Quintos wrote a critical letter to the editor after the ABJ (accurately) reported that an upcoming Dell World lacked a star keynote speaker. When I courteously congratulated another senior exec about landing a job with different company and wished him well, he replied with a critique of my reporting style. It was surreal.
In the first abruptly called performance review after the threatening phone call, managers who had written in an immediately preceding review that I was “well known in the community and respected,” “one of the most professional reporters we know” and “strictly fair” to sources now declared my job in jeopardy because I displayed “animus” toward sources. They declined to identify a single offended source. The effect of Dell’s threat was dishearteningly apparent and suggested that ACBJ execs had caved and charged my managers with creating a cover story.
Three months later, Dell denied me press credentials to Dell World. Its spokesman indicated that anyone else from the ABJ was invited to cover the event—except me. The obvious retaliation went unchallenged by ABJ managers and I covered the event with a general admission pass. In September 2016, a Dell spokeswoman denied my request for Dell World credentials and indicated that another ABJ staffer was assigned to cover event. Effectively, Dell dictated who would report on the conference. We broke the relocation story a couple days later and I waited for the second farcical performance review and subsequent termination.
ACBJ execs assigned a reporter to uncover the truth and then enabled a company to attack him for what he found. In 2010, the ABJ publisher wrote in a nomination for a company-wide award: Before Christopher came to the ABJ, our reputation for covering technology was far from where it is today. The best example of how Christopher has advanced our coverage can be found in Dell Inc. For years the ABJ has found it difficult to cover Dell. It’s a tight-lipped company that tends to give scoops to papers such as the WSJ. Dell still supplies scoops to the national players, but more often than not Christopher beats Dell to the punch due to his outstanding reporting capabilities and his ability to work around ‘official sources.’ … On top of all that, he is an absolute workhorse. He is in the office EVERY weekend and is typically the first to show up and the last to leave. Fortunately or unfortunately, reporting consumes Christopher’s life … and ABJ readers are the beneficiaries.
New York-based Advance Publications Inc., also the owner of Conde´ Nast Publications, owns ACBJ. Advance Publications is controlled by the family of the late S.I. Newhouse, a longtime donor to Syracuse University—home of the S.I. Newhouse School of Public Communications. Notably, NPR stations such as WBUR in Boston cite ACBJ reports in their broadcasts.
In January 2016, a couple months after I was dismissed, the White House named Michael Dell to the 28-person American Manufacturing Council expected to support Trump’s plan to increase the number of U.S. jobs. Instead, it served as a litmus test for the values of corporate executives after Trump refused to denounce white supremacists that rallied in Charlottesville, Virginia, and killed a protester. The council was later disbanded when nine members resigned over Trump’s response. Michael Dell didn’t.
Enterprising reporters are often the only thing standing between readers and corporate propaganda. This reporter is still standing — and standing up for the truth.
In September, Pennsylvania resident Michael Zappacosta filed a federal lawsuit against both Dell Technologies and its Dell EMC division claiming unlawful discrimination and retaliation in violation of the Age Discrimination in Employment Act and the Americans with Disabilities Act, according to the filing with the U.S. District Court for the Eastern District of Pennsylvania.
Zappacosta, a former customer service engineer for Dell client SunGard Data Systems Inc. in Philadelphia, alleges that he was dismissed from his position on Nov. 1, 2016, five days after he briefed a manager about a cancerous tumor found on his liver. The suit alleges that Zappacosta told his manager the condition required a transplant. He was 51 years old and a 10-year employee of Dell and the company it acquired in September 2016, EMC Corp.
The manager later told Zappacosta his position was being eliminated because of redundancy. No other positions were eliminated at that time, the lawsuit alleges.
In January, Texas-based Dell and Zappacosta agreed to suspend the lawsuit during settlement negotiations, another court filing indicates. Neither Zappacosta nor his attorney, Brian Farrell, could be reached for comment.
Last month, Dell announced being recognized by the Arizona-based Ethisphere Institute as one of the world’s most ethical companies for the fifth consecutive year. The company was one of only three technology businesses cited by the institute “underscoring the company’s commitment to leading with integrity and prioritizing ethical business practices,” according to a Feb. 12 Dell news release.
“Global corporations operating with a common rule of law are now society’s strongest force to improve the human condition,” the release stated.
CEO Michael Dell said “Ethics and integrity matter at Dell. We work hard to earn our customers’ trust, improve our communities, and inspire our team members through sound, ethical decision making. Because at Dell, how we do our work is just as important as the results we achieve.”
In 1997, federal officials fined Dell Inc. $50,000 for selling personal computers in Iran, a violation of U.S. trade sanctions. In 2016, it violated the sanctions again by selling to Iran through its embassies in Germany and France, The Register reported.
In 2010, Dell and its executives agreed to pay the U.S. Securities and Exchange Commission more than $100 million in penalties to settle accounting fraud charges related to supplier rebates used to inflate company revenue figures. Michael Dell and former CEO Kevin Rollins were fined $4 million apiece. They neither admitted nor denied the charges.
In mid-2009, Dell settled a $9.1 million federal gender-discrimination lawsuit filed by former company human resources manager Jill Hubley. The class-action case alleged that Dell “systematically denied equal employment opportunities to its female employees.”
Dell, which was founded in 1984, has attempted to transition from a company best known for personal computers to one offering a full line of tech products and services. The shift was sparked by the slim profit margins generated by commoditized computers versus the larger profits provided by software and storage. Dell is now structured with two segments: client solutions (computers) and enterprise solutions group (networking infrastructure such as software, servers and storage).
The company operates manufacturing plants in the United States, Malaysia, China, Brazil, India, Poland and Ireland. It employed about 138,000 workers at the end of its last fiscal year, SEC filings show.
Dell has posted declining revenue every year since 2011 (fiscal 2012). That trend changed during fiscal 2017 largely due to the late 2016 acquisition of Massachusetts-based EMC. The EMC deal boosted Dell’s revenue but hasn’t helped its bottom line. The company posted a $3.7 billion net loss ($2.1 billion of which attributed to EMC) on revenue of $61.6 billion during fiscal 2017, according to an SEC filing.
Dell also reported a loss of $1.1 billion on revenue of $50.9 billion during fiscal 2016 following a loss of $1.1 billion on revenue of $54.1 billion in fiscal 2015. (Although Dell is privately held, it reports quarterly financials because of the tracking stock it sold when buying EMC and VMware. It also hosts quarterly conference calls with Wall Street analysts.)
In November 2017, Michael Dell told an audience of Boston executives his company has invested $12.7 billion on research and development during the last three years. But that figure conflicts with Dell’s SEC filing indicating the company spent far less, just $4.6 billion: $2.6 billion in fiscal 2017, $1 billion in fiscal 2016 and $920 million in 2015.
Dell spokeswoman Lauren Lee subsequently said the $12.7 billion actually included the R&D spending of seven companies Dell Technologies acquired when it bought EMC. Effectively, the investments largely predated Dell’s ownership.
The amount raised by the Round Rock, Texas-based company’s political action committee (PAC) doubled versus 2015 largely with donations from company executives who regularly contributed to the fund, filings with the Federal Election Commission show.
The sharp increase came the same year Dell completed its $58.1 billion acquisition of Massachusetts-based EMC Corp., a deal that resulted in Dell absorbing EMC’s lobbying activities. But the merger did little to put an end to Dell’s annual losses and it’s too early to tell if the lobbying can help Dell reverse its downward trend.
Lobbying experts said it’s not unusual for companies to tap its top executives as regular contributions to PACs that promote specific industry and legislation benefiting the business. A look at Dell’s federal filings reveals a web of connections and provides a glimpse into the role money can play when government business intersects with big business.
Earlier this year, President Donald Trump appointed to CEO Michael Dell to a 28-person committee of national business leaders. (The manufacturer’s council later fell apart when several members quit in protest to Trump’s refusal to criticize white supremacists that marched in August in Charlottesville, Virginia.)
Dell raised or spent more than $5 million on lobbying during 2016 versus $2.5 million in 2015. The total included $1.8 million attributed to its Dell EMC subsidiary, $610,000 from VMware Inc., and $180,000 from Virtustream, according to the Center for Responsive Politics.
By comparison, IBM Corp. spent $4 million on lobbying last year compared with $4.6 million in 2015. Hewlett Packard Enterprise spent $4.8 million in 2016 versus $2.1 million in 2015. Online retailing giant Amazon.com Inc. spent $11.3 million in 2016 compared with $9.4 million in 2015, the CRP reported.
It’s unclear why Dell’s spending on lobbyist increased so sharply last year, and company spokeswoman Lauren Lee didn’t respond to requests for an explanation.
It’s not uncommon for execs to contribute to a business PAC because workers are the only eligible contributors. The company can’t contribute directly to candidates from the corporate treasury so they raise money from employees, CRP Senior Researcher Dan Auble said.
Dell and its PAC enlisted 46 lobbyists, 34 of whom were revolvers, or lobbyists who had previously held government positions. Lobbyists listed in Dell’s federal filings include Michael J. Kennedy, a VMware lobbyist who was Sen. Orrin Hatch’s (R-Utah) chief of staff from 2010 to 2014.
Dell has posted declining revenue every year since 2011 (fiscal 2012). That trend changed during fiscal 2017 largely due to the acquisition of EMC.
Dell’s 2016 acquisition of EMC has boosted Dell’s revenue but hasn’t helped its bottom line very much. In March, Dell posted a $3.7 billion net loss ($2.1 billion of which attributed to EMC) on revenue of $61.6 billion during fiscal 2017, according to the SEC filing.
Dell also reported a loss of $1.1 billion on revenue of $50.9 billion during fiscal 2016 following a loss of $1.1 billion on revenue of $54.1 billion in fiscal 2015. During the first six months of the current fiscal year, the company posted revenue of $37.1 billion. (Although Dell is privately held, it reports quarterly financials because of the tracking stock it sold when buying EMC and VMware. It also hosts quarterly conference calls with Wall Street analysts.)
Dell is not unlike other technology giants operating in the red. The lack of profits has become more common in recent years with companies such as Uber Inc., Amazon.com Inc. and Twitter Inc. They’re more frequently playing the long game by making investments in innovation for market dominance and future growth instead of focusing on short-term profits.
On Nov. 28, Michael Dell told a luncheon audience of 400 Boston executives that he was repositioning the company with a long-term approach of selling technology that businesses need to manage the massive amount of data they’ve been collecting.
It’s based on “thinking about the business really from the perspective of how do we help our customers, how do we solve the unsolved problems, how do we think about meeting with our customers over a three-, five-, 10-, 20-year period,” he said.
Dell took on about $46 billion in debt for its EMC buyout and it has paid off $7 billion of that amount. However, it still reports debts of $49.4 billion, SEC filings indicate. The gamble Dell is taking is whether it can pay off that debt and start generating profits before its business model or technology become outdated.
It’s important Dell reduce its debt load so it can take on more debt for future merger-and-acquisition deals, said longtime Dell consultant Roger Kay, president of Boston-based Endpoint Technologies Associates Inc.
“I can’t imagine they’re done buying other companies,” he said.
Michael Dell told the Boston executives his company has invested $12.7 billion on research and development during the last three years. But that figure contradicts Dell’s latest SEC filing indicating the company spent $4.6 billion: $2.6 billion last year, $1 billion in fiscal 2016 and $920 million in 2015.
Lee subsequently said the $12.7 billion Michael Dell cited was actually the total R&D spending for seven companies Dell Technologies acquired when it bought EMC in late 2016. So it was mostly spending that predated Dell’s ownership.
Dell has attempted to transition from a company best known for personal computers to one offering a full line of tech products and services. The shift was sparked by the slim profit margins generated by commoditized computers versus the profits provided by software and storage. Dell is now structured with two segments: client solutions (computers) and enterprise solutions group (networking infrastructure such as software, servers and storage).
The company operates manufacturing plants in the United States, Malaysia, China, Brazil, India, Poland and Ireland. It employed about 138,000 workers at the end of its last fiscal year, the SEC filings show.
In 2010, the U.S. Supreme Court ruled that company PACs could contribute unlimited amounts to political campaigns. Since then, the number of politically active U.S. companies has sharply increased, Reuters reported in 2015, citing data compiled by the Business Industry Political Action Committee.
Dell raised more than $500,000 last year through the Dell Technologies Political Action Committee that operates in Washington, D.C. The PAC lists affiliations with the EMC Corp. PAC and the VMware Inc. PAC, according to the filings. Dell’s PAC reported receipts of $157,135 in 2014 when it was called the Dell Inc. Employee Political Action Committee.
Its well-connected lobbyists included Chris Alsup, former chief of staff for U.S. Rep. Michael McCaul (R-Texas), chairman of the homeland security committee, the CRP reported.
Before working for McCaul, Alsup was Dell’s senior government affairs manager in Washington, D.C., from 2011 to 2015. He was also a legislative director for U.S. Rep. John Carter (R-Texas) for nearly nine years, his online profile indicates.
John Howard is listed as a Dell lobbyist with an environmental background. He’s the onetime director of environmental and natural resources in Texas, and was also the president of Keep Texas Beautiful and chairman of the Texas Water Foundation.
Dell lobbyists Ashley E. Davis is the former special assistant to the director of Homeland Security from 2001 to 2003, and R. James Nicholson is the former secretary of veterans affairs and once-chairman of the Republican National Committee, filings indicate.
In 2016, the Dell PAC spent $303,720 of the $500,000 it raised. Fifty-two percent of the recipients were Republicans and 48 percent Democrats. Donation amounts range from $1,000 to $10,000.
The largest recipients were Carter, Rep. Joaquin Castro (D-Texas) and Rep. Will Hurd (R-Texas) — each receiving $10,000. McCaul received $8,500, filings indicate.
The list of donors to Dell’s PAC is littered with senior names connected with the company. In addition to Michael and Susan Dell ($5,000 apiece), the donor list includes former EMC Corp. executive William Scannell, Dell Vice President Michael Young, Chief Financial Officer Tom Sweet and Dell President Marius Hass.
The issues that attracted the most activity from Dell lobbyists during 2016 were related to patent reform, specifically the Patent Act and the Innovation Act, according to the CRP.
The Patent Act addresses patent litigation reform and the Innovation Act relates to rules and regulations affecting patent infringement lawsuits. The legislation is designed to reduce the number of such suits.
Dell’s lobbying activity was also related to the Venue Equity and Non-Uniformity Elimination Act of 2016, a bill designed to change rules related to where patent actions may be filed.
Trump’s tax reform plan includes a proposal to reduce the tax rate on corporate capital repatriated from abroad. Tech giants such as Apple Inc., Microsoft Corp. Cisco Systems Inc. and Oracle Corp. reportedly have a nearly $500 billion overseas and proposed changes would save them billions in expenses.
During a Dec. 7 conference call with analysts, Sweet declined to provide specifics about the effect Trump’s proposed legislation would have on Dell. However, he did say the company is supporting a possible update to 30-year-old regulations.
“ … We’re big fans of territorial tax and those types of policy changes that they’re contemplating,” he said. “So obviously there are some headwinds in that tax proposed legislation that we’re looking at and that we are making sure that our voice is heard …”
The French company that iRobot Corp. bought in October posted profits of $23 million on revenue of $151.5 million during 2016, according to a Friday filing with the U.S. Securities and Exchange Commission.
Massachusetts-based iRobot (Nasdaq: IRBT) reported the financials in an amendment to October filings related to its acquisition of Robopolis SAS. iRobot bought Robopolis, its largest European distributor, for $141 million.
Robopolis’ financials reveal a healthy growth trend. In 2015, it posted a profit of $16.4 million on revenue of $123.8 million, the filing shows.
iRobot is best known for its Roomba home vacuum cleaner. It has sold more than 20 million of the devices since launching them in 2002. The Robopolis deal was first announced last July. The French company represented nearly half of iRobot’s 2016 revenue in Europe, the Middle East and Africa.
“As iRobot expands globally, we are excited about the current and future opportunities in Europe,” CEO Colin Angle said in October.
iRobot, which was founded in 1990, employed 607 workers in late 2016. Last year, it reported a profit of $41.9 million on revenue of $660.6 million.
The company increased it focus on consumer products with the divestiture of its defense and security business in 2016. However, shares have slumped 24 percent during the last six months as investors react to competition from SharkNinja Operating LLC. The company that is also based in suburban Boston markets an ION Robot that cleans floors and carpets and recharges automatically at a comparable price to the Roomba.