In 1990, giant tuna producing companies in the U.S decided to market their products as "dolphin-safe" after a video of a Panamanian tuna boat killing hundreds of dolphins came into the mainstream broadcast networks. This decision to sell only dolphin-safe tuna resulted from large scale public outrage and boycotting, which was directly influenced by the media coverage. In India, the massive news coverage of the Harshad Mehta scandal and the Satyam scandal has forced the corporates to bring greater transparency and instigated discussions on the responsibilities of directors in the mainstream discourse. Without a doubt, the media, particularly the financial press, have a significant influence in influencing and shaping corporate policies and governance. As information technology and social media flourishes, corporate governance and their internal mechanisms are no longer in an obscure state. The vigilant presence of the financial press and vibrant journalism have enhanced a sensationalist atmosphere for corporate misdemeanors. In this manner, the directors are forced to pay attention to what the media says.
The media's role in corporate governance is often compared to that of a lever. Various groups of people use it for multiple purposes, from disenfranchised shareholders trying to prove the shortcomings of managers and directors, to environmentalists who want to bring attention to the ecologically harmful ways certain companies operate. The degree of media's influence in changing corporate policies varies from case to case. Sometimes they simply bring crucial facts about corporates to the customers, and some other times their sensationalist coverage might even force the directors to behave in society's interests. In any case, the media has a looming presence in corporate governance and fills gaps that government agencies are unable to fill due to their limitations. According to Dyck and Zingales (2002), the media exerts its influence via three channels. First, they drive politicians to introduce corporate law reforms or enforce corporate laws. They do this because they believe that their inaction can affect their reputation in front of the public eye. Secondly, it puts pressure on the managers to take care of the shareholder's money. Thirdly, media attention affects corporates' reputation at large in the eyes of society. They are left with no choice but to consider the societal norms.
Most of the time, the media make use of the disclosures and released data to find out facts about corporate governance. For instance, most countries have Pollution Prevention Acts, which identifies the major pollutant companies and their contributions. The media publicises this data or makes a ranking list. Companies ranked high would voluntarily take measures to clean up and reduce their emission, fearing public perception and reputation. A case like this happens without any legal reformations or governmental interventions. Hence, public opinion pressure generated by an active press forces private sector organisations to self regulate and improve governance.
It is widely assumed that the news media is primarily an entity that gathers and disseminates information. However, their motivations and incentives for keeping corporations in check are not given due consideration. This calls into question the issue of the credibility of news media. With its power, media can shape public opinion and views. Like how media can bring transparency to corporate governance, it can also obscure the motives and interests behind certain corporate decisions. It is tempting for the journalists to get associated with the corporate parties and enjoy monetary benefits for not revealing compromising information. However, if such alliances are brought into the light, it affects the news media's credibility. Dyck and Zingales (2002) also state that there exists a competitive environment for media houses. If a newspaper agrees not to publish a bad news story, then the same story is likely to be scooped by another newspaper leading to the loss of credibility. Unfortunately, most media houses today are owned by big businesses who would naturally not be inclined to publish any negative news about their sister companies. It is up to the few remaining independent news bodies to report the information correctly.
Selective coverage and sensationalism are important aspects of the media's role in corporate governance that must not be overlooked. The impact of the media on corporations and public perceptions is ultimately determined by its entertainment value. The U.S savings and loan crisis of the 1980s did not receive much attention from the public because it was "too complicated and boring for mainstream journalism". On the other hand, environmental issues generate public backlash and scrutiny mainly because environmental problems can be explained through images and visual media, while corporate scandals are hard to explain to the general audience as they might not have the foundational understanding in place.
When discussing the role of the media in corporate governance, we must keep in mind the specific ways in which the media covers scandals, as well as how their effectiveness varies over time and case. In a broader sense, media intervention promotes good corporate governance by increasing shareholder wealth and requiring managers to consider public demands. However, we must also consider the possibility that media organisations have their own set of interests, as well as a proclivity to fall victim to cognitive biases. These factors can have an impact on the effectiveness of media coverage and the ability of the media to hold executives accountable.