Of Chinese Walls and Hahvuhd Yahds
What on earth is a Chinese Wall? Yes, it could be the Great Wall of China. But it’s not. It is a business term, which is defined as an “ethical barrier between divisions of a financial (or other) institution to avoid conflict of interest.” (Investorpedia)
The typical example would be an investment banking firm with multiple lines of business. Perhaps one division is helping a company sell its bonds to the public, and perhaps another division is analyzing its client’s assets, etc. One division might realize its assets are worth about 20 cents on the dollar, while the other is trying to ream the public by selling the bonds for 97 cents on the dollar. (Any bells going off yet? Think Mortgage Crisis).
Anywho, imagine what would happen if one sports team also owned the major newspaper in that town. John W. Henry the owner of the Boston Red Sox is now the owner of the Boston Globe, purchasing the newspaper from the New York Times for the absurdly low purchase price of $70M – a mere $1.030B less than the purchase price in 1993. Two years prior, the Times rejected a $300 million offer from Aaron Kushner, CEO of Freedom Communications, Inc. That’s some astute valuation work NTY. But back to my point: Isn’t it quite possible that the Boston Red Globe will essentially be a PR outlet for the team. So many great stories will go unwritten. Chicken and beer in the dugout, we will never hear about. Roid-rage incidents such as smashing a harmless dugout phone and nearly taking out the team’s best player, will go un-reported. Pitchers missing a start, only to be found on the golf course. Who will know?
Forget the Chinese Wall, how about a giant Cone of Silence?
Tags: boston globe, chinese wall, john henry, red sox