Reference no: EM13172037

CASE STUDY QUESTION 3

Read headline "Lay off Big Macs, radio boss tells staff" and using Legitimacy Theory as the basis of your argument, explain why a company such as McDonald's would not want a radio station to make adverse comments about it. If the station does make adverse statements, how might McDonald's react from a corporate disclosure perspective?

Top management at radio 2UE ordered the station's broadcaster not to make derogatory comments about McDonald's on air or the station would lose its $170,000 advertising account with the fast-food chain, according to a leaked in internal memo.

The memo from program director John Brennan in February reveals for the first time that the practice of tailoring editorial comment to suit 2UE's advertisers in an internal part of the top-rating radio station's culture.

‘It's going to be a tough year for revenue and we need all the help we can get from everyone concerned' the management memo says.
‘It is obviously imperative that no derogatory comments about McDonald's are made be any broadcaster on the station. Any such comment would see an immediate cancellation of the contract'

The memo will be investigated by the Australian Authority's inquiry into the radio station next month.

Mr Brennan's directive appears to contravene the Commercial Radio Code of Practice, under which a radio must promote accuracy and fairness in news and current affairs programs. The code may be reviewed by the ABA in separate public hearings and may result in moves away from self-regulation.

The memo contradicts statements by 2UE chief John Conde this week about the role of station management in the scandal involving

John Laws and the now defunct $1.2 million deal with Australian Bankers' Association.

The banks' deal with Laws also involved refraining from negative comments about the client answerson air.

McDonald's spokesman John Blyth said the company was unaware the 2UE directive had issued and would never make its advertising contracts conditional on editorial comment.

The memo was addressed to Alan Jones, John Laws, John Stanley, Mike Carlton, Peter Bosly, Ray Hadly, Stan Zemanek and eight other on-air presenters.

Senior management was also party to the directive.

In a letter to the Australian yesterday, Mr Conde confirmed Mr Brennan wrote the memo, which had ‘reflected (his) exuberance'. He said

Mr Brennan had promptly clarified the memo, telling staff he only intended to avoid any announcer ‘sending up' the McDonald's ads. ‘It was made plain 2UE was not seeking to curtail editorial comment'

In a separate statement, Mr Conde said 2UE and its affiliates were to receive $707,000 from the

Bank deal. Laws says his share was $303,000.

Amanda Meade (Australian, 22 July 1999 p.1)