Reference no: EM132978701

Question: Lay off Big Macs, radio boss tells staff

In February 1999 presenters at radio station 2UE were issued with a memo by program director John Brennan, with the backing of senior management, ordering them to refrain from making adverse on-air comments about McDonald's. The presenters included Alan Jones, John Laws, John Stanley, Mike Carlton, Peter Bosly, Ray Hadley and Stan Zemanek. Text in the memo was explicit: 'It is obviously imperative that no derogatory comments about McDonald's are made by any broadcaster on the station. Any such comment would see an immediate cancellation of the contract.' 2UE's advertising account with McDonald's was worth $170,000, and management was concerned to retain revenue. Speaking for McDonald's, John Blyth denied that the company would make favourable editorialising a condition of an advertising contract and stated the company had no knowledge of the 2UE memo. In a letter to The Australian on 21 July the 2UE chief, John Conde, admitted that the memo was issued by John Brennan but said that it had immediately afterwards been elaborated upon, making it clear to presenters that their editorial freedom wasn't in question, just that they should not make fun of any McDonald's ads. The publication of the memo occurred at the same time the station was dealing with the scandal surrounding John Laws and the $1.2M deal with the Australian Bankers' Association (Bankers), in which a condition was that the presenter would not criticise the Bankers on-air. Mr Conde had stated that 2UE and affiliates had been going to receive $707,000 from the deal; John Laws had said his share was $300,000. The deal was eventually abandoned. The memo seemed to confirm that editorial comment by presenters was controlled by station management to please advertisers, contradicting Mr Conde's public position on the role of management in the Bankers affair, and breaching the Commercial Radio Code of Practice which has explicit guidelines around accuracy and fairness of news and current affairs presentation. In August the Australian Broadcasting Authority (ABA) is holding an inquiry into 2UE which will include investigating the memo. It is possible that the voluntary Code may be examined later by the ABA in a public forum, and that there may be moves away from selfregulation of commercial radio stations.

Can you please answer these two question:

a. using the legitimate 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

b. if the station does make adverse statements, how might McDonald's react from a corporate disclosure perspective?