Dominion Voting Systems’ lawsuit against Fox News hasn’t just devastated the network’s reputation. It’s posing the biggest legal threat the channel has ever faced. This danger could have been avoided if better judgment had been used not only in Fox’s newsroom but at the most senior levels of management. According to a recent filing by Dominion, News Corp. CEO Rupert Murdoch conceded that he could have stopped Fox from bringing Trump lawyer Rudy Giuliani on air to lie about Dominion, “But I didn’t.”
What went wrong? An answer came when Murdoch was asked in a deposition why Fox continued to give a platform to My Pillow CEO Mike Lindell, who was spouting misinformation about Dominion voting machines. “The man is on every night,” Murdoch testified. “Pays us a lot of money … ”
Two pernicious ideas came together to destroy the reputation and the business model of Fox News. The first is rejection of objective truth. The second — less well documented, but equally pernicious — is the prioritization of corporate profits above all.
Two pernicious ideas came together to destroy the reputation and the business model of Fox News.
Fox News was founded as a platform that mixed reported news with conservative political opinion. But over the years — especially once Donald Trump was elected president — the platform shifted to sometimes, perhaps often, abandoning news altogether. Other media outlets recoiled from what Trump adviser Kellyanne Conway, counselor to the president, called “alternative facts.” But Fox News entered a postmodern world in which factual truth is relative, and one person’s story is just as valid as another person’s story.
This destructive approach was on display again this week with Tucker Carlson’s deceptive account of Jan. 6. If the story that the insurrectionists were patriots is more appealing to Fox viewers than the truth that they were violently trying to overthrow the United States government, than who’s to say the story isn’t true? One observer’s insurrectionist is another observer’s patriot.
Truth was also malleable when Fox News hosts talked about the Dominion voting machines some states used in the 2020 election. Trump and his supporters wanted to blame his loss on imaginary incidents of “fraud.” Fox hosts, with their bosses’ approval, were ready to make the false stories true simply by saying over and over again that they were true.
But why did the network buy into this approach? Why did the hosts say things they knew weren’t true? Why did they destroy their journalistic reputation for the sake of lies?
There’s an easy answer: money. Lies make money.
That’s were the second pernicious idea comes in — the “shareholder primacy norm” under which the sole duty of corporate officers and directors is to maximize profits for the benefit of shareholders. This idea has had some appeal among academics ever since economist Milton Friedman popularized shareholder primacy in a 1970 New York Times op-ed titled “The Social Responsibility of Business Is to Increase Its Profits.”
Most shareholder primacy theorists, however, have never run a business, and most people who have run a business know that in the long run the idea that profits are more important than anything else simply doesn’t work.
Storytelling rather than objective reporting is what Fox sells to their tens of millions of viewers.
Imagine an airline that announces it believed its planes are safe but that the airline’s principal obligation is to earn profits for its shareholders. Most passengers will book other flights. Imagine a corporate health care provider that says its pursuit of profits was the sole obligation of its directors and officers. Patients will find new doctors.
The Business Roundtable, an organization headed by America’s most prominent CEOs, has expressly stated that “the Purpose of a Corporation” is to promote “an economy that serves all Americans.” Corporate CEOs may not always practice what they preach, but at least they know what they are supposed to be doing. Leading New York corporate lawyers such as Martin Lipton have also rejected shareholder primacy theory, saying that corporations create sustainable long-term value when they focus on a corporate purpose that includes not just profits but also the welfare of other stakeholders such as employees, customers and society as a whole. (One shareholder primacy proponent, New York University law professor Edward B. Rock, went so far as to call Lipton’s view “Leninist,” but very few people who actually practice law or sit on boards of directors have said that Lipton is wrong.) The irony about the shareholder primacy norm is that a business manager who openly embraces it will likely be out of business. The idea may appeal to some academic theoreticians who rarely lose their jobs for saying something nonsensical, but a corporate manager who openly embraces profit maximization as a sole business objective at the expense of all other objectives will take his company down with him. One need only think of the 2008 financial crisis to know how disastrous shareholder primacy and profit maximization can be if nonmonetary values such as honesty and fair dealing are compromised to make money. As I have pointed out before, Lehman Brothers, Merrill Lynch and Bear Stearns, once among the largest American investment banks, all failed that same year because of profit driven greed. Corporate managers’ obsession with profits at the expense of other values in the end destroys the reputation, and sometimes the balance sheet, of a corporation, harming everyone, including shareholders. And that’s exactly where we are with Rupert Murdoch and Fox News. Fox did not advertise blind adherence to shareholder primacy and profits above all else when they broadcast the “news,” but the evidence in the Dominion trial shows that Fox bought this shareholder primacy theory hook, line and sinker. They abandoned the core business purpose of a corporation in the news business — to investigate and broadcast the truth — for the sake of a secondary purpose: profits. Storytelling rather than objective reporting is what Fox sells to their tens of millions of viewers. This has gone far beyond simply mixing fact with opinion, as other cable news channels also sometimes do. Fox News hosts and journalists repeatedly reported as facts things that simply weren’t true and that they and their bosses knew were not true. They did it to make money. When a typical corporation goes under due to misguided belief in shareholder primacy, the fallout is tough enough, but it’s restricted to the employees and investors. But when that corporation poses as a news organization, and makes its money selling myths, the fallout doesn’t stop with the company. Our democracy itself pays the price.
Richard W. Painter
Richard W. Painter was the chief White House ethics lawyer from 2005 to 2007 under President George W. Bush. He is the S. Walter Richey Professor of Corporate Law at the University of Minnesota and is a graduate of Harvard College and Yale Law School. 
