Mark Maremont is one of The Wall Street Journal’s top investigative reporters (and a senior editor), focusing much of his efforts on executive compensation and accounting.
He led the team of Journal reporters who wrote the blockbuster stories in 2006* that led to the backdating scandal. The team used an ingenious technique that uncovered wild statistical improbabilities in executive stock-options timing and found that many companies fraudulently inflated executive pay. The eye-opening stories resulted in dozens of corporate earnings restatements, dozens of executive defenestrations—even a few convictions.
Among other notable stories, Maremont in 2003 co-wrote a major page-one Journal story that laid out the failings and weaknesses of the SEC—something that looks prescient in the wake of the scandal still unfolding on Wall Street.
Just last week, I praised a page-one story Maremont wrote finding that companies have inflated—and had long-concealed until they were recently forced to disclose—executives’ benefit plans for years using favorable formulas they deny their regular workers.
The Audit caught up earlier this week with Maremont and talked about database trolling, “archaeological investigations,” and scaredy-cat CEO’s.
The Audit: Tell me a little about your background; how you got on the path to be an investigative journalist at the Journal.
Mark Maremont: I had done some investigative reporting when I was in London for BusinessWeek. I’d done some digging into Robert Maxwell. He was a big fraudster, and I was very skeptical about him and had written some negative stories and dug into his finances. It was fun and interesting and like putting pieces of a puzzle together—particularly when people didn’t want you to.
When I came to the Journal I had a more general-assignment type job but did do a number of investigative-type stories—mostly accounting-related.
One of the things I eventually came to realize is that the more complicated the financial area, the less likely it was that anybody else could understand it or was going to take the time to understand it and the easier it was for the bad guys to hide things. So accounting, taxes, compensation to some extent are the kind of areas where disclosures were murky or nonexistent, at least until recently. And the rules are very complicated and the numbers are daunting for people who don’t have a numerical bent. I spend a lot of time plumbing those areas of business.
TA: How did you learn this stuff, it’s not easy to figure out to pick apart a balance sheet?
MM: I wish I could say that I took a six-month course in it. I did take a couple of things. There was a class at the Wharton school that I attended for three days when I was at BusinessWeek that was helpful—kind of an accounting-for-reporters type of thing. I basically just picked it up over the years, you know? I feel like I know enough to ask the right questions or to find people who can explain it to me. I’m still far from a whiz at reading a balance sheet or an income statement, for that matter.
TA: Well, it seems like a lot of CFO’s aren’t either.
It’s interesting that you mention that accounting, taxes, things like that are fertile areas for reporters because it’s so daunting to look at. How do you go about finding things? You get tips, of course, but you don’t just randomly pick out a 10-K and look at the balance sheet, I assume.
MM: In the last three or four years I’ve spent not all, but a good portion of my time looking at executive compensation, which when I broke out at the Journal, I was heading a very small investigative team about three or four years ago…
TA: On backdating.
MM: Well, that came out of that eventually. I’d done a lot of stuff about executive perks that year. Jet aircraft and golf. I did a story linking jet aircraft being used by executives to go play golf in leisure time on company planes.
There was a way to get information on where jet planes travel, which was kind of fun. And then I eventually discovered that there was a database of golf scores that people who wanted to have handicaps had to post their golf scores on this Web site. And I said, “Woah!” A little light bulb went off: Why not marry the two and see if you could link up times where a corporate jet went from A to B and the executive was playing golf?