Using NewsHour Extra Feature Stories

Overview: NewsHour Extra features stories can help students identify and interpret key issues in current events. This activity anticipates one class period, but the follow-up essay might be assigned as homework, or in another period.

Warm Up: Use initiating questions to introduce the topic and find out how much your students know.

Main Activity: Have students read NewsHour Extra's feature story and answer the questions on the reading comprehension handout.

Discussion: Use discussion questions to encourage students to think about how the issues outlined in the story affect their lives and express and debate different opinions.

Follow-up: Students can write an 500-word editorial on the topic expressing their views and send it to NewsHour Extra [extra@newshour.org] for possible publication.

Evaluation: Students are graded on their answers to reading comprehension questions and/or their editorial.

Story: Corporate Scandals Lead to Changes in Financial Industries, 05/10/04
http://www.pbs.org/newshour/extra/features/jan-june04/corporate_5-10.html

Initiating Questions:

1. What kind of perks should you get if you're the head of a big corporation or company?

2. What do you know about the stock market? Have you, or someone you know, ever invested in it?

Reading Comprehension Questions: (click here for printout)

1. What are the similarities between the Martha Stewart and Frank Quattrone convictions?

In both cases, it was the cover-up, not the actual crime, that brought the convictions. More importantly, the verdicts sent the signal that life in corporate America may be getting a lot tougher for those who break the rules.

2. What are stock markets? How do they work?

Stock markets -- like the New York Stock Exchange and the NASDAQ -- are where shares of stock in thousands of companies are bought and sold. Each share represents a small percentage of ownership, and a company can have billions of shares outstanding. Between 1983-1999, stock prices increased 16 percent a year -- their fastest growth in more than 75 years.

3. What are stock options?

Stock options are agreements between the company and its top executives that allow the executives to buy the company's stock at prices far below what the public pays. Companies don't pay anything to issue stock options, making it a sort of "free money."

4. Why are stock options significant to the heads of businesses?

Many CEO salaries were mostly made up of stock options, with more given if the company's stock price went up. This meant that some CEOs would do anything to make their company's stock price rise, even if they had to falsify how the company was doing.

5. What is the Glass-Steagall Act and why is it important?

Another factor was the repeal of the Glass-Steagall Act in 1999, which had kept banks out of other businesses, like selling stock or insurance. The repeal created a slew of conflicts of interest -- like bank analysts recommending the stocks of companies that were customers of the bank -- which would later plague those who bought stock.

6. What did the government do to attempt to solve some of these financial problems? Explain some of the details of the new rule.

And in July 2002, Congress and President Bush created a new law, the Sarbanes-Oxley Act, that contained several new rules designed to keep such behavior from ever harming investors again.

For example, CEOs must now swear in writing that the financial reports filed every three months with the SEC are truthful. Also, the rules banned companies from making loans to executives, and made it tougher for CEOs to sell their company's stock for a profit. The law also created an accounting oversight board to supervise corporate bookkeepers. A later settlement with ten large Wall Street investment banks funded a new industry of independent stock pickers, whose recommendations the government hopes will not be as tainted as Wall Street's.

 

Discussion Activity (more research might be needed):

1. Research the Sarbanes-Oxley Act. Do you think that the rules will successfully prevent corporate scandals like the ones mentioned in the article? Why or why not?

2. Should people who commit corporate crimes be given stricter sentences than those who commit violent crimes? Why or why not?

3. How do these corporate crimes impact the average American? Explain your answer.

Write a 300-500 word essay on any of these topics providing clear examples. Send your completed editorial to NewsHour Extra [extra@newshour.org]. Exceptional essays might be published on our Web site.