Where Do Those Profits Go?
By Michael Getler
September 16, 2011
One of the enduring facts of life for PBS over the decades has been the need to supplement funds from member stations, viewers, grants, foundations and Congress with what are called "sponsorships" from corporations. These are usually tasteful, goodwill messages from large and well-known American companies. Companies are not allowed to use actual product advertisements like those you see on commercial channels.
Every once in a while, however, one of these companies becomes the focus of criticism by a segment of the viewership as somehow not worthy of association with PBS. Over the years, for example, I've had mail—steady at times but not particularly heavy—about Monsanto, BP or British Petroleum as it was known at the time, Goldman Sachs (just recently), Exxon Mobil, Chevron, Toyota, Walmart and David Koch (co-owner of Koch Industries).
I've written about most of these, including viewer observations, the PBS response and my thoughts. In many cases, there was something about these particular sponsors, usually involving some past or current action, which certain viewers simply didn't like.
If there is one sponsor that has generated the most mail for the longest time it is Chevron, the giant energy conglomerate that is one of the biggest and most successful companies in the world and currently a high-profile sponsor of the PBS NewsHour. I've also written about Chevron before when the global warming issue was more on the front-burner, and again just recently in May.
The reason I come back to it once again is because the issue in recent months is different from other corporate presentations because it is what is said by Chevron spokespeople on the air—rather than some corporate act—that is controversial with some viewers. The column back in May included several letters on this same point and I noted then that I wasn't able to get an explanation or response from PBS or the NewsHour by the time of my posting. Meanwhile, the letters from viewers have continued.
Here is a portion of the transcript from the Chevron sponsorship:
Oil companies make huge profits.
Last year Chevron made a lot of money.
Where does it go?
Every penny and more went into bringing energy to the world.
The economy is tough right now. Everywhere.
We pumped $21 billion dollars into local economies — into small businesses, communities, equipment, materials.
That money could make a big difference to a lot of people.
That money is making a huge difference.
Here Are Two Recent Letters that Sum Up the Concern:
PBS NewsHour has for some time been running an advertisement by Chevron at the top of the show that in my opinion is deceptive. I wrote to the producers about this and received no response so I am hoping I can get some action from you. The ad in question has a man remarking about oil company profits, followed by a woman from Chevron saying "last year Chevron made a lot of money." Man: "where does it go?" Woman: "Every penny and more went into bringing energy to the world." Of course this is intended to give the impression that Chevron is spending all their windfall profits to benefit the world, but it's a lie. According to their own web site, Chevron paid a total of $2.84 per share in dividends in 2010. Since dividends are divisions of profit, "every penny and more" of what they made last year was clearly not used for bringing energy to the world. I understand the need for the NewsHour to run these commercials, but in this case you are allowing an unscrupulous advertiser to compromise your integrity. Please pull this commercial.
Steve Corman, Chandler, AZ
~ ~ ~
How can Chevron in its ad used on commercial TV and PBS justify its young female engineer's response 'Every penny and more (of profits) are used for R&D?' That's just not true, of course. The corporation distributed its huge profits in a variety of ways, not just to R&D. That's an important point in a time when subsidies to oil companies are under consideration and we should be reducing our dependence on fossil fuels.
Here's the response I got from PBS' senior director of program underwriting, Marcia Diamond, when I asked again how PBS fact-checks its sponsorships and how it responds to these viewers:
"In our evaluation process, we determined that the statements made were in compliance with FCC policies and PBS noncommercial standards. Chevron submitted substantiation regarding the basis for the statements made in the spot, highlighting the fact that the dollar amount of capital and exploratory expenditures exceeded Chevron Corporation's net income."
That's It. So, Now You Understand, Right?
I'm aware that Chevron, like many big energy companies, has been involved in some controversial activities from time to time. But that is not the issue here. They are a huge company that supplies millions of people with energy they want. I support their basic right to advertise or help sponsor programs, and I have no green-eyeshade credentials that make me certain their statement is inaccurate.
But I have to say that the words in that spot, especially the ones that state with such force and certainty that, "Every penny and more went into bringing energy to the world," also sound implausible, at best, to my layman's ears and then up the scale to misleading. So I count myself as among those troubled by the assertion and the lack of a convincing explanation that laymen can understand.
My sense, from the start, was that Chevron would not put anything on the air so prominently that was factually wrong, leaving them vulnerable to informed criticism. So while I felt that this TV promotion was probably cleverly correct, it would be nonetheless confusing or misleading to many in a general audience.
According to its 2010 financial report, Chevron had sales and other operating revenues of just under $200 billion in 2010, with just over $19 billion in net income (profit) and $21.7 billion in capital and exploratory expenditures. But Chevron also paid billions in dividends to shareholders, billions to buy back shares of its stock, billions to build-up its cash reserves and mega-millions to pay top corporate executives. No problem with any of that. The question viewers have asked is how, then, does "every penny and more" go into bringing energy to the world?
There's More to It
I've asked a reporter who covers the oil industry and two analysts about this and they all agree the brief explanation and substantiation offered by Chevron to PBS is factually and technically correct as far as it goes, and would be understood within large companies and those who follow them. But, as one specialist I interviewed said, "it would take some additional explanation" for others to understand.
Essentially what Chevron is saying, as it was explained to me, is that the company made a huge amount of money last year, in part because of rising oil prices, and that the amount of that gross revenue that was spent on capital re-investment in the business and on exploratory expenditures was greater than the net profit after all expenses are taken into account. All those big bonuses and salaries we hear about, along with royalties and taxes and in some cases dividends, are part of the cost of doing business and come out before profitability. What happens to the actual profits can vary from company to company with some also going to dividends or a build-up in cash reserves, for example.
During the course of my discussions, two of the three specialists I consulted described the actual on-air sponsorship language as "misleading," one of them volunteering that "they [Chevron] had to know it's misleading." A third specialist said, "telling half the truth doesn't mean you're lying." He called it "an incomplete statement," confusing to average viewers.
I'm among them, and it is troublesome.