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Two Pulitzer Prizes For the Wall Street Journal


NEW YORK - The Wall Street Journal has been honored with two Pulitzer Prizes; the Public Service Gold Medal for uncovering the improper backdating by companies of executive stock options and the International award for reporting on China.

“These Pulitzer Prizes underscore our commitment to bring readers a unique perspective on news, providing the insight and analysis they demand,” said Paul E. Steiger, managing editor of The Wall Street Journal. “Our teams of editors and reporters have worked painstakingly this year to unravel the complicated schemes that corporate executives use to backdate potentially lucrative stock options and defraud shareholders and to illuminate and demystify the Chinese business juggernaut.”

These awards represent the 15th and 16th Pulitzer Prizes the Journal’s news department has received under Paul Steiger, who became managing editor in 1991 and reaches the mandatory retirement age this year. The Wall Street Journal has received 33 Pulitzers to date.

“It’s fitting that the Journal should be recognized for breaking the biggest business story of the year, using proprietary algorithms to uncover suspicious timing of stock options, and for putting in full context the enormous growth of China’s economy,” said L. Gordon Crovitz, executive vice president of Dow Jones & Company and publisher of The Wall Street Journal. “The Journal is the leading business publication and these two awards demonstrate our continued dedication to bring high-quality news reporting to our readers worldwide.”

Nearly 140 companies are under federal investigation in the scandal triggered by the Journal’s series. At least 70 top executives have lost their jobs and ten former executives are facing federal or state criminal charges.

The Journal’s reporting on backdating of options has already earned six awards.

To identify which companies were backdating options, Journal reporters developed their own statistical-modeling technique and then used it to find likely perpetrators of massive and long-hidden abuses. At the core of the effort were custom-built probability algorithms designed to assess the odds that an executive’s pattern of richly timed options resulted merely from chance. In one case, the odds were 300 billion to one.

Journal reporter Charles Forelle, who was a math major at Yale, wrote a computer program called a “Monte Carlo simulation,” a statistical technique that calculates odds by repeating a test billions of times to identify which companies were most likely to have been backdating their options. The number-crunching was so intensive that the reporters commandeered two powerful servers at Dow Jones & Company’s corporate offices in Princeton, N.J., in order to run the program for a week. The Journal’s reporting team also examined thousands of corporate filings and conducted numerous interviews.

Circumstantial evidence of backdating had been described before in two academic papers, but the papers relied on broad statistics and didn’t name any individual companies. A Securities and Exchange Commission probe of the matter involving only a few small companies had been largely ignored. That changed on March 18, 2006, when the Journal published in its Weekend Edition, “The Perfect Payday” by reporters Charles Forelle and James Bandler. The page-one story identified six companies that had option dates so improbably favorable that only backdating could plausibly explain the pattern.

Besides Messrs Bandler and Forelle, the reporting team on the Journal’s first Pulitzer for Public Service included Mark Maremont and Steve Stecklow.

The Journal’s coverage in 2006 of China’s rapid economic growth focused on the dislocations brought on by government policies and institutions that have not kept pace with development. A series of articles by the Journal’s nine China-based correspondents and five researchers explored these topics, bringing to light often complex and long-lasting tensions. Factories pump poisons into China’s air and waterways, maiming villagers and sending once plentiful wildlife into extinction. Workers mine coal and build skyscrapers for little pay, and often at great peril. And a central government, overwhelmed by rocketing growth and impotent to slow it, takes to spying on its own local governments via satellite to see where development is defying Central Party edict. What they find is that the defiance is nationwide.


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