Any for-profit news organization has to navigate a delicate balancing act to achieve quality, transparency and trust. At CoinDesk, we face a unique set of challenges because we are an independently operated, wholly owned subsidiary of Digital Currency Group (DCG), one of the largest investors in the industry we cover.
This article describes a recent change we made at CoinDesk with the goal of improving the quality of our product. Some may disagree with the decision we’ve made in this instance. But we are confident that this is an acceptable and necessary step given the evolution of the cryptocurrency space and certain marketplace realities of the media industry, all of which are described in detail below.
In 2022, CoinDesk is rolling out a program whereby certain high-performing employees throughout the ranks, most of whom have been here more than a year, receive stock appreciation rights (SAR) in DCG as part of their compensation. Initially, CoinDesk content employees were not going to be eligible for this program, meaning only certain members of other departments (sales, marketing, etc.) would be allowed to participate.
SARs give the holder exposure to equity, but they are not the same thing as equity. You can find a full explanation of how SARs work here. The upshot is they reward employees who stay at CoinDesk for a certain period of time with the potential to redeem them for cash payments based on DCG’s valuation growth subsequent to the granting of the SARs.
The reasons we initially planned to exclude content staff from the SARs program stemmed from our commitment to quality journalism: the potential conflict of interest, or public perception thereof, given that so many of the companies and assets we cover at CoinDesk are owned or partly owned by our parent company.
That commitment to quality and integrity has not changed. However, several other factors have convinced us that, in service of that same commitment, it now makes sense to revise the plan:
- In a tight labor market for journalists with crypto expertise or other valuable skills and proven gumption, CoinDesk has been at a disadvantage because we had no way to offer them upside or ownership in the company. This, in itself, compromises our commitment to quality and integrity.
- Inflation has reared its head, eroding salary increases and compounding the aforementioned challenges of recruitment and retention, notwithstanding our highly competitive market-rate benefits (401k match, 90% medical coverage).
- Offering this incentive fits more with an emerging crypto community philosophy that trust is built by having skin in the game with high transparency rather than by rules and restrictions.
Hence, beginning in 2022, certain editors and reporters who have performed above expectations and in most cases have worked here for more than a year will be offered SARs awards as part of their compensation packages. A number of a factors boosted our comfort in making this move:
- Employees are under no obligation to accept these awards.
- Those who do accept will not be able to begin to cash out any portion of them until after a yearlong vesting period and only during predetermined “liquidity events” (currently just once a year). These constraints greatly diminish a journalist’s opportunity to profit from a favorable story.
- Beyond the program’s basic rules of eligibility, CoinDesk management, and not DCG, has full autonomy over who is awarded SARs and the standards under which that determination is made.
- Outright purchases of DCG stock remain off-limits to content employees.
- Unlike the DCG employee stock purchase plan, holders of SARs are not provided with regular financial reporting of non-public information by DCG. (The access to this potentially compromising information was the main reason for continuing to prohibit stock purchases.)
- Journalists who are not offered SARs remain eligible for annual pay increases and cash bonuses.
We are not requiring journalists who receive SARs to disclose this in their bios (as we do for crypto asset holdings above $1,000 in value). The main reason we do not require such disclosure in this instance is respect for their privacy: An employee's compensation, and how pay differs from person to person across a company, is an inherently private matter (unless the person is a senior government official or an executive at a publicly traded company or a tax-exempt nonprofit, none of which applies here) and employees should not be forced by CoinDesk to disclose such information. To be clear: CoinDesk in no way prohibits employees from discussing wages, salary, benefits or terms and conditions of employment with other employees or a third party like a union.
Instead, the standard disclosure that automatically appears at the bottom of all CoinDesk articles will be updated in short order to note that certain CoinDesk employees (including content employees) may receive exposure to DCG equity as part of their compensation. In addition, we will be adding a passage to our ethics page that spells this out.
We reviewed the payoffs and challenges faced by many other media organizations that have, over the years, rewarded their journalists with stock or options in their parent companies (Vox, Vice, Buzzfeed, Mashable). There’s no shortage of them – many of those launched with venture capital financing over the last two decades employed this common Silicon Valley comp strategy. To be sure, CoinDesk ‘s situation is unique due to DCG’s wide presence in the industry we cover, so this was a tough decision.
But another thing that makes us unique is that we operate in a hyper-competitive labor market and there is a real premium for the scarce quality of crypto knowledge.
And there are several factors that mitigate the potential for conflict of interest and bias. Key among these are the long-term vesting of SARs and the breadth of DCG’s investments.
A reporter or editor who holds SARs would have little to gain from shilling or pulling punches for any asset or company owned by DCG. That’s in part because any gains in a company or coin valuation that result from a positively framed article are bound to be extremely short-lived (the market always wises up), while SARs take years to fully vest and can only be liquidated during one predetermined period each year.
Also, because DCG is exposed to such a wide cross-section of the industry, there are many variables that go into its valuation; a short-lived spike in the value of any one investment is unlikely to move the needle. One could argue that DCG’s uniquely broad investment in the entire crypto ecosystem means that, unlike most other companies, its interest in improving the quality of information about the industry overrides any particular, short-term interest it might have in one of its units receiving favorable coverage.
It’s also worth remembering that for several years CoinDesk and DCG have operated under a strict independence policy that forbids DCG employees from pressuring CoinDesk journalists for coverage or favorable treatment, and encourages CoinDesk employees to come forward and report any such attempts. You can read the full text of that policy on our ethics page.
The most direct and effective way any CoinDesk journalist can contribute to the valuation of the parent company is to make CoinDesk itself a better product – to reinforce our status as the leading, most trusted, most reliable media outlet in the field with an unwavering commitment to integrity. The development of a high-quality, incorruptible news source is in the long-term interest of the entire industry, not least of all DCG’s long-term interest. In this way, in the big picture, the interests of DCG shareholders and CoinDesk journalists are ultimately aligned – and we will continue to cover our parent, its subsidiaries, investment products, portfolio companies and coin holdings without fear or favor.
UPDATE (Jan. 24, 17:20 UTC): Removes word "discourage" from passage about disclosing SARs in bios, to make it unmistakably clear that CoinDesk does not in any way restrict employee discussion of compensation with other employees.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.