Business Blog: Hoover’s Business Insight Zone

Sending up a trial balloon is a time-tested practice in White House politics. The Administration comes up with a policy idea, and a Cabinet member or a friendly senator floats the idea in a speech or interview to see how it plays. If it bombs, the official can say, “I’m just putting the idea out there. It’s not a formal proposal. But in the matter of XYZ, we’re going to have to start talking about different approaches, whether it’s this one or another one.” Then the matter dies.

Of course, if the Secretary of Whatever gets good press for the proposal, the President can take it up: “You know, we should pay attention to what Secretary Jones said last week: the American [farm/health-care/retiree] community can use something like Policy ABC to help them address the problem of XYZ.” And then it’s off to the races for getting the policy implemented.

The same thing happens frequently enough in business, too — and it’s the first thing I thought of when I read Henry Blodget’s post about the stock market’s reaction to the (false) news that Dick Parsons would be stepping down as CEO of Time Warner:

Time Warner (TWX): Parsons Out, So Stock Leaps

Blodget’s verdict is succinct:

The stock market’s a decent discounting mechanism, and its estimate of the value of Dick Parsons to Time Warner is both consistent and crystal clear: negative $1.5 billion.

Now, would a Time Warner board member be so clever (or so devious) as to leak this news, knowing that it would provide this kind of market gauge? I don’t know. But if I were a Time Warner board member, and if I were thinking that sooner might be better than later for Parsons to hand off to Jeff Bewkes . . . I might be tempted.