The mayhem in the media industry continues. The Wall Street Journal, a News Corp (NASDAQ: NWS) property, is closing its Boston bureau and sending nine employees into the wind. The newswire and MarketWatch operations are going to stay open in Boston, however, with no headcount impact.

The Journal doesn't have any plans to close other offices, according to a memo by managing editor Robert Thomson: "there are no plans, nascent or otherwise, to close any other U.S. or international bureau." The WSJ will still support an "investigative function" in Boston, but the New York-based Money and Investing team will cover Boston's mutual fund industry, which boasts such heavy hitters as Fidelity.

At the same time, magazine company Time Inc., owned by Time Warner (NYSE: TWX) is looking to cut $100 million in expenses, and layoffs will undoubtedly figure into the equation. The company that owns Time, Fortune, People and Sports Illustrated – and falls under the same umbrella as AOL, which owns BloggingStocks – is feeling the squeeze of a media recession that's even worse than the regular recession we've all been battling for what feels like decades.

Raj Rajaratnam's life has just changed profoundly. The 52-year-old founder, fund manager, and partner at the Galleon Group has been accused of insider trading, conspiring with others (now named as defendants with him) to trade shares of Google (NASDAQ: GOOG), Hilton (OTC: HLNQ), and Sun Microsystems (NASDAQ: JAVA), among others. Rajaratnam generated $25 million in profits on these trades, but that's moot now.

Rajaratnam, who is #559 on the list of the world's richest people, with a net worth of $1.3 billion, now faces fines of up to $250,000 and from 5 to 20 years in prison. I doubt he'll be in the same slot on next year's list of billionaires.

In an era of unprecedented concern about executive pay, consulting firms and their clients are wondering about the question "Can a consulting firm provide advice on executive pay in addition to other services?" The potential conflict is that if a consulting firm recommended a low pay package for an executive, might he be tempted to find another consulting firm for the other work as well. Could an executive use the prospect of consulting work as a way to bribe a firm into giving him a larger pay package?

Of course, many people in the industry will tell us there is nothing to worry about. Pay consultants are part of a different group at the firm and so there's no conflict, only a PCOI (Perceived Conflict of Interest). Doesn't this sound a little bit like the "Chinese Wall" between the investing banking wings of firms and their analysts? Of course, we need only read a little bit about Henry Blodget to see how well that worked out.

Granted, most people will operate with integrity and, in most cases, it is only a PCOI (I love that acronym). But the issue is that potential conflicts of interests create the potential for unscrupulous conduct. Criminologists study fraud and white collar crime in terms of the fraud diamond (PDF-May take a minute to load). Fraud requires incentive, opportunity, rationalization, and capability. Strong corporate governance and internal controls focus on eliminating the opportunity. Only be eliminating conflicts of interest involving consultants and the companies they work for can we eliminate the potential for poor conduct. PCOI's can create the critical opportunity for an unsavory individual to engage in misconduct.

Remember Arthur Andersen? The company was engaged in auditing work and consulting work for Enron, but the consulting work was by far more profitable. To ensure that they didn't lose their consulting contracts, the company looked the other way, and in some cases actively assisted, in Enron's accounting fraud. We all know how that worked out and similar problems (albeit on a much smaller scale) can occur when consulting firms are presented with conflicts of interest.

Wal-Mart Stores, Inc. (NYSE: WMT) is beginning to look like a bad episode of the TV version of Batman. Last week, I posted on Wal-Mart's paranoid spying unit -- nicknamed the Bat Cave. Today, The Wall Street Journal reported on yet another once secret project -- dubbed Project Red -- to spin off Wal-Mart's Sam's Club [subscription required] operation. Unfortunately, Wal-Mart shareholders would not be likely to benefit from such a spin off.

Wal-Mart's recent woes are considerable. Its stock price is down 20% over the last five years while rival Target Corp.'s (NYSE: TGT) -- whose TV advertisements are fantastic -- is up 75%. Meanwhile at Wal-Mart, a former vice chairman pleaded guilty last year to fraud and tax evasion related to using Wal-Mart funds for custom-made alligator boots and a dog kennel. He had said he was reimbursing himself for payments he made to help keep unions out of Wal-Mart. In December, Wal-Mart fired a senior marketing executive, saying she had had a personal relationship with a subordinate and accepted gifts such as pricey vodka from a vendor. When she sued, Wal-Mart filed in court what it said were suggestive emails.

Now, after firing Bat Cave member, Bruce Gabbard, for spying on a New York Times reporter, it emerges that he was part of the security team for Project Red. Wal-Mart hired two teams of McKinsey & Co. consultants, so neither could fully grasp the project. Cameras inside a room recorded their activities. The security team encrypted data and reports and created passwords to secure their work.

The New York Times [registration required] has decided that layoffs like the 3,400 that Circuit City Stores, Inc. (NYSE: CC) announced last week are the wave of the future for American business.

To support its argument, it cites a memo written by McKinsey & Co., the consulting firm, to the board of Wal-Mart Stores, Inc. (NYSE: WMT) arguing "the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity."

Based on the comments I've received on this post and this one, I would conclude that the spirit of the McKinsey memo -- which seems to have motivated CC's management -- is utterly boneheaded. The same strategy that CC is using is the one that cost The Home Depot, Inc. (NYSE: HD) its best retail employees and quite a bit of business to its competitor, Lowe's Companies, Inc. (NYSE: LOW).

The following comment shows how using inexpensive retail floor staff drove sales from Home Depot to Lowe's:

Yesterday (Saturday) I went to Home Depot to check out sump pumps. My basement has started filling with water - first time in 16 years. Ok, most houses have sump pumps anyway. There were three girls (none could have been over 24 or so), standing around in their orange home depot aprons and discussing what they were doing Saturday night, and who they were going to leave the kids with so they could party. You get the picture. I stood there in front of them, obviously a customer. They ignored me, 2 feet away from them, for probably 2 minutes. Finally I just interupted and asked if they could help me with sump pump or basement waterproofing info. Two of them turned their backs and just walked away, the third said she didn't know anything about sump pumps, said I should go over to Lowes, they know about those things. I kid you not! I drove over to Lowes, about 2 miles away, spoke to a salesman, and I have a Lowes contracter coming over Wednesday to install a sump pump - Home Depot hires the cheapest and they lost a $2500 sale!

Can anyone explain why executives follow advice like that offered by McKinsey? I sure can't. But it seems scarily popular among the top ranks of American retail executives. If more executives like Bob Nardelli start losing their jobs after following this bad advice -- maybe there's hope for the people who work on the selling floor.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Circuit City Home Depot, Lowes or Wal-Mart.

MySpace may be the space of the moment, receiving praise, aplomb and (most importantly) generating traffic to Google in ever-greater numbers, but it's not even the middle of the social network craze. Really, the whole social network effect, as a theory and a technological practicality, started with the personal web sites of the early nineties. Personal web sites beget blogs beget networking sites like Orkut and LinkedIn beget MySpace, AIM Pages, YouTube, and whatever's to come next.

Thanks to a effort by white shoe management consultancy McKinsey to get the great minds of YouTube, Yahoo! and the like together with the old garde of the gigantic media (and I'm asking myself, and Aaron Cohen of Bolt Media, who was interviewed as a person of knowledge for the Financial Times piece: whither side of the old/new divide does Time Warner fall?), social networking is now coming into the good graces of the giants of Wall Street and Hollywood and Madison Avenue and all those places where fashion and money meet the people.

Robert Young, writing for GigaOm, calls MySpace the "it girl," and describes the infatuation with "her" and her groupies this way: "nearly every media company and venture capital fund on the planet is out on the dance floor stumbling over one another to see if they can identify the next breathless social networking beauty."