Investors Fail to Affect Leadership Structure at News Corp.

Murdoch's role unchanged

The hacking scandal in the English press continues to dog News Corporation, at least in the minds of a few excitable reporters, who speculate that trouble will come to the media behemoth from shareholders upset with the Murdoch family over the handling of now-defunct London daily News of the World. Those shareholders made their displeasure known at the annual shareholders meeting in Los Angeles, but to no avail.

Rupert Murdoch attempted to head his detractors off at the pass: "We've acknowledged the serious wrongdoing that occurred at some of our publications in the United Kingdom," he said in his opening remarks. "We've worked very hard to make amends. Very hard. And we've seized the opportunity to strengthen our organization in key ways." Murdoch assured investors that the new News Corp. has compliance departments ensuring that nothing on the level of the hacking scandal could ever happen again. He also said that the company is currently undervalued, and that its upcoming split into two separate entities will create great value for shareholders.

Three resolutions were offered by shareholders on the subject of News Corp.'s governance: the first proposed that the positions of chairman of the board and CEO (both currently occupied by Rupert Murdoch) be split into two distinct jobs and that the chairman be independent to better represent the shareholders; the second and third would do away with the two-tier share structure at the company.

On that point: as far as the Class A shareholders—who comprise the majority of News Corp.'s shareholders—go, it will make absolutely no difference what any of them, large or small, have to say about Rupert Murdoch except to the extent that someone might hurt his feelings. As has been well-documented, notably by the AP's Rachel Beck, News Corp. is a public company only in the sense that its shares are publicly available for sale and trade. It's one of just 44 companies in Standard & Poor's 500 in which individual stockholders have no voting power—that power is reserved for a small group of investors and the Murdoch family, which controls about 40 percent of the voting shares.

Julie Tanner of Christian Brothers Investment Service offered the first proposal. "We believe that having a CEO serve as chair is a conflict of interest and serves as an impediment to a truly independent board," she told Murdoch and the company's shareholders. Ian Greenwood, head of the Local Authority Pension Fund Forum (a U.K.-based investor), backed Tanner up, saying that continuing to have a single chairman/CEO position was likely to attract unwanted attention from regulators. "You operate in many jurisdictions," Greenwood said, "and in many of those jurisdictions this kind of issue is becoming increasingly important to regulators."

Another shareholder told the board and the audience that the company currently has "an unwieldly board vulnerable to CEO dominance"—an accusation leveled at the News Corp. board with increasing regularity. "Eight directors own no stock," the shareholder pointed out. 

Regarding its proposal to scuttle the dual-class stockholder structure in favor of a one-share, one-vote structure, the representative for the Nathan Cummins Foundation spoke directly to Murdoch himself: "In short, Mr. Chairman, we believe that there is no reason for you to wield influence so wildly out of proportion with your financial interest in this company."

Murdoch contended that as the share voting structure has remained unchanged over the years, it's unreasonable to expect voting shareholders to use their clout to ensure that they will have less clout in the future. "When you buy the stock, you know what the company is," Murdoch said. "If you don’t like it, then don’t buy the stock."

The split responsibility proposal and one of the tier elimination proposals were immediately rejected.

The rest of the meeting was taken up by concerns tangential to the three proposals, including arguments about executive pay and a question for Murdoch about his pugnacious Twitter feed