Board tries to slow Rupert's fall

The flow of bad news will weaken Murdoch, despite his corporate cheer squad, writes David Carr.

The flow of bad news will weaken Murdoch, despite his corporate cheer squad, writes David Carr.

If you sat on the board of a company that was raked over the coals by a British parliamentary committee in a 121-page document, accused of a pattern of corporate misconduct that included widespread phone hacking and an ensuing cover-up by senior officials, you might want to pause for a moment and consider all the implications.

But there was little reflection last week by the board of News Corp, which met quickly the day after the committee's report and announced "its full confidence in Rupert Murdoch's fitness and support for his continuing to lead News Corporation into the future as its chairman and CEO," before the ink was even dry on the report. (While the board expressed unanimous support for Murdoch, it's worth noting there were no such words for his son James.)

There are many reasons Rupert Murdoch has avoided any serious consequences from the scandal despite hundreds of British citizens having had their phones hacked, dozens or more being bribed in law enforcement and several dozen more of his employees having been arrested.

The market, of course, has no conscience. News Corp's share price has risen about 30 per cent in the past nine scandal-ridden months and investors might have decided that the bad news from the print division in Britain was really good news for those who believe the company should abandon newspapers altogether.

Further, Murdoch runs a large, multinational company with about 50,000 employees, so he has a certain plausible deniability, even though several of his most trusted lieutenants were accused by the committee of playing a central role in the growing scandal and cover-up.

Murdoch also remains mostly unscathed because much of News Corp's business and most of its profits lie in the US, where the scandal is viewed as something happening on a distant island.

There have been reports of corporate misdeeds in America, including computer hacking at its News America Marketing division, but other than some faint rumbles in Washington about further investigations, it's been mostly smoke, no fire.

"Ask anyone's mother here who Rupert Murdoch is and you will get blank stares," says Rich Greenfield, an analyst at BTIG, adding that other News Corp assets seem unaffected by the scandal. At parties for the White House Correspondents' Association Dinner last month, many reporters remarked on how the hacking scandal had very little traction or traffic among readers.

But the primary reason Murdoch has not been held to account is that the board of News Corp has no independence, little influence and no stomach for confronting its chairman.

Like many media companies, News Corp has a two-tiered stock set-up that gives the family control of the voting shares. The board includes family members and several senior executives the independent slots are filled by a host of familiars.

Viet Dinh, a former Bush administration official, is godfather to Lachlan Murdoch's son. Roderick Eddington was deputy chairman of a division of the company in the late 1990s. Andrew Knight and Arthur Siskind are both former senior executives, and John Thornton, the former Goldman Sachs president, served as an adviser to News Corp on several major deals.

The board also includes Natalie Bancroft, an opera singer who made a great deal of money when her family sold Dow Jones, which included The Wall Street Journal, to Murdoch in 2007, and Jose Maria Aznar, the former prime minister of Spain, who is a friend of Murdoch's.

Being a board member of News Corp is not a bad gig it pays more than $US200,000 a year and requires lifting nothing heavier than a rubber stamp. The directors apparently haven't asked why the company maintained its "rogue reporter" defence after it became clear that "rogue enterprise" was a more apt description. They appeared to sit silently by while Murdoch and his son James waited for law enforcement officials to finally ferret out employees of the company's British newspaper division who were accused of engaging in criminal conduct.

Still, the board may regret being quite so quick to throw its full support behind Murdoch and the current management. The parliamentary report, as scathing as it was, is only the first of many dominoes expected to fall in the next few weeks and months. Ofcom, the British broadcasting regulator, is assessing whether News Corp should be allowed to continue to hold its stake in British Sky Broadcasting. For its part, BSkyB was quick to get out the 10-foot pole, reminding everyone that the two companies are separate, even though News Corp owns a 39 per cent stake.

This week, Rebekah Brooks and Andy Coulson will appear before the Leveson inquiry in Parliament, offering another peek under unseemly blankets. The British Supreme Court will soon hear a case that could decide whether Glenn Mulcaire, the private investigator who pleaded guilty to charges that he had hacked phones for News of the World, is to be freed from a confidentiality agreement he made in return for payment of legal fees.

He reportedly has 11,000 pages documenting his work for News Corp. Three separate police investigations are under way - into phone hacking, computer hacking and bribes - and the results of Operation Weeting, the phone hacking inquiry, will be disclosed in the next few months. Soon enough, there could be a parade of criminal trials that could produce new evidence that those accused of misdeeds were hardly rogues but rather following a corporate culture formed to win at all costs.

It was never going to be one single thing that would loosen Murdoch's grip, but rather the steady accretion of damage from a tick-tock of criminal, civil and governmental inquiries that will go on for months and years.

At some point, the artfully crafted statements from the company and expressions of support from a board in lock step will begin to sound silly.

"We wonder how many more of these issues have to surface before the board takes a more assertive oversight role over the activities of News Corporation management," Anne Sheehan, director of corporate governance at the California State Teachers' Retirement System, which owns non-voting stock in News Corp, said in a statement the day the parliamentary report came out.

Nothing will stop News Corp's remarkable run as a successful enterprise, because a great deal comes from lucrative pay TV and broadcast properties that are not at risk in the current scandal. But the Rupert Murdoch that we have known - untouchable and evasive - has become a man falling down stairs, slowly but surely. Continued profits and a compliant board can check the fall but they can't stop it.

The New York Times

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