Investors urged to drop Murdochs

RUPERT Murdoch's two sons, James and Lachlan, should be voted off the News Corp board along with four others, according to the superannuation industry's advisory body dismayed at the phone hacking scandal and dominance of the mogul's family to the detriment of other shareholders.

By InvestSMART · 30 Sep 2011

By InvestSMART ·
30 Sep 2011

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The Australian Council of Superannuation Investors, a organisation of 42 super funds managing $250 billion in assets, yesterday asked its members with News Corp shares to recommend opposing the re-election of the Murdoch brothers at next month's annual meeting.

It wants the pair to go, along with three directors who have served for two decades each and Natalie Bancroft, the opera singer member of the family that sold Dow Jones and The Wall Street Journal to News Corp. The call comes after a British advisory firm, PIRC, told pension funds there to oppose James Murdoch's re-election and suitability to succeed his father.

ACSI chief executive Ann Byrne said investors around the world had previously called for an independent director to be chairman, rather than Rupert Murdoch continue as both chairman and chief executive, contrary to Australian Stock Exchange guidelines.

They want family and long-serving directors replaced with a majority of "credible, skilled" independents, but progress had been too slow and the AGM was an opportunity to "convey their clear view" for reform. "Because of the lack of sufficient oversight and risk management, investors need to send a message," she said.

The council concedes it will likely amount to a message only, as it knows the Murdoch family's control of 40 per cent of voting shares while owning only 12 per cent of the total shareholding makes the call unlikely to succeed in any casualties among the six nominees it opposes.

The British phone hacking scandal and the purchase of a television production company, Shine, from Mr Murdoch's daughter Elisabeth were factors contributing to its decision.

The move was not a comment on individual directors, but on News Corp corporate governance as a whole, and came after speaking with the board's current independent directors.

The responsibility for "setting the ethical tone" rested with the board, she said, but it was "impractical" to recommend the whole board be dismissed.

"When we do have such a prominent shareholding, we rely much more on the independent directors," she said.

The council wanted News Corp to have a majority of independent directors, rather than its assessment of just five from 15 after the AGM.

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Frequently Asked Questions about this Article…

Who is ACSI and why is it asking investors to oppose the Murdoch brothers at the News Corp AGM?

ACSI (the Australian Council of Superannuation Investors) is a group of 42 super funds managing about $250 billion in assets. It asked members with News Corp shares to recommend opposing the re-election of James and Lachlan Murdoch because of concerns about the phone hacking scandal and the Murdoch family’s dominance of the board, which ACSI says is to the detriment of other shareholders.

Which other News Corp directors did ACSI want shareholders to vote against?

Alongside James and Lachlan Murdoch, ACSI called for opposition to four other nominees: three directors who have each served about two decades and Natalie Bancroft, a family-associated director who was part of the group that sold Dow Jones and The Wall Street Journal to News Corp.

What governance changes does ACSI want at News Corp?

ACSI wants stronger corporate governance at News Corp, including an independent chairman instead of Rupert Murdoch holding both chairman and chief executive roles, and a board with a majority of "credible, skilled" independent directors rather than family and very long‑serving directors.

How did past events like the phone hacking scandal influence ACSI’s recommendation?

The British phone hacking scandal was a key factor in ACSI’s decision, reinforcing concerns about the board’s oversight and risk management. ACSI believes those failures support the need for governance reform and replacing certain board members.

Is ACSI likely to succeed in removing the Murdoch nominees at the AGM?

ACSI acknowledges its call may mainly be a signal to the market. The Murdoch family controls about 40% of voting shares (while owning roughly 12% of total shareholding), so removing the targeted nominees is unlikely given that voting control.

Did any other advisory firms weigh in on James Murdoch’s re‑election?

Yes. The British advisory firm PIRC advised pension funds to oppose James Murdoch’s re‑election and questioned his suitability to succeed his father, which influenced ACSI’s stance.

What does ACSI say about the role of independent directors at News Corp?

ACSI says investors rely more on independent directors when there is a prominent shareholder. It wants News Corp to have a majority of independent directors because the current board was assessed as having only about five independents out of 15 after the AGM, which ACSI considers insufficient.

What should everyday investors take away from ACSI’s call regarding corporate governance and voting at AGMs?

The article highlights that governance issues — like board independence, ethical tone-setting, and oversight — can matter to long‑term investor outcomes. For everyday investors, the AGM is one way to signal concerns about governance, and staying informed about proxy recommendations (like ACSI’s) can help when deciding how to vote or evaluate a company.