NEWS Corp has now attracted the public displeasure of at least five shareholder groups and advisory firms ahead of its annual meeting this month, one of which wants Rupert Murdoch off the board, and all of which have concerns about a board stacked with deferential directors.
Shareholder advisory firm Glass Lewis told US investors on Friday to vote against the re-election of James and Lachlan Murdoch, as well as long-term directors David DeVoe, Andrew Knight and Arthur Suskind, plus Natalie Bancroft, whose family sold The Wall Street Journal to News Corp.
Glass Lewis said shareholders should "carefully consider the nature of the relationship" each director had with the Murdoch family which controls the company through a two-class share structure giving it 40 per cent of the votes from just 12 per cent of the shares so the company could have a board with "proper independence" and oversight.
The firm said last month that "applying rigorous oversight has not been a strength of the News Corp board" and that it had "consistently failed to achieve standards of good governance due to the board's historical deference".
News Corp has won some support by launching a popular $5 billion share buyback, but the board composition remains contentious.
The Local Authority Pension Fund Forum in Britain has joined the criticism, telling its members that James Murdoch's presence on the board was "causing significant reputational damage" to the company, and his re-election should be opposed.
Unlike the other groups, it wants his father removed from the board, as Rupert Murdoch remains both the chairman and chief executive in contravention of Australian Securities Exchange guidelines. Forum chairman Ian Greenwood said: "We believe that to secure News Corp's long-term future such reform is necessary."
Last month, the Australian Council of Superannuation Investors made the same recommendation as Glass Lewis against the Murdoch brothers and four other directors, and advisory firm Pension Investment Research Consultants in Britain has made similar recommendations.
In July, the largest US public pension fund, the California Public Employees Retirement System, called the two-class share structure "a corruption of the governance system" and said it was considering its options for forcing reform.
The strength of the Murdoch family's hold on the voting shares makes the moves unlikely to succeed, but the ACSI believes a message of change needs to be sent to the board and opposition at the October 21 annual meeting in Los Angeles would do that.
Meanwhile, News Corp has recovered almost all the $8 billion hit to its value on the Australian sharemarket from the phone hacking scandal.
On July 5, the day after the scandal entered its most intense phase after The Guardian revealed that News of the World had hacked a murdered schoolgirl's voicemail, News Corp shares in Australia were trading at about $17.10. A month later, they were down 19 per cent to about $13.80.
On Friday, they closed at $16.47, 4 per cent below their July 5 value.
Fairfax Media's plan to sell its radio assets is gathering pace, after it sold eight regional stations to Grant Broadcasters. Fairfax said the sale of its metropolitan stations remained subject to acceptable offers.
Frequently Asked Questions about this Article…
Which shareholder advisers are urging investors to vote against some News Corp directors?
Several high-profile shareholder advisers and investor groups have urged opposition to certain News Corp directors. Glass Lewis recommended voting against the re-election of James and Lachlan Murdoch and five other directors; the Australian Council of Superannuation Investors (ACSI) made similar recommendations; Britain’s Pension Investment Research Consultants (PIRC) has voiced comparable concerns; and the Local Authority Pension Fund Forum in Britain has also criticised the board and called for change.
Why are shareholder groups targeting the Murdoch family and News Corp’s board composition?
Advisers say the News Corp board has been too deferential and lacks proper independence. They point to a two-class share structure that gives the Murdoch family outsized voting power and argue this weakens board oversight and governance, prompting calls to vote against certain directors to press for change.
Which News Corp directors have been specifically recommended for opposition by Glass Lewis and others?
Glass Lewis specifically recommended investors vote against the re-election of James Murdoch and Lachlan Murdoch, as well as long‑serving directors David DeVoe, Andrew Knight and Arthur Suskind, plus Natalie Bancroft. ACSI and other groups have made similar recommendations.
How does News Corp’s two‑class share structure affect ordinary shareholders?
The two‑class share structure gives the Murdoch family a disproportionate amount of voting power — about 40% of the votes from roughly 12% of the shares, according to the article. That makes it harder for ordinary shareholders to influence board composition or governance outcomes, even if they oppose certain directors.
What has News Corp done to support its share price amid governance concerns and scandal fallout?
News Corp launched a headline $5 billion share buyback, which helped shore up investor support. The company’s shares have also recovered much of the value lost during the phone‑hacking scandal; the article notes shares traded at about $17.10 on July 5, fell to about $13.80 a month later, and closed at $16.47 on the most recent Friday mentioned.
Why do some investor bodies want Rupert Murdoch removed as chairman and CEO?
The Local Authority Pension Fund Forum argued Rupert Murdoch holding both chairman and chief executive roles contravenes Australian Securities Exchange guidelines and is causing governance concern. The forum said removing him from the board would be necessary to secure News Corp’s long‑term future and restore stronger governance.
Can shareholder opposition at the News Corp annual meeting make a difference?
While the Murdoch family’s voting control makes a full takeover of board votes unlikely, ACSI believes a visible show of opposition at the October 21 annual meeting in Los Angeles would send a clear message to the board about the need for change and stronger governance.
What other media company news should investors note from the article?
Fairfax Media is progressing its plan to sell radio assets: it sold eight regional stations to Grant Broadcasters, and the sale of its metropolitan stations remains subject to acceptable offers. Investors tracking media asset sales or consolidation may want to monitor further developments.
Call 1300 880 160
Start a chat
Schedule a call
