Occupy News Corp

Michael Hedges October 20, 2011 Follow on Twitter

News media distinguishes itself from other enterprises with claims of a greater ethic. Bank shareholders, we’ve learned, expect and get big profits, dividends and no silly chit-chat. Are we so different?

If Rupert Murdoch was “humbled” by his appearance before a UK Parliamentary committee a few months ago, he may be chagrined by this week’s News Corporation (News Corp) annual general meeting in Hollywood. Shareholders – some, at least – are restless over the seeming inability of company executives to draw an end to months of very public embarrassment. News Corp, esteemed for its successes, reviled for its failures, has never faced such an outpouring of disquiet.

The latest controversy reached beyond the phone hacking scandal that led to arrests of more than a dozen people and the closing of UK tabloid News Of The World (NOTHW). It seems circulation figures for the Wall Street Journal Europe (WSJE) had been inflated in an elaborate scheme involving an advertiser. The whistle was blown and WSJE publisher Andrew Langhoff abruptly “resigned.” According to documents circulated to news agencies, top News Corp and Dow Jones executives were apprised of the practice months before former WSJE circulation manager Gert Van Mol blew the whistle.

“In essence you're providing money to somebody who uses that money to buy your copies,” said Mr. Van Mol to the AP (October 15). The quid pro quo for ELP in the arrangement included articles appearing in the WSJE. A partner in ELP is a former WSJE publisher.

“It was a non-ethical practice,” said Mr. Van Mol, quoted by Bloomberg (October 18). “I didn’t want to be part of it, so I contacted (former News Corp COO Les) Hinton and (Dow Jones president) Larsen.” Mr. Van Mol was fired in January.

The UK Audit Bureau of Circulation (ABC) originally signed off on the deal between WSJE and Executive Learning Partnership (ELP). “There now appears to be additional new information which may give grounds for further investigation,” said ABC chief executive Jerry Wright, quoted by The Independent (October 14).

Several News Corp voting shareholders and proxy managers are publicly stating their displeasure. “As a publicly traded company, we feel that News Corp should be held to the same governance standards as other companies in our portfolio,” said pension fund California State Teachers' Retirement System (CalSTRS) spokesperson Ricardo Duran to the Los Angles Times (October 17) as the pension fund announced it had voted against all current News Corp board members and nominees. “The recent scandal has underscored the need for the highest ethical standards at News Corp.” CalSTRS owns both Class A and Class B shares.

The California Public Employees' Retirement System (CalPERS), the biggest public pension fund in the US and significant Class B shareholder, withdrew its support (October 14) for Rupert, James and Lachlan Murdoch and non-independent directors. “CalPERS expects the board to continue its efforts to rejuvenate the News Corporation board with new independent directors,” said its statement.

Pension fund Hermes Equity Ownership Services and proxy advisors Institutional Shareholder Services (ISS) and Glass Lewis joined the chorus asking for changes to the News Corp board. “News Corp has not reacted with sufficient urgency to investor concerns about its board composition and corporate culture,” said a Hermes spokesperson (October 14). ISS urged shareholders to fire 13 of the 15 News Corp board members and separate the roles of chairman and CEO, both currently held by Rupert Murdoch.

While the list of unhappy News Corp shareholders has grown, Saudi Prince Alwaleed bin Talal affirmed his support for the board, Clan Murdoch and the company’s direction. The Prince owns a 7% stake in News Corp, second largest after the family.

The seemingly endless negativity has raised tensions within Clan Murdoch, which control 40% of the Class B voting shares. Relations between Rupert – The Elder – and James – The Younger – have grown chilly, reports The New York Times (October 19). The Elder ordered The Younger back to home base last year (“You're coming back to New York, or you're out.”) and made less than vague comments about COO Chase Carey taking the reins “if I went under a bus.”

Elisabeth – The Sister – chose the low profile option after selling her television production company Shine to News Corp, for what some observers and shareholders viewed as an inflated price, and declined a seat on the News Corp board.

Literally dozens of investigations are underway involving, in some way, News Corp, Clan Murdoch, former and current employees. These trials, figuratively speaking, have bled into a wider critique of media organizations, their business practices, political affiliations and corporate culture. Much of this is healthy. Some of it is posturing.

The European Commission is moving forward with a toothless inquiry of media pluralism, at best an attempt to bring definition to that debate. At worst it will conclude that curbing the biggest media organizations in some way enhances democracy. Politicians in the UK have their own investigations going, all seemingly designed to push any conclusion into the distant future.

Holding the annual general meeting at the Fox Studios Hollywood complex – attendance strictly controlled – is not without irony. News Corp’s film and television production division is highly profitable, like its US television operations. It’s the heart of the company; big, splashy and trades on fantasy.

Only part of News Corp’s business, arguably its least profitable, reports, prints or broadcasts news. But its newspapers and television news channels are visible and, in public perception, powerful. Shareholders like the feel of power but love profits and dividends. No serious observer believes this will be Rupert’s Waterloo.

See also in ftm Knowledge

Rupert Murdoch and News Corporation

News Corporation is a highly competitive media giant a global, multi-media footprint. From paywalls and pay-TV to tabloid troubles and new ventures the media industry watches Rupert Murdoch. Update includes family ties, succession plans and other News Of The World. 210 pages PDF (September 2012)

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