Will the Murdochs Be Ousted from News Corp.'s Board?

Finally, a consensus appears to be forming that News Corp.'s board should be ousted.

At the annual shareholder meeting on October 21, News Corporation investors will be asked to vote on whether Rupert Murdoch's two sons, James and Lachlan, should be reappointed to the board. At the same time, shareholders will also be asked whether to recommend the re-election of board members, opera singer Natalie Bancroft, CFO David DeVoe, Andrew Knight and Arthur Suskind.

U.S. proxy advisory firms have already recommended dumping them. British advisory bodies - both the Local Authority Pension Fund Forum and Pirc - also have called for a shakeup on the grounds that the board fails to uphold basic standards of good governance. Likewise, the Australian Council of Superannuation Investors said last month that the News Corporation board structure "does not reflect good corporate governance."

A Family Business
What finally woke them all up?

Ever since the company went public in 1998, it's been obvious to even the most casual investor that this is not a company that is dedicated to its shareholders. It started as a family business and it has remained a family business. For many years, no one minded that, for the simple reason that the Murdochs were making everyone plenty of money. Only now, with the coincidence of a falling stock price and not-so-surprising revelations about the company's dubious ethical standards, have shareholders suddenly remembered they have a backbone and maybe, even, ethics of their own.

Of course, the question they will all be asking themselves isn't really about standards of corporate governance; they've demonstrated huge flexibility already on that topic. What they need to decide now is whether News Corporation is a better investment with the Murdochs running things - or without them.

The Boys Aren't Serious
Lachlan Murdoch is fairly disengaged from the business. James Murdoch, on the other hand, gave a performance in front of the British parliament's select committee, the professionalism of which would have embarrassed the humblest MBA student. Not only would you not have hired him to run a vast and complex global enterprise; most executives wouldn't have given him an internship. On the other hand, that same occasion demonstrated what everyone already knew: it is Rupert Murdoch who runs this behemoth - and may be the only person who actually understands how it works at a high level.

Back Murdoch or Get Out
What that means is that the shareholders have to choose between two unpalatable decisions: News Corporation as run by Rupert Murdoch - or News Corporation run by no one in particular. The truth is that the genius of this organization (evil or otherwise) has always been Rupert. He's what they invested in, at age 80, he isn't going to change and they'll either back him or move their money. Nothing else makes any sense.

Of course, even if the shareholders suddenly find their courage, they will have to confront what they knew - and accept - all along: that the Murdochs control 40% of voting rights. Chances of these turkeys voting for Christmas? Nil. They could have known, and should have known, all along that they were buying into a private fiefdom. If they didn't know, well let's just call it willful blindness.

Further Reading

Rupert Murdoch's Big 5 Mistakes
How Murdoch Can Survive
See No Evil?