Rewarding Ignorance: News Corp. Gives Murdoch $33M for His Inattention

News Corp. (NWS) may be having one of its worst years ever -- its corporate name besmirched by a phone hacking scandal that has led to 15 arrests and the departure of several of its top executives. But both CEO Rupert Murdoch and International CEO James Murdoch (pictured) got generous pay raises in fiscal 2011.

News appears to be rewarding both men for being asleep at the wheel, according to their own statements and SEC disclosures.

Rupert Murdoch's total compensation rose 46 percent to $33.3 million. James Murdoch received $11.9 million after declining a $6 million bonus because he was in charge of the London tabloid unit at the heart of the scandal. That still left James Murdoch with a 16 percent pay raise from his total compensation last year, largely because he kept an $8.3 million stock award that was increased from $1.6 million the year before. In other words, one portion of his compensation was increased by roughly the same amount as the bonus he gave up. What an amazing coincidence (click to enlarge):

The company also cut 110 jobs across its newspapers.

What they didn't know
One of the Murdochs' former top lawyers, Tom Crone, told a House of Commons select committee today that he informed James Murdoch in 2008 that phone hacking at the News of the World went beyond one reporter, Clive Goodman. Crone said he was "certain" James Murdoch had seen an email implicating other reporters in the hacking of celebrity voicemails:

We went to see Mr Murdoch and it was explained to him what this document was and what it meant.

It was clear evidence that phone hacking was taking place beyond Clive Goodman.

It was the reason we had to settle the case [against Gordon Taylor, a football manager] and in order to settle the case, we had to explain the case to Mr Murdoch and get his authority to settle, so clearly it was discussed.

News' former HR chief, Daniel Cloke, also testified today that neither he nor Les Hinton, the former London tabloid chief who later become publisher of the Wall Street Journal, told the Murdochs of the extent of the hacking after their review of 2,500 internal emails.

That admission goes some way to explaining why Rupert Murdoch was wrong to blame the law firm Harbottle & Lewis for telling him they found no evidence of widespread hacking in their search of the company's emails. (The firm claims they weren't asked to find that evidence, and their search was restricted to a narrow set of emails.)

It might also explains why James Murdoch is denying Crone's version of events: If he was clueless about what his underlings were up to -- even when they were settling legal cases against the company for six figure sums -- he literally may not have understood the significance of what Crone was telling him.

In July, Rupert Murdoch said he hadn't known about the scandal because "I'm not really in touch" with the newspapers he owns. If that turns out to be the truth, then both Murdochs will have been handsomely rewarded for their ignorance.

Related:

• The 9 Most Damning Bits From the News Corp. Hacking Documents
• Murdoch Suggests COO Carey, Not Son James, Will Be Next CEO of News Corp.
• News Corp.'s U.S. Computer-Hacking Woes Are Looming Larger
  
• Did James Murdoch Lie? These 5 Execs Know the Truth