The Isolation Tank: Murdoch Faces His Darkest Hour Almost Entirely Alone

Last Updated Jul 18, 2011 11:53 AM EDT

At any other company, Rupert Murdoch would have walked the plank long ago. Shareholders would have demanded his ouster. Board members would have held heated meetings. Severance agreements would have been signed. Yet Murdoch still sits atop his News Corp. (NWS) empire as if nothing were wrong.

He is more isolated today than he has ever been. Consider his losses:

His tabloid chief, News International CEO Rebekah Brooks, was arrested Sunday and has resigned. Wall Street Journal boss Les Hinton resigned last week also, as did Tom Crone, Murdoch's top U.K. lawyer. Even Murdoch's daughter Elizabeth reportedly criticized her father for not demanding Brooks' resignation. The Wall Street Journal -- which he owns -- called the scandal "deplorable" today in a delightfully delusional editorial that also suggests the scandal is overblown because everyone is else is a hypocrite.

Although the Murdochs have voting control of NWS stock and have stacked their board with friends and family, a couple of directors have begun to question Rupert Murdoch's leadership. Tom Perkins was a director at Hewlett-Packard during that company's phone hacking scandal; and Viet Dinh, a law professor at Georgetown University, represented him at the time. The stock is at a two-year low.

Former allies are now enemies
That's just the inside of the company. Murdoch can no longer count on the U.K. police as an ally -- they were once literally on his payroll -- as London's police commissioner has resigned over his hiring of a former News of the World employee has a consultant. The assistant commissioner also quit. Scotland Yard's criminal investigation will surely focus on how far up the management chain knowledge of the hacking went.

In parliament, links to the Murdochs are now a liability, not an asset. Prime minister David Cameron is struggling for his political life, not just because he hired former NOTW editor Andy Coulson as his media spokesperson (Coulson has also been arrested) but because he was friends with Brooks; their families shared sausage rolls at Christmas. (She lives in posh Chipping Norton, near a road called Hackers Lane.)

For the first time in decades, Murdoch appears to be without strings to pull.

Tomorrow, Brooks, Rupert and James will answer questions in parliament about what they knew of the phone hacking scandal and what they did, or did not do, about it. It will be the Murdochs' darkest hour: They must either admit that they approved of the acts -- which they surely will not -- or deny that they knew what was going on at the company they control so closely; a choice between confessing evil or incompetence.

There is an obvious solution that would enable News Corp. to draw a line under the scandal and move forward with its still-robust businesses: Rupert should admit defeat and retire, handing the company to James and Elizabeth with a clean slate. It would be a grand gesture, satisfying the public's desire for a Murdoch head to roll. What's not clear is whether Rupert has the relevant management insight -- humility -- to execute such a move.

Related: Image by Flickr user mecredis, CC.

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