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Murdoch's Dilemma: Save His Loyal Execs... or His Company

News Corp. (NWS) CEO Rupert Murdoch has a reputation for ruthlessness. Usually he directs it at competitors and opponents -- even 6,000 striking printers and production workers back in 1986. But he often has long relationships with top level managers.

But in the wake of the News of the World phone hacking scandal, a number of those are about to end. That will strain his team and make it more difficult to run his company at a time when the stakes have never been higher and the obstacles never larger. Especially as Nick Clegg, leader of the Liberal Democrat part of Britain's coalition government, has called for Murdoch to drop News Corp's bid for Britain's big satellite broadcaster, British Sky Broadcasting (BSkyB). How much longer will it be before there's enough political opposition to scuttle his $12 billion dream?

Behold the lord high executioner
Murdoch has always been loyal to his own interests first. Here's how media figure Michael Wolff put it:

He stands here; they stand there. His world is his world -- it is not necessarily a part of other worlds. He exists in opposition. You are with him, you are against him, or you are irrelevant to him. Arguably, he has overcome most obstacles by that simple analysis. If you are against him, then you are his enemy and he fights you -- it becomes binary. Sometimes it seems that he creates enemies just because it simplifies the world.
Top lieutenants have often worked for Murdoch for many years. And, to the degree it makes sense, he protects them, much as carpenter care for their chisels and saws. You always want the sharp edge ready to strike.

But sometimes you need to sacrifice. That's why Murdoch had his son James Murdoch fire 200 people and close the NOTW, but retain Rebekah Brooks, who was editor of the paper during the alleged phone hacking.

He drew his snickersnee
It wasn't a sentimental move. Murdoch's son and former heir-apparent Lachlan resigned from the company in 2005 because he felt that his father interfered with and undermined him. There were also conflicts over how Lachlan and James would fare under Murdoch's will given two new children by Rupert's third wife. If children are dispensable, anyone is.

But as Alison Frankel blogs at Reuters, there is a solid legal reason why News would have wanted to close NOTW:

Under British law, Stephens explained, all of the assets of the shuttered newspaper, including its records, will be transferred to a professional liquidator (such as a global accounting firm). The liquidator's obligation is to maximize the estate's assets and minimize its liabilities. So the liquidator could be well within its discretion to decide News of the World would be best served by defaulting on pending claims rather than defending them. That way, the paper could simply destroy its documents to avoid the cost of warehousing them--and to preclude any other time bombs contained in News of the World's records from exploding."Why would the liquidator want to keep [the records]?" Stephens said. "Minimizing liability is the liquidator's job."
In the U.S., prosecutors could get a court order to require preservation of the documents. Might there be something damning? I don't know -- does a chief executive like to make money? If any of the allegations are true, then, of course there are records Murdoch wants buried with the fish. In fact, according to one report, an executive in NOTW's parent company may have deleted millions of emails that could have proven valuable evidence.

Apparently, Brooks told NOTW employees of additional revelations to come. More things that Brooks probably should have known about. Cutting her loose would have propelled her into the arms of prosecutors, which Murdoch clearly wants to avoid.

He's got a little list
But his choices are running out. Heads will have to roll, and Murdoch doesn't want to play Louis XVI during the French Revolution:

Public anger will build, especially with charges that much of Fleet Street was "up to similar things for many, many years." And Coulson used to be spokesman for current Prime Minister David Cameron, so you know the British government will do everything to prove that it isn't soft on News.

There is only so long that Murdoch will find protecting Brooks to be, on the balance, a profitability activity. Expect other allegations of wrongdoing at any News property to come pouring out shortly as well, as long aggrieved people see a good time to get even. And Murdoch will not hesitate to find people to blame and dispatch. Although it will disrupt the company, better that than disrupt him.


Image: Wikimedia Commons, public domain.
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