Tight individual control of voting stock poses problems
Is investing in entertainment a risky proposition? One list of the top-10 riskiest companies includes two showbiz congloms.Accountability to shareholders is a prime factor in evaluating corporate governance — and the main reason one watchdog group recently listed two entertainment giants among the riskiest holdings for investors. The group, GMI Ratings, included Discovery Communications and News Corp. in its first published Risk List of 10 companies whose practices could jeopardize stakeholders. Discovery and News Corp. are tightly controlled by insiders. News Corp. founder Rupert Murdoch holds about 40% of the company’s voting shares, while cable pioneer John Malone owns about 31% of the ballot power at Discovery. In both companies, multiple classes of stock make it difficult for opposition views to prevail, as was clear at the News Corp. annual meeting on Oct. 21 on the Fox lot, at which dissident shareholder voices were minimized. In addition, several directors at both News Corp. and Discovery have close ties to the controlling shareholders. GMI evaluates companies on governance, accounting transparency, and social and environmental issues.