News Corp. board re-elected amid criticism at annual meeting
News Corp.’s board of directors cruised to re-election at the company’s annual meeting on Tuesday, but that didn’t stop shareholders from voicing complaints about the Murdoch family’s iron grip on the conglom and the scandal that has rocked its U.K. publishing operations.
“The failure of internal controls has had real and lasting repercussions,” said Julie Tanner, an assistant director with Christian Brothers Investment Services, who also spoke at last year’s meeting. “It has resulted in shuttering a newspaper, criminal investigations, canceled the BSkyB acquisition, eroded public trust, and it has tarnished the company’s reputation.”
Shareholders voted down a proposal to strip Rupert Murdoch of his chairman’s post by mandating that the role be filled by an independent director. Also defeated was a proposal to end News Corp.’s two-tier system that restricts voting rights to those who hold Class B shares. The Murdoch family owns 13% of the equity of News Corp. but controls 40% of the voting shares.
News Corp.’s presentation at the Zanuck Theater on the 20th Century Fox lot was remarkably low-key compared to last year, when the phone-hacking scandal was fresh and Murdoch came armed with a slideshow presentation touting the company’s profitability and plans to overhaul its corporate governance and ethical guidelines.
On Tuesday, the bulk of the meeting was devoted to shareholder Q&A. Murdoch did most of the talking. Noticeably silent at the meeting was James Murdoch, Rupert Murdoch’s younger son and News Corp.’s deputy chief operating officer, who was there but didn’t speak. He has been the focal point of criticism of the company for the excesses at its U.K. newspaper division, which James spearheaded at the time.
Rupert Murdoch was quick to emphasize the company’s efforts to respond to governance critics, citing News Corp.’s new “strict, uniform policies with centralized oversight.” He reiterated the assertion that the phone-hacking and other questionable activities were isolated to the U.K. newspapers.
“Because these problems were based in the United Kingdom, we’ve put a special emphasis on our operations there,” Murdoch told the audience. “As you might expect, this has meant especially rigorous internal reviews. And we have confirmed that the problems in the United Kingdom were not found at our other publications.”
Although the proposal was defeated, News Corp. brass still heard from shareholders blasting the dual-class structure of News Corp. shares.
“We believe in the one share, one vote principal,” said a representative from CalSTRS, the California State Teachers’ Retirement System, which holds 150 million Class A shares but just 35,210 Class B shares.
A representative from U.K. pension fund Hermes echoed the sentiment, saying that the media conglom should follow other similar companies like the New York Times in eliminating its two-tier system.
“Well it hasn’t done much good for the New York Times,” Murdoch retorted, citing the Gray Lady’s recent economic troubles.
Other concerns raised included the tone of opinion pieces in the Wall Street Journal and compensation levels for top execs.
Surprisingly little was said about the company’s pending plan to split into two entities, one to house the publishing operations and one focused on media and entertainment (Daily Variety, June 29). Murdoch said more details about the split should be available by the “end of the calendar year.”
In the voting for board members, Natalie Bancroft and Lachlan Murdoch, who has no exec role at News Corp., received the most votes against reelection, followed by James Murdoch. Rupert Murdoch drew far fewer “no” votes, relative to his sons.
During the 90-minute meeting, Rupert Murdoch was attentive and thoughtful but unbowed by the criticism. When one shareholder referenced Murdoch’s reputation for dismissing shareholder concerns, he shot back: “If you don’t like it, then don’t buy the stock. We always consider what shareholders have to say.”
Despite the scandal and criticism, Wall Street has continued to be bullish on News Corp. The stock is up 47% over the past 12 months. It closed Tuesday at $24.77, up 41 cents or 1.68%.