Company moves to comply with Communications Act
After discovering it had violated U.S. broadcast regulations, News Corp. announced Wednesday that it would suspend voting rights for some of its non-U.S. stockholders, bringing more bad news to the scandal-ensnared conglom.
Suspension will not increase the voting power of the Murdoch family, which owns 40% of News Corp., according to a release from the company issued Wednesday.
U.S. law limits non-U.S. shareholders to 25% of stock in companies which own American broadcast stations. News Corp. owns 27 stations and the Fox Broadcasting Company.
Voting freeze will affect half the foreign owners holding class B common stock. It will not affect the owners’ ability to collect dividends and distributions. Suspension will stay in effect indefinitely.
Announcement comes hours after The Wall Street Journal reported that News Corp. had discovered it was in breach of the 25% cap.
News Corp. has run into similar problems before.
In the 1990s, a U.S. civil rights group filed a complaint with the Federal Communications Commission against News Corp., alleging that the company had violated foreign stockholder regulations. While the FCC found News Corp. to have breached its rules, the regulating body granted the conglom a waiver to continue operating.
Australian-born News Corp. chairman Rupert Murdoch became a U.S. citizen in the 1980s, which ensured that he could purchase American broadcast stations in the first place.
Wednesday’s voting freeze is the latest headache for News Corp. Company has tried to tame a phone hacking scandal that has unravelled in recent months, leading to the shuttering of News Corp.’s profitable News of the World tabloid in July. British prosecutors are currently weighing new charges against at least one News of the World journalist, as well as members of the public and law enforcement. Scandal also cost Murdoch his bid to take over British broadcaster BSkyB, in which News Corp. already owned about 40% of the company. Takeover would have made Murdoch arguably Britain’s single most influential media mogul.