Rupert Murdoch and his family members have about 44% of the voting shares in News Corp and his good friend Saudi Prince Alwaleed bin Talal owns the second largest voting block with about 7% and this gives Murdoch effective control over the composition of the Board and all decisions.
But the smaller shareholders who have been grumbling for some time are beginning to get noisy and even showing signs of resistance.
But the minorities are not rolling over. Their biggest gripe is the “rampant nepotism” in the company, and it is here that Murdoch may eventually have to give ground. ….. Even before the (hacking) crisis, small News Corp shareholders had launched a lawsuit against its “rampant nepotism” for paying £415m for Shine, a television production company founded by Rupert Murdoch’s daughter, Elisabeth.
Reuters reports that at New Corp’s Annual General Meeting in a weeks time, the opposition to Murdoch will be on display:
Rupert Murdoch’s multi-million dollar campaign to win back the hearts and minds of News Corporation’s independent investors suffered a new blow on Friday after another key shareholder group called for his eviction from its board.
Hermes Equity Ownership Services (HEOS), the shareholder advisory service affiliated to Britain’s largest pension fund, issued a rallying cry to investors to vote against all Murdoch family re-elections to the board of the embattled media group at next week’s annual general meeting on October 21. …..
…. The organization, which votes on behalf of the BT Pension Fund and more than 20 other institutional clients running $140 billion of assets, has also called for an independent investigation into the phone hacking scandal that led to the closure of top-selling British tabloid The News of the World….. “The time is right for the company to appoint an independent chairman to rebuild trust, help correct the governance discount, and ensure that the interests of all investors are properly represented,” Jennifer Walmsley, Director of Hermes Equity Ownership Services, said.
Besides seeking the removal of Murdoch and sons James and Lachlan, HEOS — whose members hold 0.5 percent of News Corp’s shares — Hermes is also withholding support for the re-election of directors Arthur Siskind and Andrew Knight, citing concerns for their independence. …… Earlier this week, Institutional Shareholder Services Inc. (ISS) said Murdoch and 10 other News Corp directors should be ousted from board in the wake of the phone hacking scandal, which it said “laid bare a striking lack of stewardship and independence.”
The ISS statement prompted News Corp, which has bought back more than $1 billion of its stock since August, to step up its appeal for shareholder support with a letter that reiterated its strong financial performance in the face of the flagging global economy.
… “There is a huge problem with shareholder democracy at News Corp — it breaches what we see as a fundamental shareholder right of ‘one share, one vote’,” (Walmsley) said.
But 51% of the voting shares is a clear controlling interest no matter which way you look at it and no matter how loud one may shout for “one share one vote”. It will be difficult to overcome and minority shareholders who are truly upset may have no other option than to vote with their feet. HEOS with its 0.5% can make noise but cannot really do much else. Murdoch is canny enough to make sure that won’t happen. He just needs to ensure they get an attractive return even if the “Murdoch” discount holds back the share value. So my expectation is a lot of noise but no real change. Perhaps James Murdoch will give up one of his Board positions just to placate the noisiest opposition.
