THE impetus for reform at News Corporation, indeed for rolling Rupert Murdoch as chairman, had dissipated months before the annual meeting at Fox Studios in Los Angeles yesterday. In the end, it was a subdued affair. Despite the predictable opposition to prodigious pay and poor corporate governance, all motions were comfortably passed in the company’s favour. Murdoch spoke for 40 per cent of the stock. He always had the numbers.
And the News Corp share price – that ultimate barometer of shareholder wellbeing – had sapped the momentum of dissent which was so pervasive last year as the drama of the phone-hacking scandal in Britain was unfolding.
After all, the stock was up 45 per cent. It seemed almost churlish for shareholders to complain. As Murdoch had tweeted last Thursday: ”Signs pretty peaceful, but any shareholders with complaints should take profits and sell!”
How did the chairman’s tweeting square with comments by Viet Dinh, an independent director, about listening to shareholder concerns, asked a fund manager. It didn’t. Yet this was a forlorn ”gotcha” moment. ”We always consider what shareholders have to say,” responded the chairman curtly, before wrapping up the meeting in a slick hour and 21 minutes.
There you have it. You can run a systematically criminal enterprise, albeit unwittingly, which leads to multiple police probes and 60 arrests, but as long as the share price is up … well, like it or lump it, as Rupert says.
Once again, the majority of News’ independent shareholders are unable to hold management accountable. The motion to have an independent chairman (Murdoch is chairman and chief executive) won 30 per cent of the vote and would have commanded a two-thirds majority but for the Murdoch family’s holding of Class B voting shares.
Similarly, some 28 per cent of non-aligned shareholders voted to dump the dual-class share structure. And so it is that, for another year, the media mogul, with just six demonstrably independent directors on a board of 14, still controls the media empire he built, despite all the scandal and with ownership of just 14 per cent of the company.
News had a good year financially. On that there can be no quibbling. As the phone-hacking scandal broke, the group moved swiftly to head off any share-price damage – and consequent exposure to a shareholder class action – by launching a $US5 billion share buyback, later increased to $US10 billion.
So far the scandal has cost $US224 million, hardly an onerous sum for a business of this size, and its legal ramifications have so far been contained to Britain.
In a deft strategic move a couple of months ago, Murdoch revealed plans to split the company in two, hiving off the publishing assets from the entertainment businesses, again sustaining the share price. The market loves a demerger.
If there is a nexus between governance and performance, it is not obvious in the case of News, or perhaps it is subject to a ”lag effect”. News Corp’s pay has always been too high, its corporate governance a relic of the 1970s and its board is about as independent as your average Perth junior mining company.
But the 81-year-old Murdoch, despite the travails of the past two years, is safe for now, thanks to a buoyant share price and rising profits.
What really got the goat of Australian shareholders this year was that they had even less say in the affairs of News than ever. For 20 years they have had to tolerate News Corp’s ”super-share” structure. That is, while Murdoch has less than a 15 per cent economic interest in News Corp, he controls the group with an iron fist thanks to its dual classes of shares. The Murdochs own the Class B shares, which carry a vote, unlike the Class A shares. They own nearly 40 per cent of this voting stock. Add to that the 7 per cent held by Saudi Prince Al-waleed bin Talal, a friend of the family, and the result of the annual meeting was always academic.
But there was another setback for shareholder democracy this year – the ”latest gerrymander” as critics have dubbed it. News had suspended half the voting rights of its Class B shareholders who were not resident in the US. This was, rather conveniently, to comply with US federal laws requiring owners of a broadcast licence to have no more than 25 per cent of their shares held by non-US shareholders.
So what little say us foreigners enjoyed in the proceedings had already been chopped in half.