The following is contributed by Stephen Mayne, a self-styled activist investor.* The views expressed are his own, etc. FT Alphaville is happy to offer a similar platform to an accredited representative of News Corp.
Rupert Murdoch has controlled News Corporation ever since his father, Sir Keith Murdoch, died in October 1952.
And whilst Rupert deserves much credit for inheriting an afternoon newspaper in Adelaide and turning it into a global conglomerate with a market value of more than $60bn, surely it is time for the world’s most powerful media mogul to embrace modern corporate governance standards.
That’s why I’ve put up a shareholder resolution at the forthcoming News Corp annual meeting in New York, which proposes unwinding the dual class voting structure that sees almost 70 per cent of the company’s shares stripped of voting rights. Murdoch owns 39% of the voting shares but less than 15% of the total.
The proxy documents were released in New York on Thursday and they contain an emphatic defence of the gerrymander from the full News Corp board.
I’m a business journalist who did seven years working for Murdoch newspapers in Australia, but have spent much of the past eight years pursuing shareholder activism, including running for corporate boards in Australia.
After six years of lively exchanges with Murdoch each year in Adelaide, including a 2002 board tilt which was almost successful from the floor, Murdoch moved News Corp to Delaware in 2004.
He then took the corporate governance low road by instituting a poison pill, which would have been illegal in Australia, to fend off rival media mogul John Malone who snapped up an 18% voting stake.
Murdoch bought peace with Malone in a $12bn buy-back and asset swap earlier this year and then promptly negotiated his way through the Bancroft family’s own dual-class share “gerrymander” to secure control of Dow Jones.
My view is simply that as the owner of The Wall Street Journal, which expects high ethical standards from global companies, it’s time for News Corp to adopt best practice corporate governance at its own operations.
By rejecting my proposal, Murdoch appears to be obsessed with retaining family control of News Corp, even if that means a lower share price.
In fact, the resolution has already moved the market and created value for all News Corp shareholders. On the back of the proxy statement released, during Friday’s trade in Australia, the voting shares rose 49c to $27.09 and the non-voting stock added 78c to $25.51, a gain of 3.15 per cent on a day when the broader market was up just 0.5 per cent. The market loves the idea of a one class company with a takeover premium and almost 1bn more shares in the S&P500 index. Even Rupert would be richer, albeit with a less tenuous hold on News Corp.
I’m planning a global campaign on this issue and the next six weeks will be a fascinating test of the editorial independence of News Corp media outlets across the world.
How can the guy whose media outlets so enthusiastically campaigned to spread democracy to Iraq resist calls to embrace standard democracy at his own company?
The Australian Financial Review’s back page comment section on Friday endorsed eliminating the two-tier voting system as a “valid corporate governance point” and said it’s time for global institutions and proxy advisory firms to gather together and force some necessary change at News Corp.
People such as former British Airways chief executive Sir Rod Eddington, a leading independent News Corp director, surely can’t keep going on defending the indefensible.
Bring on the 19 October AGM at New York’s Hudson Theatre.
Stephen Mayne
[* Stephen Mayne owns 150 News Corp voting shares. He is a commentator on the Australian-based e-newsletter Crikey; and Mayne Report, his new daily videoblog and online newsletter devoted to investor watchdogging and corporate governance, opens for business October 1 (although there’s a YouTube teaser now).]
