Wednesday, October 17, 2012

Rupert Murdoch stares down protest vote; tells unhappy investors to sell, take profits and leave

By Business editor Peter Ryan
Rupert Murdoch has stared down a protest vote over his controversial dual role as both chairman and chief executive of News Corporation.

Some of the media company's investors had questioned Mr Murdoch's independence and judgement in the wake of the phone hacking scandal which forced the closure of the News of The World.

Despite the backlash, the majority of shareholders at this morning's annual general meeting in Los Angeles rejected calls to revamp the News Corporation board and reduce the power of the Murdoch family.

Here's my analysis broadcast on this morning's edition of AM.

The backlash over Mr Murdoch's reign as both chairman and chief executive has been long running, and a similar proposal to split the dual roles was also unsuccessful at last year's annual meeting.

However, Mr Murdoch's handling of the phone hacking scandal in Britain provided some fresh amunition for unsettled investors given the multiple police investigations with 60 arrests so far.

Rupert Murdoch confronted the protest vote right from the start of his opening comments and defended his powerful roles as "good" for the company.

Mr Murdoch repeated earlier contrition for the phone hacking scandal and admitted it had been a "difficult" period.

"We've acknowledged the serious wrongdoing that occurred at some of our publications in the United Kingdom. As a result we've had to work hard to make amends, very hard," Mr Murdoch told shareholders.

But the 81 year old founder of News Corporation maintained there's no basis to suggest News Corporation acted wrongly.

"Just as important, we seized the moment as an opportunity to strengthen our governance and our organisation in key ways. We've imposed strict, uniform policies with centralised oversight. We've improved employee training.

"We've also imposed more auditing and testing so that we can fix any problem by identifying it early."

The protest vote came from a number of US pension funds with the concerns been backed by the two main shareholder advisory services, ISS and Glass Lewis

In addition to splitting Mr Murdoch's role to improve independence, there was also a defeated proposal to remove both James and Lachlan Murdoch from the News Corp board given perceived conflicts of interest.

Julie Tanner assistant director of socially responsible investing at Christian Brothers Investment Services said the company needed an independent voice to counter the power of the Murdochs and the fallout from the phone hacking scandal.

"The failure of internal controls has had real and lasting repercussions. It (inaudible) a newspaper, launched criminal investigations, cancelled the BSkyB acquisition, eroded public trust and tarnished the company's reputation," Ms Tanner said.

"That these revelations took years to uncover and address firmly suggests the need to rebalance the power sharing structure. We hold firm that separation would provide greater accountability of management to shareholders and greater independent oversight of management, including the CEO by the board."

While the investor concerns were politely received by Mr Murdoch, the proposals to dilute Rupert Murdoch's power, unseat his two sons and change the dual voting structure were never going to succeed because the Murdoch family controls around 38 percent of voting shares.

But Mr Murdoch did say his role and chairman and CEO are reviewed on an annual basis - which means the 81 year old is likely to face a similar investor backlash at next year's AGM

Coinciding with today's meeting was a report from the Financial Times that Rebekah Brooks, the former head of News International who is awaiting trial in relation to phone hacking allegations, has received a payout from News Corporation of more than A$11 million.

News Corporation shares trading in New York closed 1.7 percent higher to close at US$
24.77 a share.

Twitter: @peter_f_ryan