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October 10, 2011
Proxy Firm Tells US Investors to Oust News Corp Directors
    by Robert Kropp

Citing concerns about objectivity and independence, Glass Lewis advises shareowners to vote against six of the media giant's directors.


Fallout from the phone hacking and bribery scandal at News Corp continues, as the proxy advisory firm Glass Lewis has advised shareowners to vote against six directors for re-election to the company board.

"Seven of the fifteen directors are either affiliated with the company or are insiders," Glass Lewis stated. "This raises serious concerns about the objectivity and independence of the board and its ability to perform its proper oversight role."

The media giant's board is dominated by family members and associates of the Rupert Murdoch, the Chairman and CEO. Glass Lewis urged shareowners to vote against the nominations of James and Lachlan Murdoch, as well as Senior Advisor to the Chairman Arthur Siskind, Natalie Bancroft, and Andrew Knight.

The company's annual general meeting, which is scheduled for October 21, will be the first since the phone hacking scandal broke in July. Within a month, News Corp's stock fell by 24% and $11 billion in market value was lost.

In July, Christian Brothers Investment Services (CBIS) filed a shareowner resolution requesting that the company separate the positions of Chair and CEO. "By establishing a separate, independent Chair, the Company can begin to rebuild the public confidence and trust that is so critical to a major news organization," the resolution states.

Because the resolution was submitted after the May deadline, CBIS will introduce it from the floor at this month's meeting.

In August, CBIS and other members of the Interfaith Center on Corporate Responsibility (ICCR) issued an Investor Statement expressing "strong concern about the unethical activities of News Corporation."

In addition to the separation of the positions of Chair and CEO, the investor coalition also called for an end to the company's dual-class stock structure. A dual-class structure is comprised of one class of shares for outside investors, and one that confers majority voting status for insiders. Murdoch and his family, through their voting shares, retain control of the company.

Because of the dual-class structure, it is next to impossible that the recommendation of Glass Lewis will gain a majority vote. And considering the history of poor corporate governance at News Corp—Nell Minow of GovernanceMetrics International (GMI), which rates the effectiveness of corporate boards of directors, wrote that News Corp has consistently been given a grade of F, "only because there is no lower grade"—it seems hopeful at best that News Corp will now turn control over to a truly independent board.

 

 
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