July 20, 2012
Voting Rights Curtailed by Dual-Class Structure, News Corp. Shareowners Call for Reforms
by Robert Kropp
Eighteen investors representing over $1.6 trillion in assets under management write to Rupert
Murdoch, urging him to support a shareowner resolution calling for the separation of the positions
of Chair and CEO.
It's been over a year since the phone hacking scandal at News Corp. broke, and since then little or
nothing has been done by the media giant to address poor corporate governance. In October, GovernanceMetrics International (GMI) rated
News Corp. as one of the most poorly governed corporations; none of the issues raised by GMI—the
lack of board independence, excessive executive compensation, and questionable ethics—have been
addressed by the company in meaningful ways.
What News Corp. has done is announce
its plans to split into separate media and publishing companies, which should cheer profit-driven
investors who consider the newspaper business to be a drag on the company's share price. However,
"The level of discontent from shareholders continues, because since the scandal was first widely
reported there have not been any significant changes made by the company on any kind of corporate
governance reform," Julie Tanner, Assistant Director of Socially Responsible Investing at Christian Brothers Investment Services
(CBIS), told SocialFunds.com.
"With the announcement of the company splitting, and Mr.
Murdoch already declaring himself Chair and CEO of the far larger media company, shareholders have
a lot to complain about regarding the poor governance practices of the company," Tanner said.
The phone hacking scandal broke too late last year for CBIS and other shareowner advocates to
file resolutions addressing News Corp.'s poor corporate governance. But Tanner did introduce a
resolution from the floor at the company's annual general meeting in October, calling for the
separation of the positions of Chair and CEO.
At the meeting, Tanner said, "The issue is
so pressing that the resolution has been supported by proxy voting firm Glass-Lewis, and by
prominent investors with over $400 billion in assets under management, including CalPERs, the
Church of England, and the UK's Local Authority Pension Fund Forum, who believe, like many of us in
this room, that the pervasive and value destroying scandal at our company requires stronger,
independent leadership on the board and a more thorough response from the entire board."
challenge to any shareowner resolution filed with News Corp.—especially one that seeks to dilute
the power concentrated in the hands of Rupert Murdoch—is that the company's dual-class stock
structure confers 40% of the company's proxy voting power to Murdoch and his family members. But
that has not stopped CBIS and its allies from persisting in their efforts to effect real governance
In April, CBIS announced that it had re-filed its resolution calling for an
independent board chair, in time for it to be included on the company's proxy ballot. News Corp.
has not yet announced the date or location for this year's annual meeting.
states, "This pervasive and continuing scandal has led to an erosion of public confidence, helped
to scuttle a critical business acquisition, and threatened the journalistic reputation and
viability of News Corporation's UK publications. That these revelations took years to uncover and
are only now being addressed suggest a lax ethical culture and a lack of effective board
An independent board chair is necessary, the resolution argues, "To steer the
company through a process of reform."
The resolution was co-filed by the UK-based Local Authority Pension Fund Forum (LAPFF), an
association of 55 public sector pension funds with over $180 billion in assets under management.
This week, the filers were joined by 16 more shareowners, representing more than $1.6
trillion in assets under management and 13.4 million News Corp Class A shares, in sending a letter to Murdoch, calling on him to support the appointment of an independent
"It is important for News Corporation to uphold the highest standards of corporate
governance in order to protect the value of our investment," the letter states. "The board's
announcement of its intention to split the company into separate media and publishing arms presents
a unique opportunity for serious governance reform. Appointing an independent Chair at News Corp
and its successor companies will go a long way to restoring shareholder confidence."
of the signatories to the letter, the UK-based Legal and General Group, is an investment
management firm with over $580 billion in assets under management.
represent a broad and varied range of investors," Tanner told SocialFunds.com. "The fact that they
have 13 million shares and assets well over $1 trillion speaks to the level of shareholder
discontent. This is an opportunity for shareholders who will be unable to vote at the annual
meeting to be sure that their message of effective governance is heard by the board."
the letter points out, "As Class A shareholders, we are restricted in our ability to officially
co-file the resolution or vote on such important matters concerning our company at the 2012 annual
However, "This type of resolution has been doing well at particularly
problematic companies," Tanner continued. "There is a challenge associated with Rupert Murdoch
holding 40% of the shares, but I think it will get a very high vote. An independent chair is a
reform that institutional investors support, and it is widely supported by proxy voting agencies."