How Long Can News Corp. Board Stay Loyal?

By Carr, David | International Herald Tribune, May 8, 2012 | Go to article overview

How Long Can News Corp. Board Stay Loyal?


Carr, David, International Herald Tribune


A board that is loyal to a fault

As evidence grows of a culture of rogue behavior at News Corp.'s British newspapers under Rupert Murdoch, the board's expressions of support will eventually start to sound silly.

If you sat on the board of a company that had been raked over the coals by a British parliamentary committee in a 121-page document, accused of a pattern of corporate misconduct that included widespread phone hacking and an ensuing cover-up by senior officials, you might want to pause for a moment and consider all the implications.

But there was little reflection last week by the board of News Corp., which met quickly the day after the committee's report and announced before the ink was even dry on the report its "full confidence in Rupert Murdoch's fitness and support for his continuing to lead News Corp. into the future" as its chairman and chief executive. (While the board expressed unanimous support for Mr. Murdoch, it is worth noting there were no such words for his son James.)

There are many reasons the elder Mr. Murdoch has avoided any serious consequences from the scandal, despite the hacking of the phones of hundreds of British citizens, the bribing of dozens or more in law enforcement and the arrests of several dozen of his employees.

The market, of course, has no conscience. News Corp.'s share price has risen about 30 percent in the past nine scandal-ridden months, and investors may have decided that the bad news from the print division in Britain was really good news for those who believe the company should abandon newspapers altogether.

Further, Mr. Murdoch runs a large, multinational company with 50,000 employees, so he has a certain plausible deniability, even though several of his most trusted lieutenants were accused by the committee of playing a central role in the growing scandal and cover- up.

Mr. Murdoch also remains mostly unscathed because much of News Corp.'s business and most of its profits lie in the United States, where the scandal is viewed as something happening on a distant island.

There have been reports of corporate misdeeds in the United States, including computer hacking at the company's News America Marketing division, but other than some faint rumbles in Washington about further investigations, it has been mostly smoke, no fire.

"Ask anyone's mother here who Rupert Murdoch is and you will get blank stares," said Rich Greenfield, an analyst at the brokerage firm BTIG, adding that other News Corp. assets seemed unaffected by the scandal. At parties for the White House Correspondents' Association dinner last month, many reporters remarked on how the hacking scandal had had very little traction or traffic among readers.

But the primary reason Mr. Murdoch has not been held accountable is that the board of News Corp. has no independence, little influence and no stomach for confronting its chairman.

Like many media companies (including the one I work for), News Corp. has a two-tier stock setup that gives the family control of the voting shares. The current board includes family members and several senior executives; the independent slots are filled by a host of familiars.

Viet Dinh, a former Bush administration official, is godfather to Lachlan K. Murdoch's son. Roderick Eddington was deputy chairman of a division of the company in the late 1990s. Andrew S.B. Knight and Arthur M. Siskind are both former senior executives, and John L. Thornton, the former Goldman Sachs president, served as an adviser to News Corp. on several major deals.

The board also includes Natalie Bancroft, a trained opera singer who made a great deal of money when her family sold Dow Jones, which included The Wall Street Journal, to Mr. …

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