By Kevin McCauley
In the aftermath of the British phone hacking scandal, a shareholder resolution slated for News Corp.’s Los Angeles annual meeting calls for stripping the chairman title from Rupert Murdoch and giving it to an independent director.
The measure says events leading to the 2011 shutdown of the News of the World tabloid have raised investor concern about the impact on News Corp in the areas of jobs, reputation, market position and enterprise value.
They are concerned about inadequate oversight and the maintenance of corporate culture within the company and its operating units.
The Christian Brothers, Dorset County Pension Fund and Greater Manchester Pension Fund-sponsored resolution reads:
Events leading to the closure of News Corporation’s News of the World operations in 2011 have raised investor concerns about the cost—in jobs, reputation, market position, and enterprise value—of inadequate oversight and maintenance of corporate culture within the company and its subsidiaries.
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. It also has made clear the need for independent board leadership to steer the company through a process of reform.
That these revelations took years to uncover and are only now being addressed suggest a lax ethical culture and a lack of effective board oversight.”
The sponsors believe an independent chair is especially needed due to the Murdoch family control over News Corp.’s voting shares.
An independent chairman would be “empowered to challenge management, to foster a culture of accountability, and to reflect the interests of the wider shareholder body.”
In the shareholders’ view, an independent chair provides “checks and balances and could improve board oversight. It would give News Corp. “greater independence and objectivity on the board, begin to rebuild the public confidence and trust that is critical to a major news organization, and assure shareholders that governance failures are being addressed.”
News Corp. opposes the measure, saying it currently has the right leadership structure in place to guide a complex media entity.
Management wants the flexibility to permit “the roles of the Chairman and CEO to be filled by the same or different individuals, the Board is able to choose a leadership structure that can be tailored to the strengths of the Company’s officers and Directors and best addresses the Company’s evolving and dynamic business.”
The board doesn’t want to be bereft of Murdoch’s savvy. It claims “Murdoch’s unique insight and strategic vision make him the most capable of leading the Board in discussions of the execution of the Company’s strategy.”
Management says a lead director Sir Roderick Eddington, JPMorgan’s non-executive chairman for Australia and New Zealand, is already in place. As the designee of News Corp.’s independent director, Eddington presides over board meetings when Murdoch is not available and provides him feedback from non-management directors.
The board is also nominated two more independents to its board. They are former Labor Secretary Elaine Chao, who served during the George W. Bush administrations, and Alvaro Uribe, who was president of Colombia.
Scandal impact cuts bonuses in half
Management considered the impact of the scandal in determining the annual 2012 bonuses, according to News Corp’s proxy statement that was released Sept. 4.
The compensation committee “considered the U.K. and related investigations and litigation and their impact on the Company including the closure of The News of the World, costs and expenses for the investigations, litigation and civil settlements, and the withdrawal of the proposal to acquire BSkyB.”
The committee believes “management should share responsibility for the impact of these matters on the Company, including the related costs, in the current fiscal year and determined to award only half of the qualitative portion of the annual bonus” to Murdoch; James Murdoch, deputy COO; Chase Carey, president/COO, and David DeVoe, chief financial officer.
The committee, however, is mindful that James Murdoch made a decision to “decline his entire fiscal 2011 annual bonus in light of the issues surrounding The News of the World and acknowledged that he was already adversely economically impacted by the U.K. and related investigations.
The comp committee awarded cash bonuses of $10.4M to Rupert, $8.3M to Carey, $5M to James to $4.2M to DeVoe.
The meeting will be held Oct. 16 at Fox Studios. |