Investor to Murdochs: Back Off

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Several News Corp investors to vote against Murdoch re-election

Major investors tell the Murdoch family to step down in what may become a hostile takeover.

One of the world’s biggest investment groups says it will vote against the re-election of Rupert Murdoch and his family to the News Corp board at this week’s annual general meeting (AGM) based, in part, of the phone hacking scandal. Criticism from top investors sets up what may be an ugly AGM shareholder meeting between the Murdochs and opposing investors on October 21, 2011.

In a U.K. Sunday Telegraph article, the California State Teachers’ Retirement System (CalSTRS) added its voice to growing opposition from shareholders. The California Public Employees’ Retirement System (Calpers) and Hermes Equity Ownership Services agree. CalSTRS issued a statement of concern about revelations that continue to emerge about a UK phone hacking scandal. The questionable actions by News Corp ended News of the World, which began 108 years ago in 1903.

Calpers also expressed concerned about Murdoch’s age: Regardless of whether it’s Rupert Murdoch or anyone else, we do not have Methuselah running major companies. People at the age of 80 to 81 are expected to be stepping aside. This is common sense so a proper succession plan is nothing other than a statement of the obvious.

According to the Telegraph, CalSTRS stated, Given the lack of independent directors, effective board leadership is even more important to provide proper oversight to the company and management. CalSTRS also issued a statement that they wanted the entire 10-member News Corp board replaced, including Rupert Murdoch and his sons James and Lachlan.

The Sunday Telegraph said CalSTRS owns more than 6 million News Corp shares. A spokesperson for the organization cannot be reached for comment at this time.

News Corp is still battling—and has not yet recovered—from the infamous phone hacking scandal which led to the closure of its British weekly newspaper News of the World in July 2011. The potential that the corporation can recover is open to speculation.

In a BBC interview, Anne Simpson, Calpers senior portfolio manager, cited ethics is critical as a critical component to a successful business.

Leadership on that issue is critical, so we look to the board in its next phase to work out how to establish a reputation on leadership for ethics. Obviously one of the most important jobs of the chairman is to review the chief executive through the board. Now, if you’re there marking your own report card, marking your own examination paper, you couldn’t be objective.

It’s extremely important an independent executive be appointed at News Corp and that would require Rupert Murdoch to step down from both those jobs. If you have skewed voting rights and you have insiders on the board, in this case family members, you really need to make sure the independent directors are active and objective and really there with a view to protecting minority shareholders.

We’re voting against Rupert Murdoch, his two sons who sit on the board, and two of the directors who are non-executive, but have been on the board for a very long time.

The combined concern about various investors may not affect Murdoch, who controls 40% of voting stock in News Corp. Last week, corporate governance watchdog ISS called for the Murdochs and 10 other directors to step down.

Recently another of its newspaper titles, the Wall Street Journal, allegedly misled advertisers about its European circulation data, a charge the company described as “inflammatory.”

News Corp called the allegations “inflammatory.” Teri Everett, a spokesperson for the New York-based News Corp., said the company strongly disagrees with ISS’s voting recommendations and that the proxy advisory firm failed to consider the company’s financial performance. The company reported $4.85 billion in operating profit for the year ending in June, a 23% increase from the year before.

News Corp believes the recommendations put forth in the ISS analysis are not in the best interest of the company’s stockholders,” Everett said in an e-mail statement. The company takes the issues surrounding News of the World seriously and is working hard to resolve them.

Calpers is not the sole shareholder dissenter. Last week, the corporate governance watchdog, ISS, called for the Murdochs to step down.

Hopefully, this story will develop into a News Corp takeover.