Murdoch family survives push to loosen its grip on News Corp
By Colin Kruger
Rupert Murdoch’s News Corp said a proposal to eliminate the dual-class share structure that allows his family to effectively control the media group was “convincingly” defeated at its annual general meeting on Thursday morning.
The company, chaired by Lachlan Murdoch after Rupert stepped down last year, confirmed the defeat of the proposal in a statement to Bloomberg.
The Murdoch family has 41 per cent of News Corp voting shares, which cement its control over the media empire.Credit: AP
The company has yet to release the final vote on the AGM resolutions from the webcast meeting.
In September, US hedge fund Starboard Value filed a shareholder resolution to eliminate the dual-class share structure that allows Murdoch to control the company by owning about 41 per cent of the voting shares, despite financially owning just 14 per cent of the group.
“While we can understand how some could see a benefit to a visionary founder retaining outsized control for a limited duration of time, that potential understanding vanishes as super-voting power and the associated protections transition to others,” Starboard cofounder Jeffrey Smith said in a letter to News Corp shareholders in October.
“This transition of power from Rupert Murdoch to his children has allowed for complicated family dynamics to potentially impact the stability and strategic direction of News Corp,” he wrote.
The resolution was backed by US proxy advisory firms Egan-Jones, Glass Lewis and Institutional Shareholder Services, which all argued that no investor should have voting rights that are different from others.
A strong vote for the non-binding shareholder proposal would put pressure on the Murdochs to end their control of the media empire, which includes its Australian newspapers, the valuable majority stake in real estate portal REA and the Foxtel stake, as well as the Wall Street Journal and UK newspapers like The Sun.
The individual assets are estimated to be worth more in a break-up scenario than they are under News Corp’s umbrella.
Glass Lewis said that if the dual-class structure was eliminated, the board could face investor pressure that would likely focus “squarely on the historical performance of News Corp”.
The other battle for control of News Corp is playing out in Nevada. Members of the Murdoch clan at court (from left) Rupert Murdoch and his wife Elena Zhukova, Lachlan Murdoch, and Elisabeth Murdoch with husband Keith Tyson.Credit: AP/NTY
“The economic stake of each shareholder should match their voting power and ... no small group of shareholders, family or otherwise, should have voting rights different from those of other shareholders,” Glass Lewis wrote in its report, according to Reuters.
Egan-Jones wrote that if shareholders were given a voice proportionate to their stake in the company, they would be able to hold the management accountable for their actions.
News Corp’s board of directors pushed back on Starboard’s proposal in September and said in a statement that the dual-class structure “promotes stability” and that the company “has thrived under the current structure”.
This is not the first challenge to Murdoch’s control of News Corp.
At the 2014 AGM, rebel investors nearly succeeded in unwinding the structure when 47.4 per cent of votes supported a proposal to eliminate the dual-class share structure. If passed, it would have diluted Murdoch’s voting interest from almost 40 per cent to a mere 14 per cent.
The Murdoch family also faces a battle from within. Murdoch is attempting to ensure his eldest son, Lachlan, has sole control over the future of his businesses by securing him greater voting power compared to his siblings – a move that is being legally contested by three of Murdoch senior’s children – Elisabeth, Prudence and James.
The matter is currently before a US court in Nevada.
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