The odds are stacked: Shareholders stare down Murdoch and lose (yet again)

Minority shareholders in Rupert Murdoch’s News Corporation tried and failed this week to release the python-like stranglehold the nonagenarian media mogul has over the company. Realistically, these shareholders were never going to succeed.

The minorities want to collapse the company’s structure allowing the Murdoch family to vote 41 per cent of the shares despite only having a 14 per cent economic interest in the media giant.

However, a shareholder vote is required to achieve this outcome. You see the problem here – a classic catch-22.

Rupert Murdoch’s stranglehold on News Corporation remains despite the efforts of minority shareholders. Credit: NYT

Back in 2015, shareholders tried a similar trick. And while 90 per cent of non-Murdoch aligned shareholders voted to abandon the structure that gave Rupert Murdoch disproportionate control, it failed to pass.

Dual-class shareholding structures are the antithesis of shareholder democracy – more of a corporate version of a gerrymander.

This week’s vote was also an advisory one, meaning even if it had been passed, the News Corp board had the discretion to ignore it.

Given success was never within reach for News Corp’s minority shareholders, the more interesting question is why they chose this moment to send the company a message.

There was certainly a conga line of investors and proxy advisers screaming from the rooftops that dual voting structures are the lowest standard of corporate governance. But that’s been the case for years. And Australian shareholder Perpetual Investments took a contrarian position and supported the Murdochs, reasoning that it allowed the company to make long-term decisions on capital.

One wonders if those seeking to abandon the dual voting structure were spurred into action by last year’s retirement of founder Rupert Murdoch and his passing of the baton to his eldest son, Lachlan. It lines up with the family’s succession brawl that is playing out in the US courts.

Currently, all roads lead to the US backwater city of Reno – a gambling town without the glitz of Vegas – where Rupert Murdoch is fighting a legal battle with three of his four eldest children to lock them out of decision-making on the family trust, which holds the family’s stakes in News Corp and Fox Corp. He is seeking to hand control of the trust and therefore the management of his listed corporate empire to Lachlan.

Murdoch has prevailed in defending the family’s control over his empire because of what can only be described as ‘the cult of Rupert Murdoch’.

At 93, Rupert appears to be tidying up his affairs. A couple of years ago, he flagged a proposal to merge News Corp and Fox – which looked like an attempt to give Lachlan easier control over the entire empire. The plan was abandoned after shareholders and media analysts argued it would devalue both companies.

More recently, the Murdochs have revealed they are pursuing the sale of Australian pay television operator Foxtel, which is majority owned by News Corp and minority owned by Telstra.

Although News Corp chief executive Robert Thomson told shareholders a few weeks ago that the sale of Foxtel remained “active”, the previously rumoured buyer, US private equity outfit Platinum, revealed it is no longer in discussions. It opted out of the negotiations earlier this year because it believed News Corp had unrealistic expectations on price.

Murdoch has a history of successfully selling assets for top dollar, so presumably he doesn’t want to sully that record.

More importantly, News Corp has provided more than $1 billion in loans to Foxtel, so getting repaid would be an important part of Murdoch’s corporate tidy-up. Yet, Foxtel, which is struggling to retain subscribers for its streaming services and experiencing a slow churn in cable subscribers, is not an especially sought-after asset.

Murdoch has prevailed in defending the family’s control over his empire, despite sometimes restless shareholders and a long line of critics, because of what can only be described as “the cult of Rupert Murdoch”.

Shareholders will be too aware there is no “cult of Lachlan Murdoch”.

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