Super body urges vote against re-election of James and Lachlan Murdoch after ‘failures of oversight’ by News Corp board
James Murdoch, Lachlan Murdoch and four other directors should be voted off the News Corp board at the media giant’s upcoming annual general meeting to send a “clear message to the board” in the wake of the News of the World phone hacking scandal, a superannuation advisory body says.
The Australian Council of Superannuation Investors, the country’s largest investor body, says its recommendation “follows events emanating from the phone hacking scandal which have brought into question the effectiveness of systems of oversight and risk management in News Corporation”.
“Responsibility for this, as well as setting the ethical tone throughout News Corporation and affiliated organisations rests with the News Corporation board,” ACSI chief Ann Byrne says.
ACSI, which represents more than 40 super funds that manage more than $250 billion in assets, acknowledges that its proposal is unlikely to succeed given that the Murdoch family controls 40% of voting rights despite holding just 12% of the overall stock.
The body says the recommendation is not based on individuals failings of the six directors, but given the impracticalities of voting against the whole board, “no” votes against the family and affiliated board members are appropriate to reflect unhappiness over the board’s “failures of oversight”.
The other four targeted directors are Natalie Bancroft, who gained a seat after the takeover of Dow Jones a few years ago, plus Andrew Knight, Arthur Siskind and David De Voe, who between them have 61 years on the board.
“All boards should comprise a majority of independent non-executive directors who are sufficiently motivated and equipped to fulfil the function of independent scrutiny of the company’s activities,” Byrne says.
“In a situation where there are dual classes of shares minority investors rely on the independent directors to protect their interests and rights, therefore the skill and independence requirements are vital.
“Board renewal at News Corporation is required to ensure that the interests of all shareholders are at the forefront in every board discussion.”
BBY media analyst Mark McDonnell says ACSI’s proposal is sensible and not entirely unexpected.
“I am sure it reflects wider views,” McDonnell says.
“These issues around corporate governance have been widely aired,” he says, citing concerns about Rupert Murdoch’s age and his likely successor, the controversial purchase of his daughter’s well-regarded production company Shine earlier this year, the lack of an independent chairman at the company, and investigations in the UK and in the US over police payoffs and illegal voicemail access by the now-defunct tabloid.
“It’s very difficult for people when they own a company as professional investors to be engaged in behaviour that is seen as critical of the company without damaging their own interests,” McDonnell says.
“The significance of the proposal is that it transcends those concerns that individual professional investors can have about expressing those views. It’s one of the more legitimate functions that these umbrella groups can perform.”
McDonnell says News Corp’s share buyback, announced after the phone hacking scandal intensified, did more than stabilise the company’s share price.
“The significance of the share buyback, to my mind, is that it is likely to see the Murdoch family interest increase in respect of the voting stock and the percentage hold relative to the whole,” he says.
The ACSI comments follow advice by British advisory firm PIRC to oppose the re-election of James Murdoch, who headed the British division of News International, during the News of the World scandal and whose testimony at a British parliamentary inquiry was contradicted by former senior staffer members.