The statement was simple, abject, forthright, unlike the corporate discourse that for weeks had preceded it. Rupert Murdoch said: "We are sorry." The action that prompted the advertisement in all the major UK newspapers wasn't described. Les Hinton, Murdoch's trusted aide for 52 years, had resigned as chief executive of Dow Jones and publisher of the Wall Street Journal. Rebekah Brooks has resigned a few hours earlier as chief executive of News International, the wholly owned subsidiary of News Corp. that operates its UK newspapers. Brooks had been editor of the now-closed News of the World at the time of the worst alleged excesses. Hinton had been chief executives of News International – her boss. The circumstances that led to it dominated the news those weeks, at least in the UK, where the story crowded out disasters and terrorists acts in other countries and prevented serious discussion of fiscal and monetary policy in the eurozone and US, issues of great macroeconomic import. This micro-story, however, holds lessons in psychology, ethics and corporate governancee, not to mention freedom of the press, so it's more than a little local disturbance in a small island that led a once-great empire many years ago.
We are sorry. Never mind that it was signed by Rupert Murdoch over a News International logo when the man holds no position at the legal entity of that name, not even that of shareholder. That they are difficult words to say means we have consciences, scruples, even principles. Saying "sorry" only comes easy to the cynical. That it took so long for Murdoch and News Corp. to say it, suggests that allegations of his supposedly unprincipled attitudes are somewhat wide of the mark. Comments that Murdoch is "only interested in the money" contradict those that describe his investor-unfriendly love of the dirty print business and then recount the money lost on keeping newspapers like The Times in business. A complex ethic is at work here, part driven by utility, part by virtue. Murdoch is an authentic businessman, in ways that suggest how difficult it is to separate categories in ethics, even in the face of what society at large regards as unethical behaviour. Can ethical people engage in unethical actions? This case suggests the answer is yes, which tells us we need to think long and hard about ethics.
Corporate governance at work: The corporate governance section of its website starts with the simple statement: "News Corporation’s Board of Directors and management are committed to strong corporate governance and sound business practices." The corporate governance lessons loom large here, but they're not a clear as some commentators assert. News Corp. is a family-run business. One look at the board will tell you that: father, two sons, close colleagues and former senior executives make up the executive side. The non-executives have a bent towards Australia, whence Murdoch sprang, or business interests through their Chinese connections or links to the world of private equity. One independent non-executive is a member of the family that sold the Dow Jones business to News Corp. This is a tight board, capable of marshalling resources and pushing the business forward in the direction its principal owner wants. Family-run businesses with outside shareholders (as News Corp. does, aplenty) run big risks of conflicts of interests. They rightly trade at a discount to the market (as News Corp. does), leading to a higher cost of capital and a need to drive more aggressively for margin. It's also the characteristic of a lot of businesses that put something other than margin as their first priority.
Voting rights: News Corp. is also a business with unequal voting rights for the capital, a condition much derided in what scholars and practitioners now call the "governance industry" but one surprising common in media businesses in America and elsewhere. That makes the position of the father, the 80-year-old chairman and CEO, impregnable, not an entirely bad thing when he's a genius, as many of his critics and rivals acknowledge.
Challenge? Shareholders can rarely challenge management anyway, especially in the US. With the boardroom unlikely to show control, challenge may still take place, but on only one side of the board's activities. The News Corp. board may well come up with reasons to challenge the strategic thinking at the company, if not the boss's final decision. In good times, that may be enough. In bad times, it may help, too, when you want a single decision, forcefully executed, after a robust debate. But it helped less in the times in between, when decisions are less dramatic but more likely to be ambiguous. Was this sorry tale a case of that?
The muddled middle: The phone hacking and bribery alleged to have happened at one of the News International UK titles was shocking because it was business as usual. This wasn't just a bad decision on a bad day, as the company, its editors and executives repeatedly tried to claim. It doesn't appear to have been an obsession with numbers to the detriment of human relations and the human touch, either. If the allegations are true – and closing the (profitable) newspaper in question as well as saying Sorry are signs things were amiss –, in what some people have called the culture of the business, or what might be better termed its ethos. News Corp. wanted good stories, a journalistic virtue. People at varying levels of the business shared that concern. And being the "bad boys" was part of what made this an "authentic" news organization. There's virtue on both sides. Integrity screams out about the character of these actors, despite the outrage at the actions committed under their guidance if perhaps not explicit direction. And, yes, the money matters, too. Virtue doesn't always equate to a philanthropic spirit.
Politics, too: But the reason News Corp. matters is because the media matter. They influence public discourse, though they have much less control over it now than they once did. Murdoch's politics (liberal, in the European sense, tending towards libertarian) come coupled with rebellious radicalism. The term "right-wing" doesn't come close to describing the complexity. These are politics that alienate the establishment as much as its social critics. Enemies would prefer that the Murdochs – father and son James, at least – had resigned, rather than the trusted, aging aide and the divisive heroine of newsroom. That won't happen, because the integrity and authenticity of the venture demand that they stay. The resignations of Hinton and Brooks are meant to "draw a line under the matter", we hear in the press. Practices will change. The character of the man and the ethos of the company, though, look intact. Consider the subtext of Rupert Murdoch's news release announcing Hinton's departure concluded:
This isn't the end of the story, though. Rupert Murdoch, in saying "sorry" said as much. The final sentence of his apology was this:
To be sure, we will. Integrity and authenticity demand it every bit as much as the politicians who are trying now to call the Murdochs to account.
Source documents: The news release on Hinton's resignation tells a bit of the story. The corporate governance section has links to its ethics statement and board mandates, and to the resignation letter from Brooks.
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