Activist investors and the proxy voting agencies teamed up for an assault on the governance structures at News Corporation, but to no avail. The octogenarian chairman and chief executive, Rupert Murdoch, won re-election to his post as a director, as did his sons, James and Lachlan. A shareholder resolution to split the roles of chairman and CEO failed. The outcome wasn't all that surprising. The Murdoch family controls about 40 per cent of the votes with a 12 per cent equity stake, thanks to differential voting rights embedded in the articles of association. Even a modest number of shares not-voted would have ensured the defence success. That News Corp. was a target this year is linked in large part to the phone-hacking scandal at one of the company's newspaper titles in the UK, the now-defunct News of the World. James Murdoch was chairman of News International at the time and he and his father had faced a public grilling in the British parliament a few months ago. The story has died down since then, but its embers burn on, not least with an appearance at the annual meeting of a shareholder-and-UK-MP, who asked the Murdochs whether they were aware of a new investigation into alleged computer-spying by the UK newspapers. The patriarch said they weren't.
The opposition: Both Institutional Shareholder Services and Glass Lewis, two of the most prominent proxy voting agencies, recommended that clients support the shareholder resolution and called on shareholders to vote against re-election of one or more of the Murdochs. The California Public Employees Retirement System, known as CalPERS, joined the protest with a pre-meeting declaration of intent, as did a number asset management firms specialised in "ethical" investing or representing charities.
Equalising voting rights: Equally far from winning support were the calls from some investors to eliminate the family's control by eliminating the preferential voting. Investors bought the shares knowing there was a governance risk, and eliminating the share might thus allow them to capture a governance premium. But it wasn't – and probably isn't – to be. As most shareholder resolutions are only advisory, it seems unlikely that this board and this management would heed what these shareholders wanted, even if they mustered a majority. That the Murdochs have created considerable shareholder value has proved enough to keep enough shareholders happy, for now. But the story isn't going away. Next year, same time, same place … ?
Source documents: You can listen to the News Corp. annual meeting through a webcast. The Reuters account of the ISS move also gives the News Corp. rebuttal. There's also a story about the Glass Lewis recommendation in AdWeek. The two firms' own website didn't have public statements about their recommendations.
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