One third of News Corp. (NWS) shareholders voted against the election of Rupert Murdoch’s sons to the board, a protest against the family’s control over the media company in the wake of a phone-hacking scandal.
James Murdoch, deputy chief operating officer and son of the chief executive officer, received the most votes against his election, at 35 percent, according to figures released by the company yesterday. James, 38, has been called to U.K.’s Parliament next month to answer questions for a second time about phone-hacking at one of News Corp.’s London newspapers.
Thirty-four percent of shareholders voted against Lachlan Murdoch, 40, while 14 percent voted against Rupert. The elder Murdoch’s hold on the board wasn’t in question, given that he controls about 40 percent of the Class B voting shares, and all 15 of the company’s nominees were elected as directors.
Investors not named Murdoch are calling for an overhaul of the board, beginning with his sons. Not counting Murdoch’s stake, 67 percent of Class B shareholders voted against James and 64 percent against Lachlan. Three other directors failed to get a majority, excluding Murdoch’s stake.
“How can they not feel compelled to appoint more independent directors?” Julie Tanner, director of socially responsible investing for New York-based Christian Brothers Investment Services Inc., said after the vote totals were released. “It’s clear this insider arrangement is the polar opposite of transparency.”
Without Murdoch’s Stake
Investors including the California Public Employees’ Retirement System had said they planned to vote against the family members. Proxy advisers and investors including Calpers, the largest U.S. pension fund, had called on the Murdochs to leave the board to bolster independent oversight in the wake of the phone-hacking scandal.
According to News Corp. (NWSA)’s proxy, 798.5 million Class B shares were eligible to vote. Of the total, Murdoch controls about 40 percent and about 7 percent is held by Saudi Prince Alwaleed Bin Talal, who has voiced support for the Murdochs.
“When you back out Rupert’s shares, with more than two- thirds voting against James, what must the board think?” Tanner said in an interview.
The "unprecedented investor dissent" shows a desire for change by the shareholders, and News Corp. needs to add "genuinely independent representation" to its board, the Local Authority Pension Fund Forum said in an e-mailed statement. The group of British pension funds has 54 members with assets of 100 billion pounds ($160 billion).
Jack Horner, a spokesman for News Corp., declined to comment on the numbers.
Tanner’s floor resolution to separate the roles of chairman and CEO, now both held by Rupert Murdoch, didn’t pass with 1.5 million votes in favor and 680.5 million against. Tanner called it an expected tally given that she couldn’t distribute the resolution prior to last week’s company meeting.
Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information and is a business partner of Alwaleed.
Class A shares in News Corp., which owns the Fox broadcast network and the Wall Street Journal, rose 1.1 percent to $17.40 at the close in New York yesterday, and have climbed 19 percent this year. The shares, which represent about 70 percent of the economic interest, have no voting rights.
The reports of hacking at the now-closed News of the World tabloid in London have raised questions about News Corp.’s management and the board’s independence. The company formed a management and standards committee to aid outside inquiries. Police have arrested at least 16 people, including Andy Coulson, Prime Minister David Cameron’s former communications chief and an ex-News of the World editor.
Institutional Shareholder Services, which advises more than 1,700 institutional investors on corporate-governance issues, recommended that shareholders vote against 13 of 15 directors, including the Murdochs, to establish more independent oversight.
The three other directors who received a majority of votes against their election, excluding Murdoch’s shares, are Natalie Bancroft, with 64 percent against; Andrew S.B. Knight, with 61 percent; and Arthur Siskind, with 58 percent.
Directors with the highest level of support were venture capitalist James W. Breyer and attorney Joel Klein, with more than 90 percent of the votes even excluding Murdoch’s stake. They were the only directors ISS recommended shareholders support because of their short tenures on the board.
At the shareholder meeting, the elder Murdoch said his company must and would address the phone-hacking charges.
“There are real issues that we must confront and are confronting,” he said “We could not be taking this more seriously.”
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