News Corp. Chairman Rupert Murdoch, facing the fallout from alleged phone-hacking at a London newspaper, got a vote of confidence from Saudi Prince Alwaleed bin Talal Al Saud, one of the company’s largest shareholders.
Alwaleed remains “both supportive and confident in the leadership of Rupert and James Murdoch,” he said in an e-mail yesterday. The statement came a day after Rupert Murdoch and his son James, who is deputy chief operating officer, were questioned by U.K. lawmakers during a three-hour hearing on alleged phone-hacking at News Corp.’s News of the World tabloid.
The Murdochs answered “all questions” at the hearing with “full honesty and integrity,” said Alwaleed, whose Kingdom Holding Co. holds 7 percent of the voting stock in News Corp., the second-largest after the Murdoch family. He also said he supports the inquiry as “part of a necessary process to address the unacceptable practices that developed at the now closed News of the World.”
Alwaleed’s support comes after governance experts who heard Rupert Murdoch’s performance said he may not have done enough to acknowledge his accountability. Jay Lorsch, a Harvard Business School professor, said the company’s board may have to replace him as chief executive officer after the appearance.
News Corp., owner of the Fox TV networks and the Wall Street Journal, has fallen 12 percent on the Nasdaq Stock Market since allegations surfaced July 4 that Murdoch’s tabloid hacked into the voice mail of a murdered schoolgirl. The stock today rose 1.6 percent to the equivalent of $16.59 in Australian trading.
Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.
During the questioning in Parliament, Murdoch, 80, denied any knowledge of phone-hacking and payments to police at News of the World. Both Murdochs said they didn’t know about employees intercepting voicemails or paying police for stories.
“The News of the World is less than 1 percent of our company,” Murdoch told Parliament’s Culture, Media and Sport Committee. He said he may have “lost sight” of the paper because it was “so small in the general frame of the company.”
“If he didn’t know what was going on, he’s doing a lousy job as CEO and the board should replace him,” said Harvard’s Lorsch. “The board should be asking, ‘Where were you?’.”
News Corp. yesterday also said it will immediately terminate “any arrangement” to pay legal fees for Glenn Mulcaire, a private investigator who went to jail for intercepting phone messages left for supermodel Elle Macpherson and members of the British royal family. The Murdochs had told U.K. lawmakers during their testimony that they didn’t know if News Corp. was still paying his legal fees.
News Corp. also authorized Harbottle & Lewis LLP, the law firm it hired to review documents for evidence of phone hacking, to answer questions from police and U.K. lawmakers.
Alwaleed’s support is significant as other shareholders voice opposition to Murdoch. Christian Brothers Investment Services in New York filed a petition with News Corp. on July 15 that seeks to permanently split the CEO and chairman positions, said Julie Tanner, assistant director of socially responsible investing at the organization, which holds 30,755 Class B voting shares on behalf of Catholic institutions.
Murdoch’s testimony that he isn’t responsible for the scandal isn’t acceptable, Tanner said.
“He needs better policies in place and to have a better grasp of what people in the company are doing,” Tanner said.
News Corp.’s dual-share structure also was criticized by Calpers, according to reports in the Financial Times and the Guardian.
“The situation is very serious and we’re considering our options,” Anne Simpson, a senior portfolio manager at the pension fund for state workers, told the Financial Times in an interview. “We don’t intend to be spectators - we’re owners.”
Calpers owns 4.87 million non-voting News Corp. shares and 1.49 million voting shares, according to Bloomberg data.
Alwaleed, in his statement, said that News Corp. is “a valuable and long term investment”.
“I commend my friends and partners Rupert and James for addressing these serious issues head on, cooperating fully with the official inquiries and taking the appropriate steps to bring ethical reform to News Corp,” he said.
Mario Gabelli, CEO of Gamco Investors Inc., also voiced support for News Corp.
“These are great assets with great cash flow and not much debt,” said Gabelli, whose firm held 6.7 million non-voting shares as of March 31. “Nothing that’s happening right now changes that.”