Rupert Murdoch Losing Control of News Corp After Major Investor Revolt

By Colin Kruger and Matt O'Sullivan, The Sydney Morning Herald

17 November 14

upert Murdoch's iron grip on his publishing empire is slipping after a massive revolt against the family's minority control of News Corp that appears to have included one of his key backers.

The voting of a large number of investors at News Corp's annual meeting revealed widespread displeasure for the company's structure, which disenfranchises most of its shareholders.

At the meeting a shareholder proposal to unwind the company's controversial dual-class voting structure was narrowly defeated by 79.1 million shares voted in favour to 87.6 million against.

The structure allows the Murdoch family to control around 40 per cent of the company's votes despite owning just 12 per cent of News Corp through its ownership of class B common stock, which holds the voting rights.

It has allowed the Murdoch family to effectively control the company with a minority shareholding, leading to accusations it is run more like a family fiefdom than a coventional public company

"This kind of governing structure may be exactly what we'd expect in Cuba or North Korea, but it is at odds with good governance practices here," Bill Dempsey, chief financial officer of the New York-based Nathan Cummings Foundation, told Mr Murdoch at Friday's meeting.

At the meeting, which was attended in person by only six investors, Mr Murdoch heralded his son Lachlan as an important part of the company's future. "I'm particularly proud today to be sharing the stage with my eldest son Lachlan, who is co-chairman," he said.

"It is a very special thing to be fortunate enough to work side-by-side with Lachlan who has proven himself to be a talented and successful executive in his own right here and in Australia and will lead us to a very prosperous and bright future."

With the Murdoch family owning 78.72 million shares, it appears that a small minority of investors outside of the family's inner circle backed their minority control.

There are conflicting reports about whether a win for dissenting investors would have automatically translated into the share structure being abolished.

Based on the voting, it is reported that Saudi billionaire Prince Alwaleed bin Talal, who has long been seen as closely aligned to Mr Murdoch, voted his near 7 per cent stake in favour of the proposal to unwind the structure.

"It is a close outcome. It is fair to say that there is really only a small group of insiders who happen to have a very large position that have benefited from the structure," independent analyst Mark McDonnell said.

Had the resolution passed, Mr Murdoch faced the prospect of his control of the company he has built into a global media empire significantly diluted, making him much more vulnerable to the influence of other investors.

Voting results filed with the US Securities and Exchange Commission after Wall Street closed on Friday showed 53.7 million votes against Mr Murdoch's re-election as chairman versus 112 million votes in favour.

Proxy firms ISS and Glass Lewis had advised investors to protest at the company's poison pill mechanism, which makes it extremely difficult for another company to take over the company.

Gerson Zweifach, general counsel of News Corp, told the meeting: "The rights plan does not protect and prevent against any takeover of the company. All it does is it requires that anybody who wants to obtain control in this company has to pay for it. That's what it does and it applies to the Murdoch family trust as well."

News Corp Australia declined to comment on Monday.

Mr Murdoch bowed to investor pressure previously with his decision to split his media empire last year, with the more valuable broadcast assets housed in 21st Century Fox.