The Murdoch story is like Rasputin. You can’t kill it. Every day in the runup to the annual News Corp. (Nasdaq: NWS)
shareholders meeting last Friday in LA, it seemed the papers were
reporting another investor service or pension fund -- the proxy advisory
firm Institutional Shareholder Services and Calstrs among them -- recommending a "no" vote on proposed directors.
As one analyst put it, the investors seemed to be against anybody
named "Murdoch." Apparently, there has been some dissatisfaction with
the management of the company. However, Sir Rupert had nothing to fear.
He long ago took the precaution of having a majority of votes sewn into
Furthermore, the company gave him a 47% compensation increase, to
$33.3 million in the 2011 fiscal year. What did he do to deserve it? In
its statement, the company said, in effect, "great leadership."
Anyway, the increase was minuscule compared to the one for his son,
James. The titular co-leader's compensation rose more than 73%, to $17.9
Then there were the stories about shady circulation tactics employed
by the company's most prestigious newspaper. The Wall Street Journal
Europe was caught building circulation
by giving away copies for pfennigs. That's really bush league stuff
when compared with the UK hacking scandal, which still refuses to go
I can understand why investors are restless, looking at all the past
year's cock-ups. In my opinion, it was a mistake to have closed down the
cash cow News of the World, the most widely respected member of the
crappy newspaper genre and a rag that inspired newspapers like the New
The Murdochs could have chosen a simple solution, as analyst Robert K. Blechman has suggested: "Where the New York Times posts All the News That's Fit to Print, the News of the World could have displayed the motto: Caveat Lecteur." ("Let the reader beware.")
They hit the panic button -- and missed.
With that kind of thinking about unethical, unprofessional editorial
standards, Rupert could have closed Fox News, too, for its unbalanced
and unfair coverage of the Obama administration since 2008.
James Murdoch, or whichever Hercules made the decision on how to
clean up the NOW stable, really stepped in it at Wapping. First, there
was the question about whether he knew about what was going on at the
paper. If not, why not? Second, treating a $1 million payoff to one of
the victims as a petty cash item may have seemed a bit cavalier to
investors. The other hackees, lined up like planes taking off on a
Friday at 5:00 p.m. at Heathrow, also might take umbrage at their
shabbier hush money.
The rats are leaving the ship, with more journalists being arrested
and lawyers talking to the press and police about how top executives
knew what they were doing, even while they slept at the helm.
And the fun isn't over yet. Les Hinton, who was chief executive at
News Corp. before doing the perp walk in July, is back in Parliament
testifying about what he didn't know.
And then the main event. James is being called back to Parliament in
November. He has been saying all along that he stands by earlier
testimony. What the Culture Committee wants to know: Is that standing
alongside the previous testimony? Or in the next room? Or the next
county? Just how close will be a source of interest to the MPs.
His appearance could be the biggest show in Parliament since the
Profumo case of 1963. John Profumo, secretary of state for war in the
Macmillan cabinet, lost his job and his reputation for lying to
Parliament about his affair with a call girl named Christine Keeler -- a
story broken by none other than News of the World. In fact, it was the
paper's first major coup under Rupert.
All of this could be more than just a bump in the road for News Corp.
Having James found guilty of telling less than the truth to Parliament
could lead to criminal prosecution for perjury and prison time. This
would mean Rupert could be a co-conspirator for not remembering the same
things as James.
James and Rupert doing time for perjury could hurt company prospects
in 2012. My guess, however, is the Murdochs have a couple of Get Out of
Gaol cards up their sleeves.