Bloomberg News

News Corp. Declares Victory Over Opponents, Withholds Vote Total

October 22, 2011

Oct. 22 (Bloomberg) -- News Corp. investors challenged Chairman Rupert Murdoch and his sons at the media company’s annual meeting, as their demands for governance changes and limits to family control fell short.

News Corp. said all 15 directors were elected at the meeting yesterday in Los Angeles, while a proposal to split Murdoch’s role as chairman and chief executive officer was rejected. The company failed to provide vote totals as it has in the past. Complete results will be filed with regulators early next week, according to a statement.

Murdoch promised at the meeting that final results would be filed with regulators that day. The outcome of a challenge to his dual role as chairman and chief executive was never much in doubt, given his 40 percent of the voting shares. A high percentage of votes against a continued board role for Murdoch, 80, and his sons, James and Lachlan, would be an embarrassment.

“Obviously there’s going to be some large withhold votes from directors and possibly that’s part of the rationale for them not releasing the votes at the meeting,” said Julie Tanner, director of socially responsible investing for New York- based Christian Brothers Investment Services Inc.

News Corp. didn’t immediately respond to a request for comment about the delay.

Christian Brothers introduced a resolution from the floor to separate the chairman and CEO roles held by Murdoch, who has run the New York-based media company for more than five decades.

Symbolic Effort

“The resolution to separate the chairman and CEO was always symbolic, a way to get the discussion going, and there was a lot of support,” Tanner said. “But because of the way we had to file the resolution, it couldn’t get all the support it needed.”

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 of the company in the wake of a phone-hacking scandal. The elder Murdoch went into the meeting with at least 47 percent of the voting shares on his side, including Saudi Prince Alwaleed Bin Talal, who has voiced support.

According to News Corp.’s proxy, 798.5 million Class B shares were eligible to vote. Of the total, Murdoch controls 317.3 million. The company owns the Fox broadcast network and the Wall Street Journal.

Share Repurchases

News Corp. Class A shares, those most widely held, rose 2.1 percent to $17.20 at the close in New York yesterday. The shares, which represent about 70 percent of the economic interest, have no voting rights. The company has repurchased $1.71 billion worth since announcing a buyback in July.

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.

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.

The company also said it is investigating other U.K. publications. The testimony of James Murdoch, who once led the News International unit, concerning when he learned of the hacking was contradicted by former employees, and he has been asked to testify again in Parliament.

Focus on James

James Murdoch may face additional scrutiny over the Wall Street Journal Europe, which boosted circulation by selling issues at 1 euro cent per copy to third parties, according to documents obtained by Bloomberg News.

“Shareholders have to wonder whether there could be something else to come out in the future,” said Christian Brothers’ Tanner.

Institutional Shareholder Services, or ISS, which advises more than 1,700 investors on governance issues, recommended voting against 13 of the 15 directors, including the Murdochs, citing a “lack of stewardship and failure of independence” by the board. The average amount of dissenting votes among S&P 500 companies is around 5 percent, according to ISS.

Hermes Equity Ownership Services also sought the ouster of Murdoch and his sons from the board. Two other advisers, Glass Lewis & Co. and Egan-Jones Proxy Service, recommended James, 38, and Lachlan, 40, be removed. Their concerns include a slow response to the phone-hacking scandal and executive compensation.

Other Allegations

The California Public Employees’ Retirement System and the California State Teachers’ Retirement System also took stances aimed at loosening Murdoch’s control.

British lawmaker Tom Watson, a Labour Party member who has led Parliament’s inquiry into phone hacking, drew attention at today’s meeting to allegations of computer hacking and the activities of a private investigator, Jonathan Rees.

In response to Watson’s questions, Murdoch said he wasn’t aware of computer hacking in the U.K.

“These rumors you speak of are being addressed,” Murdoch said. “We will put this right.”

“A large enough ‘No’ vote by independent shareholders may pressure the board to split the chairman and CEO roles or create an explicit succession plan that doesn’t contemplate one of Rupert’s offspring in the CEO role,” Doug Creutz and Jason Mueller, Cowen & Co. analysts, wrote in a note yesterday.

--With assistance from Andy Fixmer in Los Angeles. Editors: Rob Golum, Anthony Palazzo

To contact the reporters on this story: Edmund Lee in New York at elee310@bloomberg.net; Ronald Grover in Los Angeles at rgrover5@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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