News Corp. (NWSA:US) Chairman and Chief Executive Officer Rupert Murdoch, preparing to split his media empire into entertainment and publishing businesses, resigned from three of the company’s boards, including the News International newspaper division in the U.K.
Murdoch, 81, also stepped down as a director of Newscorp Investments and Times Newspapers Holdings, according to U.K. regulatory filings. News International publishes the Times, the Sunday Times and the Sun newspapers in the U.K.
The resignations were presaged by Murdoch’s son James, who left the boards of News Corp.’s newspaper companies earlier this year. The Murdochs’ retreat follows a costly yearlong scandal at the U.K. newspaper operations, which is seen as a drag (NWSA:US) on the rest of the business.
“It’s all part of a withdrawal from the U.K.,” said Claire Enders, a media analyst at Enders Analysis. “It’s a continued disassociation with the Murdochs as a family because, after all, James and Rupert Murdoch are not all that different in the playout of the scandal. They’ve both been heavily implicated in different ways. So this is a response.”
The two men have been compelled to appear before the British Parliament and explain how reporters and editors were able to get away with illegally hacking into mobile phones and paying public officials for stories without executives’ notice.
Tom Mockridge, head of the U.K. unit, told staff in a memo that Murdoch “remains fully committed to our business as chairman,” a person familiar with the e-mail said. The person asked not to be named because the message was private.
News Corp., under pressure from shareholders, announced plans last month to split into two publicly traded entities. The publishing business will consist of newspapers in the U.S., U.K. and Australia, as well as book, education and marketing assets. The media-and-entertainment company will have film and TV assets. Murdoch is slated to be chairman of both entities and CEO of entertainment when the deal closes in about a year.
“Last week, Mr. Murdoch stepped down from a number of boards, many of them small subsidiary boards, both in the U.K. and U.S.,” New York-based News Corp. said in an e-mailed statement yesterday. “This is nothing more than a corporate housecleaning exercise prior to the company split.”
The Guardian newspaper reported on July 4 last year that journalists at the now-closed News of the World tabloid hacked into the voice-mail account of a murdered schoolgirl. The revelation disrupted News Corp.’s plans to take to take full control of British Sky Broadcasting Group, Britain’s biggest pay-TV operator of which it owns 39 percent.
Now media regulator Ofcom is examining whether the Murdochs are “fit and proper” holders of a broadcast license. James Murdoch, who is currently serving as deputy operating chief of News Corp. in New York, stepped down as chairman of BSkyB in April after his involvement in News International attracted unwanted attention to the stake. The regulator has the authority to revoke a broadcaster’s license, threatening part of News Corp.’s most profitable business.
Operating income at News Corp.’s publishing unit, which includes the Wall Street Journal, New York Post and Times of London, dropped 32 percent from fiscal 2008 to 2011, according to data compiled by Bloomberg. A shift to the Web has cut industry advertising and circulation revenue, while News Corp.’s entertainment units, including Fox networks and the Twentieth Century Fox film studio, increased profit by 13 percent.
‘From the Top’
Murdoch built his empire on the newspaper business, first acquiring the Adelaide News in Australia in 1953 and adding on acquisitions of other newspapers and television stations. In 1969, he bought The Sun and The News of the World in the U.K. In 2007, Murdoch bought Dow Jones, publisher of the Wall Street Journal, now the most popular newspaper by circulation.
Separately, a U.K. committee, after probing whether News Corp. misled Parliament in the phone-hacking scandal, concluded in May that Murdoch is “not a fit person to exercise the stewardship of a major international company.” Murdoch “exhibited wilful blindness to what was going on in his companies and publications,” the House of Commons Culture Committee said in a report. “This culture, we consider, permeated from the top.”
Last week, a lawyer for phone hacking victims revealed that an executive within News International was in possession of an e-mail with instructions on hacking the mobile-phone voice mail of a “well-known person.” The company had failed to disclose the e-mail for months, David Sherborne said at a London hearing.
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