Rupert Murdoch’s resignation from the boards of several News Corp. (NWS) newspapers may seek to reassure investors that the fallout from a U.K. phone-hacking scandal won’t follow them after the company splits into two units.
Directorships the 81-year-old News Corp. (NWSA:US) chairman and chief executive officer quit last week include at News International, the U.K. division that publishes The Times and The Sun, newspapers that Murdoch acquired and used to help build a $53 billion global media empire over the past decades.
While News Corp. described the resignations as “nothing more than a corporate housecleaning exercise” before the planned separation, the New York-based company is formalizing a more distant role for Murdoch, said Claire Enders, founder and CEO of London-based media researcher Enders Analysis. U.K. regulator Ofcom is examining whether Murdoch is fit and proper to control a broadcasting license through News Corp.’s 39 percent stake in British Sky Broadcasting Group Plc. (BSY)
“The Murdochs have always been keen to sit on every board and have a finger in every pie,” said Enders, whose company advises clients including the U.K. government. “The newspapers don’t benefit anymore in the U.K. from having the ear of Rupert Murdoch” and his resignation from the boards “seems to me to be potentially pleasing to every constituency.”
Bowing to pressure from shareholders (NWSA:US), News Corp. said last month it plans 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 businesses. Murdoch is slated to be chairman of both units and CEO of entertainment when the deal closes in about a year.
In the year since the Guardian newspaper reported on July 4, 2011 that journalists at News International’s News of the World hacked into the voice-mail account of a murdered teenager, News Corp. has shut the tabloid and abandoned a 7.8 billion- pound ($12 billion) bid (NWSA:US)for the remaining 61 percent of BSkyB.
Other boards that Murdoch stepped down from last week include those of Newscorp Investments and Times Newspapers Holdings, according to a regulatory filing. Prudence MacLeod, Murdoch’s oldest daughter, remains a director at Times Newspapers, a body Murdoch created to guarantee the Times’ editorial independence after he bought the newspaper in 1981.
Daisy Dunlop, a News Corp. spokeswoman in London, said some of the directorships Murdoch gave up are “small subsidiary boards, both in the U.K and U.S.”
News Corp. fell 1.1 percent to A$21.40 in Australian trading and has advanced 19 percent this year.
Tom Mockridge, head of News International, told staff in a weekend memo that Murdoch “remains fully committed to our business as chairman,” a person familiar with the e-mail said, asking not to be identified because the message wasn’t public.
James, Murdoch’s younger son, also resigned from the boards of News International and its newspapers this year. He stepped down as chairman of BSkyB in April after his involvement in News International attracted unwanted attention to the stake. The Ofcom regulator has the authority to revoke a broadcaster’s license, threatening part of News Corp.’s most profitable business.
“After all, James and Rupert Murdoch are not all that different in the play-out of the scandal,” Enders said. “They’ve both been heavily implicated in different ways. So this is a response.”
Operating income (NWSA:US) 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.
Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.
Circulation at The Sun has declined 7.7 percent in the past year through June, according to the Audit Bureau of Circulation. The Times has lost 11 percent of readers as total daily circulation in the U.K. has declined 9.3 percent.
News Corp.’s Sunday newspapers, which took a hit after the News of the World closed, are declining as well. In May 2011, about a month before it shut, the 168-year-old News of the World had 2.7 million customers. News Corp. released the Sunday version of the Sun in February to try to win back customers. Since February, circulation has declined by almost a third to 2.1 million readers, according to ABC.
After inheriting an Australian newspaper in Adelaide in 1953, Murdoch built his empire, eventually acquiring television assets and expanding internationally. In 1969 he bought The Sun and The News of the World tabloids in the U.K.
His newspapers helped make him one of the world’s richest men, giving him a net worth of $8.3 billion as of March, and ranking him as the 106th wealthiest person, according to Forbes. They’ve also provided him a platform to influence politicians.
As part of a judge-led inquiry into the phone-hacking scandal, Prime Minister David Cameron and other high-ranking British politicians were forced to explain why they attended Murdoch family weddings, Christmas parties and vacations, accepting rides on private jets and holding meetings on yachts.
Murdoch has made public his desire for one of his children to follow him as CEO, grooming his oldest son Lachlan, daughter Elisabeth as well as James as executives within his empire.
“You do have, for the first time, a complete Murdoch gap,” Enders said. “They have a very direct and engaged style of management in a number of matters by sitting on those boards, but this unfortunately hasn’t saved them from embarrassment.”
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