Investors voice disapproval of Murdoch’s sons

Investors in News Corp have clearly signalled that they oppose Rupert Murdoch’s plans to pass control of the media giant to his children, voicing strong opposition to the re-election of sons Lachlan and James Murdoch to the board at the company’s annual general meeting last week.

The AGM was the first time investors have had a chance to tackle the company over the board’s handling of the News of the World phone hacking scandal.

Vocal critics of the company’s governance structure include US public pension funds CalPERS and CalSTRS. The funds have called for the News Corp board to be comprised of a majority of independent directors and an end to the company’s two-tiered share structure, which gives Murdoch 40 per cent of the voting shares while only having a 12 per cent overall stake in the company.

There was stronger opposition to the re-election of James and Lachlan than to the re-election of Rupert. Only 14 per cent of B-class shareholders voted to either withhold support or oppose Rupert’s re-election; 34 per cent of votes opposed or were withheld for Lachlan’s re-election, and 35 per cent for James.

When the votes controlled by Rupert Murdoch or Saudi Prince Alwaleed bin Talal were excluded from the count, approximately 55 per cent of votes cast were against the re-election of James and Lachlan.

“This protest vote is a clear message from global investors that the current quality of corporate governance and behaviour at News Corp is unacceptable,” says Ann Byrne (pictured), the chief executive officer of the Australian Council of Superannuation Investors (ACSI).

“Our position is clear, and we are not going away.”

The organisation, which represents 38 Australian superannuation funds with total assets of more than $300 billion, has been a long-term critic of the News Corp’s governance structure.

This included a court case surrounding the movement of the company from its home in Australia to a more lenient corporate regulatory environment in Delaware.

Byrne says the vote also showed that the independent directors currently on the board need to “strengthen independent oversight”.

In a statement, CalSTRS said it was disappointed with the outcome of the vote but was not surprised given the two-tier voting share structure of the company.

“We are heartened by the strong showing of support for governance changes at the company,” the fund said.

“The high number of withholds for certain directors demonstrates the strong desire of unaffiliated shareholders, such as CalSTRS, for a more independent board.”

Other directors also up for election encountered similar shareholder opposition to that experienced by Lachlan and James Murdoch.

Natalie Bancroft, whose family once controlled Dow Jones before it was acquired by News Corporation saw 33 per cent of votes cast against her. Other directors Andrew Knight (32 per cent against) and Arthur Siskind (30 per cent against) also bore the brunt of an investor backlash over their oversight of the company.

CalSTRS said it will continue to push for governance changes at the company, and said News Corp would be held to the same standards as other companies in its portfolio.