ROBERT SIEGEL, HOST:
On Friday, News Corp will hold a long-planned annual meeting for shareholders. After months of scandal, the meeting will offer a forum for a growing chorus of dissident shareholders. They're intent on challenging Rupert Murdoch's grip on the company.
But as NPR's David Folkenflik reports, they also face long odds.
DAVID FOLKENFLIK, BYLINE: The bill of grievances is long and growing, start with News Corp's legal and financial exposure from the British phone hacking and police corruption scandal that led the company to close a profitable tabloid. Throw in the loss of the nearly $13 billion takeover deal of BSkyB - the largest broadcaster in the U.K. Recall too the charges of nepotism that followed the purchase of the production company of Murdoch's daughter Elisabeth. She personally pocketed more than $200 million.
LAURA MARTIN: If you had this happen in normal company, in theory, the board would have required the CEO to resign.
FOLKENFLIK: That's Laura Martin, senior media analyst for the investment bank Needham and Company. But as Martin points out, News Corp is not just any company and its leader is not just any CEO.
MARTIN: Do they think the shares that they own are going to go up more if Rupert Murdoch is displaced or less?
FOLKENFLIK: Several major institutional investors are pushing for change. Two California state employee pension funds will vote their shares against re-appointing Rupert Murdoch to the board. The Amalgamated Bank, which owns a million shares, filed a lawsuit against the company, in which it is citing, quote, "a culture run amuck within News Corp and a board that provides no effective review or oversight."
Along with Rupert Murdoch, who is chairman and CEO, the board includes his sons, James and Lachlan, along with a half dozen current and former company officials and others with close connections.
Plans for Elisabeth Murdoch to join the company's board were shelved. Not good enough, says Robert McCormick. He's the chief policy officer for Glass Lewis, which advises investors on governance issues.
ROBERT MCCORMICK: You know, there's the basic statutory definition of independence - usually governed by stock exchanges. But then there's the more real world definition of independence, you know, if you're best buddies, if you're, you know, golf partner or a former employee, how independent is that person really going to be when their former boss is someone that they're, in effect, charged with overseeing?
FOLKENFLIK: Glass Lewis advise clients who hold shares in News Corp to vote against six directors, including James and Lachlan Murdoch though not the father. McCormick says the problem with the company can be found in the makeup of the board.
MCCORMICK: The fundamentals of the firm, the success of the firm are evident and longstanding. So, I think to overthrow the founder-CEO and an entire management team is probably not warranted at this point.
FOLKENFLIK: The math just about assures that any such efforts will fail. The company has a two-tiered ownership structure, so the Murdoch's control about 40 percent of votes even though they own just 12 percent of the company. The next largest shareholder, a Saudi prince, is standing squarely behind Murdoch, too.
But James Murdoch's actions while running News Corp's British operations and his testimony before Parliament this summer have been called into doubt. During a conference call with analysts and reporters in August, I asked Rupert Murdoch about how the company was run, and the independence of the oversight of the company's promised internal inquiry into phone hacking.
You mentioned that you and the board affirmed it would be right that you continue on as chairman and CEO of the corporation. That said, there are a lot of ties - familial, corporate and financial - between yourself, members of your immediate family, the board and those responsible for the internal inquiry. What do you say to those analysts who contend that your company...
RUBERT MURDOCH: That's not true.
FOLKENFLIK: Murdoch said Viet Dinh, a director, would provide scrupulous oversight of that inquiry. Dinh is a former assistant U.S. attorney general but is also the godfather to one of Murdoch's grandchildren.
MURDOCH: Mr. Dinh is a completely independent director, a distinguished lawyer. You know, and I'll just assure you that we continually evaluate our corporate governance practices, and have engaged outside counsel to confirm that we are in compliance with standards of good corporate governance.
FOLKENFLIK: Meanwhile, investigations into the scandals continue unabated. Over the next six days, former executives for News Corp's British arm will testify before a parliamentary committee. And James Murdoch is expected to be called back to face more questions himself next month.
David Folkenflik, NPR News.
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