The speech to Rupert that wasn't delivered
December 6, 2015
Rupert Murdoch played a tough game at the News Corp AGM. He went straight to the shareholder resolutions at the start of the meeting and placed a 3 minute limit on speaking time. I ended up making some off the cuff comments, rather than reading these prepared notes about the dual class voting structure, but the flavour was similar.
Rupert Murdoch was genuinely shocked by the avalanche of bad publicity he got after launching News Corp's bid for Dow Jones. At the conference call for the full year results, he complained of being painted as a "genocidal tyrant".
Now Rupert is not a genocidal tyrant, although some people argue his media power could have prevented the Iraq war. Over the past 55 years in charge of News Corp, Rupert has mastered the dark art of Game Theory that he learnt from his old Oxford mate Robin Farquharson in the early 1950s.
Risk taking and pioneering has made him a $10 billion fortune – although the morality of it all is often dubious. Our company has made billions degrading British society with soft porn in the world's biggest selling newspapers.
Fox News is worth billions – although it has debauched the noble profession of journalism with its propaganda, even generating an anti-Fox News documentary called "Out-Foxed: Rupert Murdoch's war on journalism" which has been seen by more than 1 million people around the world.
Rupert has also mastered the dark art of duchessing politicians, whether by personal dealings, positive coverage or generous book deals. And he has dealt extensively in most of the world's tax havens. Then we have the whole question of corporate governance and democracy at News Corp.
The worst thing Rupert ever did happened two days after the 1987 stockmarket crash, which happened 20 years ago tomorrow. Queensland Press, a company which was 44% owned by News Corp, paid $A475 million or $16 a shares for 42 million News Corp shares owned by the Murdoch family. This was a substantial premium to the price at the time and well above the low of $3.19 reached in January 1991. Sure, it has subsequently turned out to be a good investment but using News Corp funds to bail out the Murdoch family after the 1987 stockmarket crash was appalling corporate governance.
Even after this happened, Rupert kept running News Corp like it was his private company. John D'Arcy is a former News Corp director who self published a book in 2005 which included the following:
"There were very few News Corp board meetings held that I was invited to join, or anyone else from Australia I believe, and Rupert really did pursue his own ambitions without any regard to the regulatory requirements of a publicly listed company. Earlier in 1988 I had a phone call from one of the fellow directors from News Corp in New York who said, "John, do you know anything about this deal that Rupert has just made?" I had to reply, "I read about it in this morning's press." The deal was the purchase by News Corporation of Triangle Publications for $US3.8 billion. Triangle published TV Guide in America and Rupert apparently could see no problem in going ahead with the purchase without any reference to the board itself."
Given this sort of thing has happened before, us News Corp shareholders should put in place mechanisms to stop it happening again. We dropped a couple of billion on Triangle and it contributed to us almost going broke in 1990.
However, rather than improving governance after this episode Rupert fired our then chairman, his Geelong Grammar school friend Richard Searby, by letter and inserted himself into the top post.
Then, for the next 14 years in Australia, he refused to submit himself for election despite this arguably being against the law Down Under.
Whilst the Murdoch family did own almost 50% of the shares 20 years ago, these days they are down to less than 15%, but have retained control by creating a gerrymander that sees almost 70% of the shares on issue denied the vote.
We know that Rupert doesn't like being challenged by his shareholders or News Corp directors. In 2003, Rupert's Australian shareholders revolted and voted down a lucrative incentive scheme for executives, including his son Lachlan.
It was the first time in 51 years Rupert hadn't got his way and Rupert's response was to immediately start working on plans to move the company to Delaware, even sacrificing his long cherished Australian holiday from capital gains tax.
We were told the US move would drive the share price higher because News Corp shares would be included in the S&P500 index. Three years later, us B class voting shareholders are still not in the index and the shares have underperformed the index on both sides of the Pacific.
John Malone used the weakness in the stock from the reincorporation proposal to snatch a 19.1% voting stake and then Rupert caused the share price to plunge by introducing a poison pill. We've spent much of the past three years securing a peace deal, which meant we surrendered one of our crown jewels, DirecTV, to get Liberty Media off the register, in a deal that will hopefully close by Christmas.
Now, we've bought Dow Jones and The Wall Street Journal and actually control which stocks are included in the 30-strong Dow Jones Industrial Average.
Financially, we've never been stronger so with Malone going, now is surely the time to embrace proper corporate governance at News Corp. The New York Times has been subjected to a substantial campaign against its gerrymander and given Rupert's dream to use the Journal to take on The Times, we should fire an opening shot by cleaning up our own governance and strengthening our moral authority.
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