Saying farewell to Rupert in 2004

1. Rupert's flock follows loyally

Rupert Murdoch receiving a thumping endorsement from his shareholders today with a record turn out and all resolutions passed with more than 90 per cent support. So it's bye bye Adelaide, hello Delaware after a remarkable 51 year journey which left plenty of people feeling a little melancholy.

A record number of shareholders spoke at the five different meetings which lasted from 10am till 1.12pm at the Hilton International in Adelaide, a venue Rupert hasn't used for an AGM in recent years, but needed for its extra big ballroom that was full with more than 500 attending.

However, there was still plenty of debate and Crikey led the charge against the proposal but was slapped down on numerous occasions or simply had questions left unanswered. Rupert was at his charming and sometimes aggressive best but he did give everyone a chance to have their say knowing full well that he had won the day.

Early proxy release deflates drama

The heat came straight out of the meeting when News Corp released the proxies figures and distributed them to various journalists at the meeting before the AGM started. This is usually criticised for being intimidatory but that naturally didn't stop Rupert. It is worth looking at all the figures carefully here.

Rupert was naughty in that he voted undirected proxies and he didn't answer the question when Crikey asked that he not do this given that he had a conflict of interest and wasn't voting his own stake. The undirected vote was smaller than expected and Rupert was pleased as punch with the overall turnout which was clearly a record for the company. However, it was academic at the end of the day because 96 per cent of non-voting stock supported the deal and 92 per cent of the voting shares.

The difference was small but important and Crikey hammered the point that ordinary voting shareholders were being shafted because they were getting kicked out of the Australian indices but wouldn't be included in the US S&P 500 because only one class of share is allowed by the Amercans and there are more preferred shares on issue so they get the nod.

Why this deal is a lemon

Consider these facts which Crikey regaled the meeting with: Since the deal was announced, the ordinary shares have fallen from $12.16 to $10.44. That's a drop of $1.72 or 14 per cent and it has wiped about $3.6 billion from the value of the company.

The preferred shares have only fallen from $10.91 to $10.11 a drop of 81c or 7.3 per cent which has also wiped out $3.12 billion in value. However, the difference between the two has contracted from $1.25 to just 33c.

However, it should be noted that both classes of share are up strongly this afternoon (ordinaries 32c to $10.75 and prefs 47c to $10.54) as the market welcomes the certainty that comes from the deal proceeding.

Wearing his ordinary shareholders hat and not knowing about today's share price bounce, Crikey gave Rupert a sustained bollocking for putting up a deal that is bad news for everyone, especially him. Afterall, Rupert's stake has fallen by about $1 billion, he's transferred billions of dollars of value to the non-voting shareholders and he's lost his tax holiday. We concluded the only incentive for doing the deal was shoring up the inheritance and grasping the extra takeover defence mechanisms available in Delaware, something that he declined to answer.

However, when the next meeting happened and the preferred shareholders hat was donned, we congratulated Rupert for improving our relative position and suggested all we now needed was to end his gerrymander and give us a vote, especially as we number 65 per cent of all the shares on issue. Alas, Rupert said this could cause instability and he wouldn't be ceding the chair or going one vote one value any time soon.

Big and small shareholdings - and tiny dividends

Whilst Rupert has 626 million odinary shares and more then 200 million preferred shares, he told the meeting that Crikey only owned 18 shares. Such misinformation! The reality is we have a vast shareholding which is 12 times larger than that - Mr and Mrs Crikey each own 50 preferred and ordinary shares so we have put down more than $2000 of our hard-earned, enough to buy an airfare to next year's AGM in New York.

The most often mentioned question was Rupert's pathetic low dividends and Crikey mentioned how annoying it would be for us receiving four cheques each half - two for US75c and two for $US1.50. We won't bother cashing them. After promising to look at the dividend last year, Rupert was pressed for a timeframe and finally opined that it would be reviewed within two years. Hooray.

Moans aside, you can't get away from the fact that Rupert won the day. Even the retail shareholders were rounded up in their droves and Crikey congratulated Rupert for a magnificent proxy solicitation campaign by Computershare's Georgeson Shareholder Services division which hit the phones hard to help win the day.

A total of 112,453 ordinary shareholders supported the move and only 2084 voted against it and the preferreds had an impressive 73,283 support the move and just 2523 oppose it.

The mood on the floor was nowhere near as supportive and Rupert rejected two requests, one from Crikey, that we be allowed one show of hands before the poll to gauge the sentiment of those who had attended the meeting and listened to the debate.

Rupert did a lot of rejecting of advice - he also gave short shrift to Crikey's suggestion that he alternate between speakers in favour and against the move, as Nick Whitlam did at the big NRMA demutualisation meeting. As it turned out this wouldn't have lasted very long, because this is how each meeting unfolded as the debate waned:

AGM: 10am till 11.21am with a record 16 speakers. The best and most diverse general debate ever at a News Corp AGM, something that Rupert acknowledged at the end of proceedings.

EGM for ordinary shareholders: 11.22am till 12.07pm with 9 speakers. Quite a bit of moaning from pre-1985 shareholders about capital gains tax and Rupert pointed out that he was the biggest loser in this regard.

EGM for preferred shareholders: 12.20pm till 12.42pm with just two speakers. Crikey got up twice just to drag this meeting out for the full 12 minutes. Former Philip Morris chairman Geoffrey Bible, as the chairman of the independent directors committee, gave quite detailed responses but also slapped Crikey down on a couple of key points.

EGM for all shareholders to reduce capital: 12.50pm till 12.57pm with just three speakers. Again, Crikey got up as everyone else had given up, knowing it was all a foregone conclusions and lunch was waiting outside.

EGM for option holders: 1.03pm till 1.12pm with no speakers. Alas, we were never offered any during our 7 years at News Ltd.

Crikey got up at every available opportunity and was the only shareholders to vote against re-election of affiliated directors Ken Cowley and John Thornton, despite numerous interjections from Rupert at the AGM to stop the point about their lack of independence being made.

Rupert's pay and pension

The Australian Shareholders' Association put in another disappointing performance, offering no commentary on the move to Delaware or the $2.95 billion valuation on Queensland Press. Their Adelaide rep did get the ball rolling on executive pay at the AGM and Crikey followed this up as quite a bit was revealed about how Rupert and his top men are paid.

Remuneration committee chair Andrew Knight, who has a massive conflict of interest having made more than $100 million from Rupert's generosity with share issues over the years, gave a long-winded explanation on why Rupert's pay suddenly soared to a record $30 million last year, exceeding the total paid to deputy Peter Chernin for the first time in almost a decade.

Knight said they called in Deloitte from Chicago for a review and suddenly realised Rupert was grossly underpaid compared to Chernin and his peers at Disney and Viacom. There was no mention of the fact that Kerry and James Packer take no salary from Australia's biggest media company, PBL, because the $100 million-plus a year in dividends keeps them going. Rupert's salary is no huge and his dividend policy so tight-fested that his family derives more from the company in salary than dividends.

Knight effectively admitted that they gave Rupert a pay rise because he worked so hard on the DirecTV deal and gets less than others, but then promised that any future bonuses would be based on EPS growth.Whilst Knight created the impression that his committee calls the shots, Rupert then piped up that he doesn't even have a service contract.

Crikey asked about the massive $US3.5 million superannuation payment to Rupert and extracted some interesting information. Rupert will get a pension of $US2 million a year when he retires but after 50 years of service he revealed he has hit the peak and can't get any more. The notional figure of $US3.5 million wasn't paid in cash but reflected an assumption on how long Rupert will work and live - assumptions that finance director David Devoe declined to share with the meeting. Wouldn't the market love to be told this?

Oil, Sam Chisholm and other snippets

With no end of opportunities to get up and ask questions throughout the course of the three hours, Crikey even got to ask Rupert "When are we going to see the $US20 a barrel oil price that you predicted the Iraq war would bring?"

Diverting well away from the oil politics of the Middle East, Rupert replied, "when the Chinese economy collapses".

This was just one of many examples of the wily 73-year-old dodging questions or turning to humour to deflect criticism. The $US20 a barrel oil prediction was made in an interview with The Bulletin's Max Walsh which specifically dealt with the Iraq war. Invade Iraq and get cheaper oil was Rupert's conclusion but now all this has supposedly been overtaken by the booming Chinese economy.

We also tried to get Rupert to take a shot at Sam Chisholm for joining the PBL board and therefore having a big conflict of interest as the Telstra-appointed chairman of Foxtel. Rupert didn't bite and offered support for Chisholm although he did express surprise that he joined the Packer camp and said the conflicts of promoting a free-to-air network and its pay-TV rival were manageable.

Who was there and who spoke

It was definitely the most power-packed line-up of directors and executives of any AGM ever held in Australia. The full board was there with the exception of DirecTV CEO Chase Carey, British Airways CEO Rod Eddington and independent director Tom Perkins.

Peter Chernin has been paid $US95 million over the past six years but he didn't get to say boo at the AGM. Finance director David Devoe popped up with plenty of comments, chief general counsel Arthur Siskind was also called upon on several occasions by Rupert and the Sun King really did sound appreciative when he announced that Arthur was stepping down as the top lawyer and would become "chief adviser to the chairman" in what sounds like a scaled back role.

It was the first time in recent years that Geoffrey Bible bothered to come down for a meeting and Rupert announced that he would be retiring from the board at the end of the year. Having chaired the special committee of independent directors, Crikey professed to be "troubled" that there might have been some fallout from the recent arduous process, but Geoffrey insisted that he had been working for 51 years and at 67 wanted to slow down and spend some more time with his wife in retirement.

The huge praise for Rupert and News Corp from the fellow Australian expat and former Philip Morris boss sounded quite genuine.

The corporate governance debate

So, Rupert is heading off to shareholder unfriendly Delaware and he's losing his senior independent director in Geoffrey Bible. His board remains stacked with affiliates who pretend to be independent and don't insist that Rupert go with the flow and allow a genuine independent chairman to take charge.

Executive pay is going through the roof, questionable related party transactions continue aplenty and the stock continues to trade at a solid discount to its US peers as Australian institutions dump billions of dollars of shares and Americans worry about its risk profile and quality of earnings.

The company has just spent $49 million going through this controversial and distracting process that has so far only served to destroy value. Yes, the corporate structure is cleaner and better reflects News Corp's operations, but in no way can it be said that this deal will stand the test of time.

There was a huge press pack of more than 50 there today and Crikey has done five ABC radio spots today and spoke to all the commercial television networks after the meeting. There was a hell of a lot of information, colour and movement to digest during these historic meetings today so it will be very interesting to see how the media covers this story.

Crikey threw plenty of curly questions around but we'll be surprised if any of them see the light of day in the Murdoch press. We'll have more to say on today's meetings tomorrow.

News Corporation AGM snippets

Adelaide old money. You don't see it out that often any more. They certainly wouldn't have recognised the music playing in the background when Rupert and the News Corporation board members entered the Hilton ballroom for their last AGM in South Australia. Everything But The Girl. “Wherever you go I'll follow you...”

Adelaide old money does get some pop culture references. There was an audible giggle in the room after Rupert referred to the “cultural phenonomen” of American Idol.

The cover of the News Corp annual report highlights some content. Bart Simpson is there, natch. Rupert might be looking more and more like Montgomery Burns with every passing year, but he can never thank the brat enough for helping save the company during the dark days of the early nineties. What's interesting is to see the front page at the very top – the Oz of December 15 last year with the banner “SADDAM CAPTURED”.

Mike Moore fans, don't worry. There's something in the Annual Report you can conspiracise over – a shot of Dubya at a ball game talking to the Fox Sports Network. Then there was Group General Counsel Arthur Siskind's very relaxed attitude to questions from the floor over whether or not the Delawre move would make Australian shareholders liable for American inheritance taxes. It sounded remarkably like “don't ask, don't tell”. Wasn't that a Democrat policy? And you can make what you will of Rupert's comment “If President Bush is re-elected there won't be any estate duties”.

One of the highlights of News Corp's year has been one million sales of Gabriel Garcia Marquez's “100 Years of Solitude”. Do they realise what an unswerving friend of Fidel Castro the Columbian author is? Do they remember how he refused to succumb to blandishments even from Susan Sontag last year and criticise the Cuban dictator after three men who tried to hijack a Havana ferry to the US were summarily shot? How does that play with Florida voters. That might puzzle the Mike Moore squad.

Never underestimate the power of the Sun King. There was one brief mention during Rupert's annual report speech of the introduction of new colour printing facilities for his British papers. The issue has scarcely rated a mention, but it's the closure of Wapping and its replacement with new facilities. Compare and contrast with the riots – literarally – the move to Wapping caused. How the world has changed since then – and what influence Murdoch has had on that.

Rupert's amazing proxy solicitation campaign

From the October 27 sealed section

By News Corp shareholder Stephen Mayne

We all know that Rupert Murdoch employs an atrocious gerrymander to entrench his power, but at first glance yesterday we thought that even the great dictators of history would be proud of his effort at rounding up votes.

On page E-44 of the Information Memorandum, it states that "News Corporation had 64,681 registered holders of ordinary shares at 12 August 2004."

And on page E-46 of the Information Memorandum, it states that "News Corporation had 18,907 registered holders of preferred shares at 12 August 2004."

So how on earth did we finish up with 114,719 ordinary shareholders (112,606 were in favour) and 75,906 preferred shareholders (73,368 were in favour) voting on the Delaware and Queensland Press proposal?

There is a relatively straightforward explanation, which also points to an almighty and expensive proxy solicitation process by the newly acquired Computershare division, Georgeson Shareholder Communications, on behalf of News Corp.

On pages 13 and 14 of the Information Memorandum, there is a description of the process that was established to allow ADS holders in the USA to vote as individuals in their own right, if they wanted to do so.

For normal registry purposes such as that used in the annual report, the beneficial holders of the ADS (which are equivalent to four News Corp shares on the ASX) do not appear in their own right but are shown as totalling one, which is largely held by the custodian Citicorp Nominees.

The beneficial holders of ADS equate to about 25% of the issued capital of voting shares and something more like 60% of the preferred shares.

What this tell us is that yesterday's result was very much a "made in America" phenomenon. Crikey estimates that about 70 per cent of the ordinary retail shareholders who voted were American residents and the figure for preferred shareholders was probably closer to 90 per cent. The vast majority of the against votes would have come out of Australia.

Proxy solicitation is very common in America and News Corp obviously had an easy message to sell. American shareholders expect the call and obviously would vote for any company to move to America.

When there was no-one delivering a no case, all Georgeson had to do was encourage participation and they got a phenomenal response.

However, when the executive chairman stands to benefit from a deal such as the inflated Queensland Press related party transaction, you have to ask whether it is appropriate that even participation polling be employed at all, let alone be funded by all the shareholders.

Check out all the final voting figures released to the ASX this morning here.

How the press covered Adelaide extravaganza

So, how did the newspapers cover the great News Corp shareholder meeting extravaganza today?

Terry McCrann, all News is good News for Rupert's most devoted follower who claims the company will still retain is Australian culture, despite the move to Delaware. Despite our recent battles, McCrann defied the Peter Blunden ban to mention Crikey, but naturally it wasn't complimentary.

In contrast, The Age's Stephen Bartholomeusz was never under any illusion that News was an Australian company in the first place and so the go-ahead to move was no surprise and Bartho said many institutions would be happy to see the back of News Corp.

Crikey even cracked a mention on the front of The Age , although sadly Penny Dobelle got our name wrong by dropping the .au. However, the web version got it right and even has a link.

At The Australian Geoff Elliott and Jane Schulze reminisced about News Corp's Australian roots as Rupert clocked up yet another corporate victory. However, it was a little disappointing that Rupert's flagship failed to produce any substantial colour or commentary, apart from a fairly predictable company line editorial.

If Terry McCrann could make it to Adelaide, you would think either Robert Gottliebsen or Bryan Frith would make the trip and provide some decent commentary. Ironically, the former third Oz business commentator Mark Westfield was at the PBL AGM in Sydney yesterday wearing his spindoctor hat with Cosway.

Other non-News aligned reports were filed by Wendy Frew at the SMH and Cathy Bolt for The West Australian, and while Christine Lacy didn't make the trip, her CBD column in the SMH had two "written from afar" items. At least Rear Window in the AFR produced something that was written by someone at the meeting and they were also big enough to publish Rupert's sledge of the national financial daily.

The Guardian's take on Rupert at his final Aussie AGM should not be missed - Murdoch gets emotional as he moves out

Why couldn't any of the Australian hacks at the meeting produce such a piece, although it did have a couple of small errors? Reporter David Fickling said Murdoch has chaired the AGMs for 25 years. No, yesterday was the 25th News Corp AGM - before that it was under a different guise - but he has only been chairman since he dumped his old Geelong Grammar school mate Richard Searby during News Corp's debt crisis in 1991 - the last year that Rupert himself failed to turn up at the AGM.

Meanwhile, the Fin Review reports that the News approval has sparked a rally on the market. And the stock is up again today as the ordinary shares closed 16c higher at $10.92 and the preferred stock gained 15c to $10.69.

Two jets and a generous show bag for shareholders

When you are the world's most powerful man, it is handy to have two private jets at your disposal. And so it was for the Murdoch clan yesterday as Rupert jetted off to Melbourne in one company jet and Lachlan headed back to Sydney in another one.

Rupert missed the celebratory dinner at colourful Sydney eatery Machiavelli's because he was catching up with his mum and sister in Melbourne.

Meanwhile, we were surprised that no-one picked up on the generous showbags handed out to shareholders yesterday.

The Mr and Mrs Crikey strategy of having four distinct shareholdings paid off - and we were able to snaffle three show bags for the AGM swat squad, although only one came back to Melbourne.

Each showbag contained the following:

• A DVD of the Matt Damon comedy Stuck on You
• RM Younger's official biography of Rupert's dad, Keith Murdoch: Founder of a media empire
• Kylie Minogue's greatest hits on CD courtesy of Festival-Mushroom records
• The Meg Henderson novel, The Last Wanderer
• A Donna Hay magazine
• A copy of Inside Magazine

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