Murdoch and Packer transcripts

News Corp AGM: Has Rupert ever been elected a director?
New York, October 2007

Stephen Mayne: I've got some questions on the individual directors.

Rupert Murdoch: could you just hold up for a little while?

Stephen Mayne: sure

Rupert Murdoch: on the direction?

Stephen Mayne: yes on the directors

Rupert Murdoch: we've declared them...

Stephen Mayne: you haven't asked for any questions on the election of any of the directors

Rupert Murdoch: if you want the votes, I can tell you

Stephen Mayne: chairman I have to say that you are running a slightly unusal AGM here. We have an agenda.

Rupert Murdoch: right.

Stephen Mayne: the first of which is the election of 5 different directors. Now normally wouldn't you say, we're now dealing with the first director, I'm up for election, I'll hand over to neutral chair because this concerns me, are there any questions, let's talk about the proxies and let's have a vote.

Now I know I'm from Australia and it might be different here, isn't that the normal way to do it, rather than...

Rupert Murdoch: yes, but if you want to speak for 3 minutes go ahead.

Stephen Mayne: I've questions on some of the different directors up for election and you're first on the ballot. So my first question to you chairman is, when were you last elected?

Rupert Murdoch: I imagine 3 years ago.

Stephen Mayne: you went for many many years in Australia without an election, and when I asked you two years ago when you were last elected, you said you couldn't remember because you didn't have to be elected in Australia. Now I don't ever recall you being elected at the annual meeting 3 years ago. As far as I'm concerned I can't find any records of you ever being elected. Now 2 years ago when I asked you said you didn't remember, now you're saying it happened 3 years ago. Which is right?

Rupert Murdoch: I didn't say I've never been elected I said I didn't recall.

Other boardmember: and not only that, it didn't happen at an annual meeting, it happened as part of the special vote for the reincorporation.

Stephen Mayne: So the whole board was re-elected as part of the move to America, but in regular AGM 3 year terms, chairman when were you last elected?

Rupert Murdoch: at that time.

Stephen Mayne: Have you ever been elected in regular AGMs, you have been CEO for 55 years of publicly listed company, have you ever been elected as a director or re-elected as a director?

Rupert Murdoch: Mr Jacobs can you answer that?

Arthur Jacobs: it occurred at the reincorporation in November 2004. If you look at page 87 on the information memorandum, you will see that each of the directors then serving as directors of the Australian company, were elected in 3 different classes. Mr Murdoch was part of a class 1 director that was to serve until the 3rd annual meeting, succeeding the reincorporation.

Three years did not elapse until this meeting date. So consequently he was elected as part of the reincorporation procedure in November 2004. This is the first annual meeting he is required to stand for election and he has done so.

Stephen Mayne: thank you Arthur. Now we have established that Rupert was elected as a director when we reincorporated to America as part of the EGM. Now my question. In the 55 years of annual general meetings of News Corporation, when were you last elected?

Arthur Jacobs: Mr Mayne, look, you know the corporation law in Australia. The managing director of an Australian corporation is not required to stand for election. Mr Murdoch through all those was managing director of News Corporation Ltd, which was the name of the company at that time, he was never required to stand for election, and you know that. Don't ask silly questions.

Stephen Mayne: Arthur, it is not a silly question. The chairman of Australian companies are required to be elected. Every other Australian executive chairman of note, James Packer, David Clark - Macquarie Bank, Kerry Stokes - Channel 7, every billionaire, every prominent executive chairman in Australia, is re-elected every 3 years. The exemption relates to chief executives only.

When Rupert fired our former non executive chairman in 1991, he became the executive chairman. At that point, he should have been re-elected every 3 years, and there is no other prominent executive chairman in Australia who hasn't.

So my simple question is, he didn't do the right thing in Australia and I'm simply asking a question of historical fact, has Rupert ever been re-elected at an annual meeting of this company? Whether that be News Ltd up until 1979, or News Corporation since then.

Rupert Murdoch: I have been re-elected today.

Stephen Mayne: So I think from all this, the answer is that the world's longest serving chief executive, the most powerful businessman in the world, who's News Corporation for 55 years, has never ever been elected by shareholders.

So we should all celebrate today. Today is history! Rupert 's up for election and congratulations, I think with your 32% of the shares, chairman you will get back. I would simply say that I think you shouldn't have been so paranoid over the years to avoid election. It's terrific they we're finally having an election, as you are probably the world's oldest and longest serving CEO of a major company, are you intending to serve a full 3 year term?

Rupert Murdoch: Absolutely!

Stephen Mayne: At any point are you considering going non executive, which is what Frank Lowy has in Australia has just done?

Rupert Murdoch: It is not my intention, but it will be up to the board.


Jousting with Rupert Murdoch over my shareholder resolution

Stephen Mayne: I've come over from Australia for this meeting today, to support a resolution proposing that we get rid of the dual class structure of our capital base. I also would like Rupert to speak on the other resolutions, but I will just give you a quick two minutes on this resolution. Could you advise the proxies on this resolution first please. What's the current proxy positions? You've got the proxy results up there...

Rupert Murdoch: yes.

Stephen Mayne: could you just inform the meeting to what they are.

Rupert Murdoch: at the appropriate time we will announce the results - yes.

Stephen Mayne: So you can't do it now?

Before I speak, I think that this resolution has probably been quite well supported, and I would just like the meeting to know what the figure so we can talk to that.

Rupert Murdoch: yes, it was supported by 22.9%, which is 184 million shares, and opposed by 620 million.

Stephen Mayne: did Mr Malone oppose it or support it, do you know?

Rupert Murdoch: well if he voted, he certainly would have voted against it because he has more shares than 184 million.

Stephen Mayne: right, okay. My point is, if you take out Rupert's shares and Mr Malone's shares I think you'll find that's getting close to 50% of the neutral or independent shares supporting the resolution.

Rupert Murdoch: opposing the resolution. yes.

Stephen Mayne: sorry, supporting the resolution. If you take your shares ...

Rupert Murdoch: yes.Yes.

Stephen Mayne: what I am saying is, I think there is a lot of merit in moving to a one class stock company, because all of us B-class shareholders aren't currently in the S&P500.

So when Rupert first proposed the move to America, the big selling point for us Australians was that we would all get our stock in the S&P 500, but under the S&P's rules, only the most populous stock is allowed in the index. That's the non-voting share.

So all of us shareholders are sitting here with voting shares that aren't represented in the S&P 500 Index, so the simple argument would be if we went to a one class stock company, we would have a billion shares added to the index, and we would get a re-rating. The argument goes that now that Malone is off the register, Rupert doesn't need to be so paranoid about someone taking the company over.

I mean Rupert is an absolute legend. He's the longest serving CEO in the world. He's done 55 years straight - he's an amazing guy, no one's going to sack him.

The paranoia of having a two class company, is that Rupert is basically saying that I don't trust our shareholders. I think that they might vote me out, and we all suffer a lower share price for that.

If we have one vote, one share, rather than a gerrymander which sees 70% of the shares on issue not have the vote, then sure Rupert would come down to 15% from the 40% post the Malone deal, but that would actually cause a re-rating of the stock price.

So I'm actually proposing something that will probably make Rupert a billion dollars. The share would probably go from $A26 to $A30 because you would instantly get a takeover premium pricing of the stock. We get the index re-rating of having the B-class shares in the index, and Rupert could stand there and say I stand here on my record. I don't need to hide behind a gerrymander where only 30% of the stock on issue has the vote.

So I am simply saying to you Rupert, stand on your record. Trust yourself. You are not going to get the sack, no one is going to take you over. The company is worth $60 billion, Malone is neutralised. You've bought The Wall Street Journal, we now tell everyone else how to behave with The Wall Street Journal, but we're running a capital structure which is frankly, embarrassing - which is a gerrymandre.

Look at what has happened with the New York Times over the last 2 years. They've suffered a fairly substantial campaign against them on this very point. Don't have a dual class structure. So if we are trying to take on the New York Times with The Wall Street Journal, let's make the first move. Let's take the corporate governance high ground and actually go one vote, one value.

Frank Lowy, who is the third richest bloke in Australia, did that 3 years ago - the guy behind Westfield, the world's biggest shopping centre company. He went down from 30% to 10%, and no one has taken him over, no one has sacked him - he's still there and shares have been re-rated.

So I simply say Rupert, trust yourself, back your record, you are a legend, you have had a great career, no is going to sack you, so why not go one vote, one value, and actually makes yourself another billion dollars? Thank you.

Rupert Murdoch: Thank you very much. Well based upon the proxies already received I happy to inform the meeting, that a majority of the votes cast, have already been voted in favour of the re-election of each of the directors nominated.

In favour of the ratification of the appointment of Ernst & Young LLP. Against the stockholder proposal regarding the annual election of directors, and against the stockholder proposal regarding the elimination of the company's dual class capital structure.


———————————————————————————————

Here is an edited transcript of our exchanges at the 2005 NewsCorp AGM.

Stephen Mayne: Yes. Good morning, gentlemen. My name is Stephen Mayne, I'm a shareholder. I've got the stake up to about $US10,000 this year. I'm also proxy for my wife and I've got some open proxies for a couple of other Australian shareholders. I think Rupert and I are probably the only 2 people in the room who have been to the last six AGMs of News Corp. Just by way of background for the Americans, I worked for Rupert for 7 years as a journalist from Australia and have been going to these annual meetings for the last 6 years as a shareholder.

I ran for the Board in 2002 and tried to nominate this year, but was rejected on the grounds the nomination wasn't timely. Having spent all this money coming over here from Australia, I'm looking forward to a lovely shareholder showbag this year, Chairman, to justify the trip. And I have to say I think we've gone backwards in terms of process. I mean why are we having all resolutions discussed at once? In Australia over the last few years we've made some progress. You do the Chairman's address at the start, we have the reaction to that, and then we went through the resolutions one by one. Come to America and all of a sudden we don't get your address until the end and it's one in, all in, we have to ask you about everything at once.

Chairman and CEO Rupert Murdoch: I can assure you that after my address you'll be free to ask any further questions.

Stephen Mayne: Okay, well I've got a couple of questions for the directors that are up for reelection so I'm hoping that you'll indulge me in allowing them to answer them. And also, when it comes to general questions, I was hoping that the Chairman of Board Committee
would be available to answer any relevant questions.

Rupert Murdoch: Yes, they certainly will be.

Stephen Mayne: Okay. In relation to Chase Carey's election, when James Murdoch was appointed CEO of BSkyB, he decided that it would be in accord with good governance practices that he resign from the News Corp board. Now, I understand, Chairman, you were opposed to that and he insisted that happened. So my question to Chase Carey is, doesn't he feel that he has a conflict of interest in remaining on the News Corp board, while being the CEO of Hughes? And why didn't he take the same approach that James Murdoch took with BSkyB?

Director Chase Carey: No, I don't think it's a conflict. And, in fact, based in principle and the sort of a core premise on News Corp, because my background is in News Corp before DirecTV, when we invested in DirecTV was to capture synergies and opportunities for News Corp and DirecTV to work together. And I think these roles, particularly given the breadth of the US assets of News Corp and Fox and DirecTV's US base, I think the role gives me an ability to make sure we try and capture the opportunities for those 2 businesses to work together and really capture the opportunities inherent in that.

Stephen Mayne: Okay. This is a second question for you Chase. How do you handle the related party transactions? You've done some large programming deals between News Corp and DirecTV. Are you negotiating with yourself?

Chase Carey: I'm not allowed to, no. No. I mean first, I'm on the Direct side of that and in Direct there's a very clear process set up for related party transactions that have the independent directors on the Audit Committee approving those transactions. So there's been a very clear process set up to deal with that.

Stephen Mayne: Okay. A couple of questions for Andrew Knight. Andrew, you're a chairman of the Remuneration Committee. You're on the – in the annual report or the proxy statement you're down there as owning $US7 million worth of shares. I guess my concern with you being in charge of the Remuneration Committee is that I understand you have made more than $100 million out of – or you've made a large amount of money out of some very generous and attractively priced equity issues that you received when you were an executive with News Corp.

So we have a situation with someone who's supposedly an independent but is actually an affiliated director hailing from management. You benefited enormously from the generosity of the Chairman and then he sits on the Committee dishing out $9 to $10 million cash bonuses to that same Chairman. Now, from my way of thinking, that's a pretty severe conflict of interest. Can you spell out exactly what the equity situation was, what the history is there so we can have the full context as to your position as you dish out bonuses to your Board colleagues?

Chairman of Compensation Committee Andrew Knight: Gosh, Mr Mayne, I wish that were true. I wish I had made that much money. I was an executive of the company between 1991 and 1994. As an executive, I had some options, which I exercised. I didn't make anything financially like that amount of money and I wish I had. Those shares are in trust, which a large chunk of them are in charitable trusts, which I am not a beneficiary of. I'm an eligible beneficiary of the other one, but, as you know, the dividend of News Corp is very low, so I would think that I have benefited in terms of income in terms of maybe tens or hundreds of thousands over those years. I ceased to be an executive in 1994 after three and a half years with the company.

Stephen Mayne: Okay. Question for Peter Chernin. One of the problems with the poison pill is that it caused the share price to tank by about 10% since the pill was extended. Now, Peter, you're most exposed, apart from the Chairman, in terms of options, you've got 9 million options in News Corp. Doesn't it concern you, as someone who's got largely out of the money options, that the Board has implemented a policy which had the effect of depressing the share price by 10%? And you've got fiduciary duties to try and maximise the value of the company and you've got a large options play running you still, why would you support such a policy which has put your options even further out of the money?

President and COO Peter Chernin: Well, I think first of all the amount of options I have is a pretty good indication that my interests are clearly aligned with the company and my interests are in the best interests of the company. I believe that the poison pill was in the best interests of the company and my fiduciary interests and my options is over the long term, I'm not interested in cashing in tomorrow. I'm interested in seeing the company maximising its growth, which I believe it has the potential to do over the longest period of time. The other thing I might point out is I believe that our stock was traded fairly similarly to other media stocks during that same period of time.

Rupert Murdoch: I'd just add to that, I think it's purely coincidental. All media stocks are out of favor at the moment and we're all down. Although in our case we've had by far the fastest growth of any other media company of all our peers, shall we say.

Stephen Mayne: Okay. Question for Rod Eddington. Rod, given your reputation as being a well-regarded CEO of British Airways, a director of Rio Tinto, I'm particularly disappointed that someone such as yourself has supported this poison pill. The poison pill, it's all very well for Rupert to go with the poison pill; he wants to entrench his power in News Corp, that's his position. But the real disappointment here is the genuinely independent directors and those who are meant to be representing us, the small shareholders. And I think personally Rod Eddington is probably one of the most disappointing performers here.

So I'd like to ask Rod, as an independent director or someone who claims to be an independent director, how is that you could regard the poison pill as an acceptable policy? I mean all the time we see News Corp making takeover raids on other companies. We're making a bid for Realestate.com.au at the moment. What would we think if suddenly Real-estate's Board came out and said, "You can't buy any more shares or we'll be massively diluted"? We'd be outraged. We've been launching takeover bids for years. Never before have we had to seek the permission of a Board to do that like we apparently required John Malone to do. So, Rod Eddington, why is it, do you think, that we can possibly have a policy of this poison pill which is in any way defendable?

Chairman of Audit Committee Roderick Eddington: The issue of the poison pill was something that was discussed at the Board at some length and it was the view of all the directors, certainly independent directors, that it was the right thing for our company to do at this point in our journey. It was something that was considered carefully and discussed thoroughly and we believe it was the right thing to do for the company at this point in its journey.

Stephen Mayne: Do you appreciate that your reputation has suffered given the undertakings that were given to a group of institutions and proxy advisors at the time of the re-incorporation to the US?

Rupert Murdoch: Before you make statements like that, you should wait to hear the vote.

Roderick Eddington: I think the issue there is, again, it was discussed thoroughly. We're clear about what was and wasn't said. As I understand it, this is a matter of legal process anyway at this point in our journey and I think to say any more at this point in time would be inappropriate.

Stephen Mayne: Okay. In terms of...

Rupert Murdoch: I'd just like to say something here. You're from Australia. There are very different rules in Australia where you can't do a creeping control. And the poison pill is simply to prevent people from taking over a company without paying a proper premium.

Stephen Mayne: But you're not even giving Malone a chance to pay any premium. You're saying that he could –

Rupert Murdoch: Yes, he can walk in any day, offer us $100 a share and we'll consider it at the Board.

Stephen Mayne: But he can't make a $40 a share takeover bid right now. And as a shareholder, I'd –

Rupert Murdoch: Sure he can.

Stephen Mayne: ...love to receive.

Rupert Murdoch: Sure he can.

Stephen Mayne: No, he can't.

Rupert Murdoch: Yes, he can.

Stephen Mayne: He can't come on to the market and start buying –

Rupert Murdoch: No, he can't. He just can't come on the market and buy it at $15. If he wants to come at $40, come and talk to us.

Stephen Mayne: (inaudible) has to get permission to buy shares is absolutely ridiculous. I just have a couple of questions for directors. Mr. Eddington is also the –

Rupert Murdoch: The whole point is protection of the small shareholders not being tricked into giving up control of the company at a low point

Stephen Mayne: Well, I –

Rupert Murdoch: ...and so that everybody should get the same premium.

Stephen Mayne: I haven't enjoyed the 10% haircut that your so-called protection –

Rupert Murdoch: Which had nothing to do with the poison pill. No one likes the present market in media stocks, particularly myself. All media stocks, regardless of results, have been completely out of fashion for the last 12 months.

Stephen Mayne: I guess my point is that if you want to get the share price up, remove the poison pill.

Rupert Murdoch: Well, (inaudible) don't have them and see where their shares are.

Stephen Mayne: Okay. Another question for Rod Eddington. Rod, you're chairman of the Audit Committee. The results that were announced for the 2004-05 financial year have a capital gain of $US264 million based on the fact that the BSkyB share price had fallen. Now, it's a little bit complicated, but there's $US1 billion in convertible equity in BSkyB, which we have to pay out in 2016 and, perversely, if the BSkyB share price falls, we have to pay out a different amount of shares and that gets booked through the accounts as a profit.

Now, I guess my issue here is with disclosure, where it had the all-singing, all-dancing, which was the best profit ever announcement from the Board, but if you read the annual report, this is not actually spelled out, that $US246 million of our profit increase came from the fact that the BSkyB share price had fallen. Now, as chairman of the Audit Committee, I just want to ask you why wasn't that spelled out properly in the profit results and in the annual report and it wasn't until we got a 10-K announcement a little while back that the full scale of that increase was revealed?

Roderick Eddington: My understanding and recollection is that there was full disclosure on that issue. It was certainly in the 10-K, as you say. And I think it was there for everyone to see. That is my recollection.

Rupert Murdoch: I think Mr DeVoe might like to speak to just how this works.

CFO David DeVoe: It's not only in the 10-K; it's in the annual report.

Stephen Mayne: What's the figure?

David DeVoe: The figure is in the annual report. I'm looking at page 106 of the annual report, if you'd like to look that up. And in that report it shows that there was a gain on the change in – fair value of the Boks is $246 million. And I might also say that in our press release announcing our results it was also disclosed. So if you look at our profit results, the increase to earnings per share of 28% year over year, that is a true increase in our EPS.

Stephen Mayne: All right. A question...

David DeVoe: Would you like a copy of the page?

Stephen Mayne: Sure. A question for Mr. Knight. The bonuses, the cash bonuses have been paid out by your Remuneration Committee, in part based on – or mainly based on an EPS formula. Despite the fact that the share price has gone backwards over the last year, we've obviously had a massive increase in cash bonuses, $US55 million to the top 4 executives, unprecedented in the company's history. Was the gain on the BSkyB convertible equity included in the EPS figures as you decided those record bonuses?

Andrew Knight: Well, Mr Mayne, you were present at the AGM last year, and you will remember that what I said then about how we were going to remunerate the top officers of the company. It was rather warmly welcomed and I'll now repeat it for those who weren't there last year. The Compensation Committee retained Deloitte in Chicago as independent advisors and we tried to set an arms length arithmetic formula for bonuses for the senior officers with the company rather than making it discretionary, rather than having a group of them sitting there coming to judgment. And we benchmark it with Deloitte's help against our peers and our peers are very obvious ones, Disney, Time Warner, Viacom. And it became very apparent during that process that certainly one of our senior officers was significantly under-compensated.

But, as I say, we didn't make a judgment about that; we just applied the formula to those senior officers. We've had a stellar year and that was reflected in the bonuses that have been paid, which still doesn't take them out of the quartile or out of the peer group. There were no share options; we got rid of those because investment community opinion were very much veering in that direction. We decided to make it (inaudible) with some restricted stock units in the case of Mr Chernin. And the results are what you see. Now, if the earnings were to go down, which – as we're looking for it to go up as far as I can see this year, but if the earnings were to go to down, that would be reflected in the bonuses.

Stephen Mayne: My concern is –

Rupert Murdoch: I sympathise with that point of view. And, Mr Mayne perhaps you would keep the rest of your questions till later...and let other people.

Stephen Mayne: ...this is the problem –

Rupert Murdoch: We ought to just answer this question first.

Stephen Mayne: This is the problem we're having at all –

Rupert Murdoch: Let us just –

Stephen Mayne: ...all resolutions as one.

Unidentified Company Representative: Let me just –

Rupert Murdoch: No, there's plenty of time.

Unidentified Company Representative: Let me answer your question. The gain on Boks (inaudible) is excluded from management compensation -.

Unidentified Company Representative: I was just about to say that. It's on true earnings. In other words, excluding exceptionals of any kind. And we are very rigorous about that. And I think actually you could have noticed that yourself.

Stephen Mayne: I guess my problem is –

Rupert Murdoch: Now, I think you've had all your questions answered.

Stephen Mayne: I have –

Rupert Murdoch: Now, I'm not getting into a debate with you. I'd like you to sit down –

Stephen Mayne: I have one more –

Rupert Murdoch: ...and take your turn.

Stephen Mayne: I have one more for Mr. Chernin. I want to decide whether I'm voting for Mr Chernin or against him, and I have one more question for him.

Rupert Murdoch: It doesn't really matter how you vote, but go ahead.

Stephen Mayne: Well, I know that. But this is democracy. And my question for Andrew Knight is in deciding whether to vote for him in his role as Chairman of the Remuneration Committee. Now, my problem with what Mr Knight is saying is that he's announced record bonuses. We've gone to a formula of EPS, earnings per share, whereas the shareholder return, our shareholders have actually gone backwards. So we have a situation where we've taken a haircut, we're losing money, and you're paying out bigger cash bonuses. And that's the reason for my question, is how he can justify that in his position as chairman of the Remuneration Committee.

And my last question on these resolutions is for Mr. Chernin, and I want to ask him about his contract. Lachlan Murdoch was quoted in the New York magazine saying that Chernin's contract was quite an unbelievable contract. And yes, he got his $US19 million cash bonus in a year when the share price went backward. What I want to ask him, though, is why does he feel the need to have a cash $US40 million payout negotiated if he was terminated. I mean that just seems extraordinary, $US40 million in cash.

And can he explain the thinking behind the company being mandated to buy a 6 year deal where we've got to buy 2 films a year at a minimum and a certain amount of his TV productions at the most favorable terms of TV and film purchase deals that our company's ever done. What's going on here? What's the point of this TV and film deal over 6 years? If we want to fire him, surely we just want to fire him, we're not really locked into taking his product for another 6 years at unfavourable terms for us. So can you tell us, maybe it's on to you (inaudible) if you negotiate it or maybe it's one for the chairman of the Remuneration Committee? But it does indeed sound, as Lachlan described it, kind of like an unbelievable contract and I think we need a little bit of explanation as to what is.

Rupert Murdoch: Those terms have been there for many years and this was just a continuation of that. What was changed was that there would be a firm basis on the bonus on the lines that Mr Knight explained to you. Otherwise, there was no change in salary or conditions, as I remember.

Andrew Knight: Mr Chairman, do you want me to answer the question on stock?

Rupert Murdoch: Yes.

Andrew Knight: Mr Mayne, you've shown your fidelity to the company, you're a long-term holder. And I don't think you've taken a haircut at all unless you sold. If anybody here was to try and base bonuses on whether the stocks go up and down, they'd be basing bonuses on often bookmaking systems. You don't know whether the stocks are going up and down, we don't know. We've decided and I have to say a I feel totally confident that we were right and we were advised by Deloitte in this direction that earnings per share is the only true measure of achievement. That will be reflected in the stock price over time if we have confidence, which we clearly do, in the company.

Stephen Mayne: Chairman, (inaudible) Evelyn and I have formed a very happy coalition of the willing here. Just a couple more supplementary questions and obviously I would love to see some other shareholders get up. I'll just ask a couple and then give someone else a chance.

Rupert Murdoch: It'd be a nice change.

Stephen Mayne: I should say by way of background, Rupert had one question over 7 years (inaudible) in the 1990s and he did enjoy that. But America, the place of the famed culture of shareholder pressure, it's good to see a few more people get up. On the vote, though, Chairman, did John Malone vote in favor of all resolutions?

Rupert Murdoch: Yes.

Stephen Mayne: So, what in effect has happened here is that John Malone has given the directors a pay rise, has he? Because that resolution would have been lying bull (ph). The resolution –

Rupert Murdoch: Well, that could go for a lot of shareholders perhaps.

Stephen Mayne: Yes, but I think – the way you were reading those figures before, you were trying to make the point that it seemed to be very strong and all that sort of stuff. Fact of the matter is that the biggest ever no vote against a News Corp. director in the past was
(inaudible) in 2002 when there was 71 million voted against, and that's adjusted for the one-for-two consolidation as part of the move to America. So the fact that we're now at around 120, 130 million, or almost $2 billion worth of stock, he's actually the largest ever processed vote against any News Corp. director in its 52-year history – by double.

So today we've seen double the biggest ever processed against these Board directors. Without the Murdoch and Malone voting block of 48% of the stock, it would have been lineball in terms of the director pay rise and it was about 65/45 order, 60/40 order for the individual directors. So make no mistake about it –

Rupert Murdoch: I think I'd say that the AE Harris Trust did abstain from the vote on the shareholder – on the directors.

Stephen Mayne: Yes, that's why that was 60-odd%. What I'm saying is that Malone voted on that one, so we have this lovely irony here of Malone objecting to the poison pill, but then choosing to vote his (inaudible) voting stock in favor of giving the shareholders effectively a US $100,000 bonus for all their hard work on approving the move to America, which enabled the poison pill to happen in the first place.

So I think we should have for the record here today, that this has been a substantial process vote against the directors for breaking their word, for choosing a poison pill, which has been against the interests of the shareholders because it's driven down the price. And I'd just like to ask you firstly, directly, Chairman, why are you so scared of John Malone? What is it about him – and I was looking at the Forbes rich list yesterday. He's only at, what, 1.9 billion; you're at US $6.7 billion. He's a tiddler compared to you. Why are you so worried about him getting on the Board? He's a great thinker. Work with him, let him buy more stock, drive the share price up, get him on the Board, and we'd all be happy. I mean why is it you're so paranoid about John Malone?

Rupert Murdoch: I'm not going to make any comments. I have a good relationship with him, and I intend to keep it that way.

Stephen Mayne: Okay, and –

Rupert Murdoch: And actually, your arithmetic is wrong; if you'd taken away his 180 million votes, it still would have been a majority. A narrow one, but a majority.

Stephen Mayne: Yes, close is right. And actually supplementary on that, what was the size of the undirected open proxies that were given by default to the Board on average across the resolutions? Was it about 10 million?

Unidentified Company Representative: We don't have that.

Rupert Murdoch: No idea.

Stephen Mayne: Those figures have to be disclosed by law (inaudible).

Unidentified Company Representative: They will be disclosed. We're still –

Stephen Mayne: Okay, because I suspect that that resolution would have failed but for Malone and the open undirected proxies. So I think it's important not to try and put some spin here on the size of the process that has occurred. Chairman, a specific question and then I'll sit down and give someone else a chance. The proxy statement refers to the fact that you don't have a beneficial interest in the Murdoch Trust, that you disclaim any beneficial interest in the Murdoch Trust.

Now, given the departure of Lachlan from the Board and given what John Malone has done of late, I think this is a fair question to ask. You might argue it's a private matter. But in terms of what happens to that 30% voting stake in News Corp., which today has exerted control over a number of resolutions, do you personally have absolute and unfettered control over that voting stock in all circumstances? So if you were to resign from the Board, do you still have absolutely 100% voting stock?

Because the public record is that you've got 4 votes and that your children, your 4 adult children have 4 votes, so that seems to be 4/4, but the perception is that you have control. Can you just clarify that you have unfettered control even though the proxy statement says that you disclaim any beneficial interest in those voting shares?

Rupert Murdoch: I'm not prepared to say anything other than what's in the public record, which is a very full description of what the situation is.

Stephen Mayne: Just a brief supplementary. Are you in the position to unilaterally decide to sell those shares were John Malone to make a bid or do you have to go to your children to approve that?

Rupert Murdoch: You'd have to go to all the (inaudible).

Stephen Mayne: Right, so you don't have unfettered control in terms of selling the stock?

Rupert Murdoch: I'm not prepared to go into that or what the conditions are or what the rules are.

Stephen Mayne: If anyone else would like to ask a question?

Rupert Murdoch: Thank you. Well, if that's all –

Stephen Mayne: I've got – if no one else wants to ask, I've got another couple. Mike Mangham is an analyst at Deutsche Bank and has been following News Corp. for 15 years until his resignation a few months ago. Last week online in Australia he published an extraordinary account of life as a News Corp. analyst in which he alleged that when he first downgraded the stock from a buy to a hold in 1995, he was "abused, insulted and sworn at by News Corp. executives".

When he plucked up the courage to downgrade the stock in 1998, your representatives told his boss and called him unprofessional and threatened the relationship and any ongoing fees from News to Deutsche Bank, although I don't understand that there are many of those over the years. When he put a sell on the stock at the peak of the dot-com boom in 2000, which was a smart move given the stock's fall from $56 to $0.22, your executives again called his boss and asked for him to be removed. He put a sell recommendation on the stock early this year and he said he's been retrenched, although I understand that that's been tendered and that he was offered a position in New York as the media analyst.

Now, Mike Mangham in this piece claims that you put Murdoch control and media domination ahead of shareholder return in terms of priority and the poison pill would certainly be an example of that. And "no other company I know has ever had so many buy recommendations yet produced such appalling returns". And he quotes the fact that there's been no shareholder return since 1998 and earnings per share has been static since 1987, 18 years. He also alleges that you've generated about US 250 million in fees for investment banks over the last 10 years – a year and that you –

Rupert Murdoch: A year.

Stephen Mayne: A year, and he's talking about the after market and all sorts of things. And he's claiming that you effectively used those fees to influence the analysts to have a slew of buy recommendations on your stock and he makes the point that he's never seen so
many buys when there's been such share bad performance. So my question to you is are his allegations correct and in light of the Spitzer reforms in the U.S., can you commit to not allowing such a situation to occur again? And can you state on the public record that any analysts recommendation towards News Corp. stock won't influence any investment banking relationships and won't influence things like whether they get a run on the conference calls?

He alleges that he always gets left off the back of the conference calls, because he hasn't got a buy recommendation on the stock. And he never gets invited to cozy lunches and breakfasts because only those that have a buy recommendation in the stock. So these are very serous allegations and I think you need to deal with them and you need to also state a public policy for News Corp. to –

Rupert Murdoch: I'd like to handle that and say they are very serious allegations and they are total fiction. I've investigated them, there was never any – either any abuse of him nor, indeed, was there ever any pressure to Deutsche Bank. So, as you say, we do, I think, practically no business with them. Oh, perhaps a little bit from time to time. And so the whole story is a fiction and the poor guy's out of a job I guess. That has nothing to do with me. He was never a significant figure. When you're in public life, you've got to put up with these sort of inventions. But there was absolutely not a word of truth in that.

Stephen Mayne: Ed, you should have bought the stock on January the 19th, 1990. I think that was the low point, wasn't it?

Rupert Murdoch: About $2.

Stephen Mayne: Now, if you adjusted for everything, it's about US $1 back then. And you could have got out at 56 at the peak of the dot-com boom. So, the point is there's been no earnings per share growth since '87, so you're alleging from '52 to '87, and then
you've done nothing, if we're going to be honest about the shareholder return. Now, Chairman, you took over this company in October 1962. I'd like to ask you, when was the last time you were elected?

Rupert Murdoch: In Australia, chairmen are not elected. I will now – in much tighter regulations, I will be standing for election next year, whenever –

Stephen Mayne: Have you ever been elected?

Rupert Murdoch: Not recently, I don't think so. I forget. But in Australia –

Stephen Mayne: Yes. Chairmen are not exempt. (inaudible) every other prominent executive chairman in Australia –

Rupert Murdoch: I'd be very happy to submit my name next year, and you can make another 5 speeches, all right?

Stephen Mayne: But you haven't – you're elected for 2007. It's not next year. So not only have you not been elected in 30 or 40 years, but then you tagged yourself on at the lightest (ph) possible time. Was that done by ballot or, did you just say to your chairman of your
Nomination Committee, Mr. Viet Dinh, who probably wasn't alive when you were last elected, did he – did we have a ballot for that or did you just tell him ?

Rupert Murdoch: I have no idea.

Stephen Mayne: What do you mean you have no idea?

Rupert Murdoch: Certainly never spoke to –

Stephen Mayne: You have every idea –

Rupert Murdoch: ...Mr. Dinh about it.

Stephen Mayne: I want to ask Viet Dinh a question. He's the chairman of the Nomination Committee. Now, we've seen some statements in the press the last couple of weeks claiming that News Corp. has a majority of independent directors. Now, I haven't heard something quite as funny as that in a long time. Five of those so-called independents are former executives of the company, Rod Eddington, Andrew Knight, Ken Cowley, and you've got Stanley Shuman, at least he knows that he's not independent.

So we've only got 3 genuine independents on this Board. We don't have a majority of independent directors. How can Ken Cowley be an independent director when he and Rupert started the Australian together – newspaper in 1964, before you were born, Viet Dinh? Ken Cowley and Rupert have been in business together for 43 years and this Board has the temerity to tell us that he's only been on the Board since 1997 and that he's an independent director. I mean whose leg are you pulling here?

Rupert Murdoch: We're following all the regulations, which describe these people exactly as what they are, which is independent.

Unidentified Company Representative: And in addition –

Chairman of Nominating and Corporate Governance Committee Viet Dinh: Let me add to that –

Unidentified Company Representative: In addition, ISS has also determined that we have a majority of independents (inaudible - microphone inaccessible)

Viet Dinh: And also (inaudible - microphone inaccessible)

Stephen Mayne: Okay, now you're in charge of finding new independent directors, Viet Dinh. How's that process going? What sort of directors are you looking for? Is the Chairman going to have any influence on who it is or are you a genuinely independent chairman of
the Nomination Committee.

Viet Dinh: We have an independent – a committee of nomination (ph) and corporate governments that is composed entirely of independent directors. We follow established procedures, including input from Board members and other interested persons. And we'll leave it at that.

Stephen Mayne: Is it fair to say that support of the poison pill not going to a vote of shareholders is a prerequisite for any new independent directors that your committee chooses?

Viet Dinh: No, it is not a prerequisite. Each and every single one of us has a fiduciary duty to act in the interests of all shareholders and we are in agreement with that responsibility and we'll carry out that responsibility according to facts and circumstances of the case.

Stephen Mayne: But you obviously admit that it's going to be difficult to find genuinely independent shareholders because –

Rupert Murdoch: Why is it obvious? He never said that.

Stephen Mayne: Well, he's saying that –

Rupert Murdoch: What do you know about it? You don't even live here.

Stephen Mayne: I don't know –

Evelyn Davis - Highlights and Lowlights, Editor - Shareholder: You have had enough (inaudible - microphone inaccessible)

Stephen Mayne: Now we're getting along well, Evelyn.

Evelyn Davis: (inaudible - microphone inaccessible)

Stephen Mayne: I've come a long way, Evelyn.

Evelyn Davis: You make it bad for the rest of us.

Stephen Mayne: I have one last question and then I'll sit down. Evelyn, I've come a long way –

Evelyn Davis: inaudible - microphone inaccessible

Stephen Mayne: I've flown a long way, 20 hours on the plane.

Evelyn Davis: (inaudible - microphone inaccessible) Why don't you wear a tie and shirt, and a jacket?

Stephen Mayne: I didn't want to have any luggage. I didn't have any stored luggage, so I travel light.

Evelyn Davis: (inaudible - microphone inaccessible)

Stephen Mayne: All right, I promise I'll wear a suit next time, Evelyn.

Evelyn Davis: (inaudible - microphone inaccessible)

Rupert Murdoch: Time is moving. Mr. Mayne –

Stephen Mayne: My last question –

Rupert Murdoch: ...one question only.

Stephen Mayne: One last question, Chairman. I think I'd like you to explain, Stan, what happened with your son Lachlan and his resignation, his (inaudible) resignation a couple of months ago. We've seen that extraordinary sort of 8,000-word feature in New York magazine by Steve Fishman, which was clearly Lachlan's side of the story. Although not directly quoted, obviously it was clear what happened there. And he made a series of claims that –

Rupert Murdoch: Excuse me; I'll take no more of this. Lachlan made a personal decision to resign from an executive role in the company, at least for a number of years, while he does his own thing and he's very welcome to it and we wish him well. And that's all we have to say. Thank you.

Stephen Mayne: Thank you.


–––––––––––––––––––––––––––––––––––––––––––––––––––––

News Corp shareholders meeting
Adelaide, November 13, 2007

Watch video

Rupert Murdoch: Here's a familiar face. I thought I got rid of you in New York!

Stephen Mayne: It's been 3 long weeks since New York chairman.

Firstly I would like to thank you on behalf of all the Australian shareholders for continuing this tradition of coming out to Australia. I think there are about 25 registered shareholders in New York, so Adelaide is confirming its status as shareholder attendance capital of Australia, and we'll see you all here on November 28 for the BHP AGM.

Rupert Murdoch: for the which?

Stephen Mayne: BHP is coming here following your lead.

Rupert Murdoch: really? I thought they would go to Broken Hill.

Stephen Mayne: I was presenting a Walkley award last year live on television, and was assaulted by one of your drunken journalists Glenn Milne...

Rupert Murdoch: he hasn't had a drop since, I can assure you.

Stephen Mayne: I'm not going to storm the stage with my $65 physio bill from the sprained ankle that I suffered, but I have found the Australian management to be particularly belligerent in their approach to this incident. In firstly, not sacking Mr Milne, and then point blank even refusing to just doing a token gesture of paying my physio bill.

So I just reach up to the head office to the guru and say, would you pay my physio bill as a small signal that this was unacceptable conduct?

Rupert Murdoch: I was thinking of giving him a drink tonight as a matter of fact. I'm sorry that occasion, that happened. I think other apologies have been given in the past.

Stephen Mayne: Thank you.


———————————————————————————————
Below is the transcript of our questions and answers from the Crown AGM held at James Packer's Crown Casino in Melbourne on October 28, 2009.

Full version of direct exchanges with James Packer

Stephen Mayne: I must say at the outset that I really enjoyed your presentation today James, it is the most thorough presentation I have seen from you over the years. It is fair to say that you have been put through the wringer publicly of late, with 4 Corners and Paul Barry's book, Today Tonight hatchet jobs , Murdoch tabloid beat ups - its been a rough old trot you've had, and I thought a lot of what you said today were very strong arguments.

The tourism argument is a very strong one, the total shareholder return argument - the figures don't lie. I do a bit of anti-gambling campaigning, and you are absolutely right. You are the only major player in the country that signed up for pre-commitment which is the most important thing you can do to mitigate problem gambling, and the vast majority of people like Nick Xenophon's attention is on the likes of Woolworths, who are a complete disgrace the way they run their suburban venues, and a major contrast to what you do.

In terms of the international holdings that we wrote down to zero, could you takes us through where zero really is zero. Do you think there is any residual value in those properties or those investments you written down to zero?

What's the thinking of that, is it an exit plan? Are we looking to exit our major international investments, with the exception of Macau, or is some of the other press speculation right, that might go in again if the right opportunity comes along?

What was the thinking behind not participating in the Malco capital raising and how big is the unrealsied gain?

James Packer: Thanks Mr Mayne. My presentation has been more thorough in anticipation of your questions.

In terms of our write-downs - the numbers don't lie, and I recognise I have a very fortunate place in society, I wouldn't swap places with anyone. Every now and then the sacrifice for that is you get some unwanted attention, and this year I have probably had my fair share of it, but once again, the numbers don't lie.

Equally, it is not a time to be flippant about our North American investments. Clearly the performance of those investments has been extremely disappointing, and I think that it would be fair to say that many shareholders are probably disappointed at that, and those shareholders, I am as disappointed as any shareholder. So except for the people who were upset over that issue, I can sympathise with them and I would like to state to shareholders that we do realise how serious the issue is.

But to Stephen's point is zero, zero?

We have written off $207 million in the last two years. That doesn't include a $500m gain as we sit here from our Macau investment, which is close to double if you are selling shares today, and we have no intention of selling shares today.

In Stephens question in relation to North America, is zero, zero.

We took the view that were going to be conservative in our markets at this reporting period, but if take an investment like Harris for instance, which we have written to zero.

So we would hope over time, we would recapture some of that value.

Is zero, zero? Hopefully zero is not zero, but this I think, has made sense to be as conservative as possible as we marked our investments.

Stephen Mayne: your recent decision to spend , I think, a couple of hundred million increasing your stake by 35 and paying a premium, got everyone talking about your intentions to potentially take Crown private. I was wondering if you can say what you feel comfortable saying about that, and my second question is, during those investments that we made, particularly in North America, were they what you would call regular board processes, around all of those investments?

I am just trying to get a sense as to whether this board operates like a traditonal board, as Geoff Dixon would have experienced at Qantas, or given the fact we have a controlling shareholder, that it operates a little bit differently and maybe a little bit more unilaterally?

Maybe, it would be nice to hear from the lead independent director on how the board process worked during that when we spent a couple of billion dollars off shore.

James Packer: your second question, a regular board process, my experience in life is one of the truer cliches of life, is that success has many failures, and failures are awful. So the board processes that we went through in regard to our North American investments were not particular different to the board processes that we went through in regard to selling our media assets, not particularly different to the board processes that we went through when we purchased our sub-concession from Steve Wynne, they were not particularly different to a bunch of processes that we went through when Crown was part of PBL. It's a fair question when something doesn't go well, but the board processes were very similar.

In regard to how does this compare to Qantas? I am probably biased in saying that Crown is a lot more democratic than Qantas. Geoff ran Qantas like a complete autocracy and none of us, we were all very careful about asking questions.

Stephen Mayne: last year you talked a little bit about, I asked you whether you had any leverage over your personal stake in Crown, and I think there was an answere that there were some there, I suspect now that the answer is that there is none, but I would be interested in hearing you confirm that there is no leverage at all there.

Another issue you see in the press from time to time is speculation of a Tabcorp merger. Then people talk about regulatory issues. I've never really quite got my mind around those regulatory issues and how they relate to Tabcorp potentially losing there wagering license in Victoria, losing their gaming duopoly in Victoria.

I am not asking you whether you want t merge with Tabcorp, whether you've had any discussions with Tabcorp, but I would ask you to actually explain the regulatory impediments that currently exist for such a transaction to even be legally considered.

James Packer: in regard to your first question, in regard to leverage. Without being flippant I would be happy to swap positions, to say that we don't have any issues, and we didn't have any issues last year, and the world is a lot better this year than last year, and as you pointed out CPH has actually spent approximately $400m this year increasing its shareholding in Crown.

In relation to Tabcorp, there are no current conversations. In terms of impediments - there are many and they are varied. Then there is a real issue that has not covered as closely as I would have thought, in the press, but our licenses are fundamentally different.

In the case of Crown and in the case of Burswood, there is a specific license condition in agreement between the state and Burswood, and the state and Crown, that the government cannot change tax rates without mutual agreement. In the case of the NSW and Qld casinos, there is specific wording that says that the government, at its sole discretion, the government can change tax rates. So I think they are fundamentally different licenses. So that's point one.

Point two is that Tabcorp has a wagering business that, may prove to be a very good wagering business, and I'm not looking to denigrate it, but it is a wagering business that faces real structural issues, and the strength and success or not of that business, is somewhat out of their hands in the sense it is going to relay on court decisions because clearly there are operators who are taking section 92, freedom of trade between states approach to the highest court in the land, and are trying to develop new businesses with a strong internet focus.

So the wagering business would be an issue, the terms of the licenses would be an issue, and under the existing Victorian legislation the duopoly gaming machine license cannot be owned by the owner of Crown Casino. Suffice to say there are no present talks, and Crown certainly does not need to merge with Tabcorp to do well into the future.

Stephen Mayne: Macquarie and UBS have been the two principal advisers that we've used over the years with media and casino deals, we've got Chris Mckay on the board, former MD of UBS in Australia, now Ben who is an executive director at Macquarie, does either of those gentlemen sitting on the board, impact on those relationships - the broader corporate relationships we have and the deliberations we have as to who we choose to deal with?

I would like to hear from Ben if possible as to his background with you James - how far back you go, dealings, to get a sense if he is the genuine real deal independent director.

James Packer: I think having access to the best people from the best firms, there will always be a question to be asked and answered, that if you have close relationships with the best people and best firms, but I believe that is an asset. As for Ben's independence, I think Ben is clearly a highly regarded and independent person, and has no financial ties with CPH.

Stephen Mayne: one last observation chairman, reading the tea leaves, I get a sense that you've had a gut full of life in the public spotlight. Something tells me that
this may be your last day attending public company annual meetings. If that happens, I hope the offer to take us private is well into double figures, well over $10 a share.

If this is not the case, I would simply ask that you commit to webcast next year's Crown and CMJ AGMs, as the vast majority of other ASX 100 companies do. So if those people predicting you are going to take us private are right, thanks for an entertaining and interesting 10 years of debate, and we look forward to receiving your very big offer.

James Packer: Stephen, you always want a headline, but I am confused because you started your questions today by saying my performance as chairman was better, but we will have to wait and see on all of those things.

————————————————————–

Below is the transcript of our questions and answers from the Crown AGM held at James Packer's Crown Casino in Melbourne on October 28, 2008.

1. Has any director read Who killed Channel Nine? Plus, will James Packer buy back Channel Nine?


Stephen Mayne: My first question is, could any director who has read Gerald Stone's book Who killed Channel Nine? please raise their hand?

Okay. One. Alright, thank you.

My second question relates to the PBL media situation. I guess as a preliminary comment, I think this board should be congratulated for fetching $5b for selling Channel Nine, ACP, and the other smaller businesses at the very top of the market. That will go down as one of the great business decisions taken by any board in Australia, when people look back at that decision.

Now when you read the press today after yesterday's decision, you get people telling us James doesn't have any interest in Channel Nine, there's no emotional connection, this is it, it's over once and for all. Others say no, James is going to repeat his father's move and he is going to buy back in for a song from the troubled current owners. I think, given the way that everyone so publicly speculates all the time about the emotional connection or about the sentiment, that our controlling shareholder and the founding family behind this company has to these assets, I think it is a reasonable question to ask for James to put on the record, is it never ever?

Can we say that this is it, that you would not be interested if it came back at a certain price, or are we an opportunistic media company, and if it came up at the right price we'd look at it from a shareholder point of view. So is there an emotional element or is it straight business, and I guess, the John Howard never ever question, can you actually give us an answer on that one.

James Packer: it is an emotional day for a whole series of reasons. I think though, when my father bought back into Channel Nine, he bought back in at a time when barriers against traditional media businesses, were different to the barriers today, so I would not say never ever, but I think it is a different world. The world of free to air television and magazines, occupies a different place in the world, then the place that occupied when my father bought Channel Nine back in the late 1980's.

Copyright © 2024 The Mayne Report. All rights reserved

• share
  Share
  • 
    Facebook
  • 
    Twitter
  • email
    Email
  • print
    Print
  • link
    Copy Link
  • cancel
    Cancel