News Corp finds yet another way to annoy investors
By Richard Beales¬†
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.¬†
News Corp has found yet another way to annoy investors. The seemingly tardy discovery by Rupert Murdoch‚Äôs family empire that non-U.S. holders control 36 percent of its voting stock – breaching the 25 percent limit for owners of American television broadcasters – has led it to suspend half the voting rights of overseas owners. Even shareholders resigned to disenfranchisement have cause to worry.
They‚Äôll be used to the control exerted by Murdoch. Owners of the company‚Äôs more numerous A shares don‚Äôt get a vote at all on most things. And voting B share investors are up against the family‚Äôs nearly 40 percent stake. In a tacit admission the conglomerate cocked up the monitoring of its shareholder register, the Murdochs agreed not to go beyond that percentage in any vote, even though foreign investors will now only have half the votes they had before.
All the same, the suspension may needle affected shareholders, including the retail and institutional bases in Murdoch‚Äôs native Australia. But what‚Äôs really galling is the bungle itself. The Fox TV franchise and other channels in the United States are critical to News Corp‚Äôs business, and they depend on licenses from the Federal Communications Commission.
Those licenses in turn rely on the company staying within shareholding and voting rules. While it seems to have done so with ownership of A and B shares combined, it looks as if the voting aspect escaped the company‚Äôs investor relations and legal teams – until now, when license renewals are looming.
The UK phone-hacking scandal and all that it wrought, including the departure of News Corp‚Äôs general counsel last summer, may have been a distraction. And all that followed a series of other missteps, like overpaying for Dow Jones and MySpace. But Murdoch should be acutely aware of the FCC‚Äôs U.S. ownership requirements. News Corp‚Äôs antipodean origins created headaches in the mid-1990s over the original acquisition of U.S. stations, with a waiver eventually being granted.
Any such accommodation looks improbable now. All News Corp shareholders would be harmed if the company lost its licenses because of the oversight. Yet it is characteristic Murdoch justice that those least responsible for the error have to suffer to stop that from happening.