Rupert Murdoch vs News Corp shareholders
Bloomberg is sounding out News Corp’s independent directors, and they’re not happy:
Independent directors of New York-based News Corp. have begun questioning the company’s response to the crisis and whether a leadership change is needed, said two people with direct knowledge of the situation who wouldn’t speak publicly…
News Corp.’s independent directors, who hold nine of 16 board seats, have expressed frustration over the quality and quantity of information they’ve received about the scandal and concern about management’s ability to handle the crisis given how slowly the company has responded, the person said.
Some directors said Murdoch, the company’s 80-year-old chairman and chief executive officer, appeared to be in denial over the fallout from the scandal in an interview he gave last week to the Wall Street Journal, one of News Corp.’s newspapers.
And that’s not all: in another article, Bloomberg says that even parts of the Murdoch family are turning on its patriarch:
Some people close to the Murdoch family and News Corp.’s directors said last week they thought it would make sense for Murdoch to relinquish his job as chief executive officer and stay on as chairman.
Independent directors constitute the majority of News Corp’s 16-person board, and so in theory have significant power over Murdoch’s future. If they are talking about “a leadership change,” shouldn’t that help boost the depressed News Corp share price? Instead, it continues to fall today.
There are two reasons why the massive Murdoch discount built in to the News Corp share price refuses to go away and indeed is increasing. First, the markets still don’t believe there’s a real chance he’ll actually relinquish his position as CEO. And second, he’ll still control the company even if he does.
“Rupert Murdoch controls the votes of the company through the Class B shares,” Elson said in an interview. “He can just replace them if he wants. They may do something, but it will be temporary. Maybe he becomes chairman, but this is still his company and he can do what he wants. When he controls the stock, he controls the board.”
My feeling is that the markets are being a bit too pessimistic here. Murdoch lives to control his company, it’s true, but he also knows that real control comes through his ownership of Class B shares, rather than through his office as CEO. If his directors and even relations — along with his crisis managers at Edelman — start telling him that it might be time to install Chase Carey as CEO, the pragmatist in him might be tempted. Especially if the tough questions about him refuse to go away, which seems like a reasonable base-case scenario for the time being.
That wouldn’t necessarily mark the last time that a Murdoch ran News Corp, either. Given his control of the voting shares, Rupert could still install his daughter Elisabeth as CEO in future.
How much of a Murdoch discount would be reasonable at a company where Rupert was chairman, Carey was CEO, and Elisabeth was being groomed to replace Carey? Some kind of discount would still exist — but a much smaller one, I think, than what we’re seeing now. If you think that Rupert’s job is in peril, then maybe News Corp shares are a buy at these levels: in a weird way, at this point, the worse the news for Rupert, the better the implications for his company’s shareholders.