Contemplating life after Murdoch

July 10, 2013

Rupert Murdoch has been summoned back to explain to British lawmakers comments he made at a private meeting with his London tabloid journalists. It seems that whatever regrets he has expressed in public about the phone-hacking and police bribery scandal that has so far cost his company $57.5 million, in private he thinks the affair has been overblown. There have been 126 arrests so far, with six convictions, a further 42 awaiting trial, and up to 10 more awaiting charges.

The Fox boss told his reporters and editors, all facing jail time, he didn’t see why the police were making such a fuss about “next to nothing”; that “payments for news tips from cops? That’s been going on a hundred years”; and promised them — though he was careful not to run afoul of the law — he would give them their jobs back “even if you’re convicted and get six months, or whatever.” He also pledged to use his newspapers to exact revenge on the “incompetent” police for pursuing the investigation so vigorously.

Little noticed in accounts of the secretly recorded conversation, an editor said Murdoch’s promises were all very well but asked him what guarantees they would have of being reinstated if he was no longer around, i.e. if Murdoch was dead?

The 82-year-old was taken aback. It was the first time anyone in his company dare say to his face what his shareholders and his senior staff have been asking for years. After a pause, Murdoch muttered, “It will either be with my son, Lachlan, or with [the CEO of his newspaper business] Robert Thomson.”

The history of business is littered with big personalities who have dominated their companies and become indispensable. Last century they were giants like J.P. Morgan, John D. Rockefeller, and William Randolph Hearst. This century they include pioneers in new technology, such as Bill Gates, Michael Dell, and Steve Jobs. Each one-man-band has posed a dilemma for shareholders highlighted by the question put to Murdoch: what happens when you’re gone?

Jobs is a perfect example of how the fortunes of a company are tied to an energetic chief executive driven by a vision to bring exciting new products to market. Apple learned the hard way it could not live without Jobs, who founded the company. He was fired after a boardroom coup in 1985 and the company slid towards bankruptcy until he was reinstated.

During his interregnum he bought George Lucas’s animation company and transformed it into the highly successful Pixar. Not long after he returned to Apple, Jobs’s demanding design specifications led the company to become the market leader in media players, phones, and tablets and made it, so long as he lived, the most valuable company in the world.

The problem with big personalities, however, is that they leave behind big shoes to fill. Since Jobs’s death in 2011, Apple has struggled to stay ahead of the competition. Samsung has eaten into their market share and profit. True public companies remake themselves by a well established system of checks and balances that allows investors to find a suitable successor when a leading light dies. But in the case of Murdoch’s business, those checks and balances do not apply.

Like many firms, Murdoch enjoys a share structure that keeps control in the hands of family members. Yet for many shareholders, owning Murdoch stock offers a twofold benefit. First, they trust Murdoch to aggressively grow the company while providing an adequate if not spectacular return.

Second, they are in it for the long haul and expect to dismember the company on Murdoch’s death. The phone-hacking scandal has already helped them towards this goal by provoking the separation of the hard copy press and book publishing business, that is less profitable, from the entertainment business that owns Fox movie studios and the Fox TV network.

Which is why Murdoch’s decision on-the-hop to nominate Lachlan to succeed him, at least in the publishing business, sent shivers down the spines of the long-term shareholders. Squabbles over how best to deal with the phone-hacking and public bribery scandals have taken their toll on the cohesiveness of the already fractured Murdoch family. As Murdoch has rejected each child in turn as unequal to the task of taking his place, the prospect of having to negotiate with a family at odds makes matters complicated.

Lachlan, once his father’s favorite, lives in exile in Australia, with his time in the United States strictly limited to board meetings. His son James, who replaced Lachlan as the blue-eyed boy, has in the wake of the London scandals been summarily brought home and languishes in his father’s headquarters on Sixth Avenue, New York.

After a coruscating assault on her father, Murdoch’s daughter Elisabeth has declined a position in the family business and remains in London with her husband Matthew Freud, whom her father detests. Prudence, Murdoch’s daughter by his first wife, has always kept her distance from the company.

The succession is further complicated by the failure of Murdoch’s spring-autumn marriage to Wendi Deng, aged 44, whose two daughters own a stake in the family-only structure but, following the strictures of the divorce agreement with Murdoch’s second wife, Anna, have no voting rights.

Or at least that is true at present. It will depend on how hard Wendi fights for her children. Until the terms of Murdoch’s third divorce are settled, shareholders will be fearful of the scale of the dismantling task ahead of them.

Wendi’s departure is likely to hasten Murdoch’s demise. She is famous for leaping to her husband’s defense, as James looked on, the last time the Fox chief was ordered to appear before British members of parliament and a protester tried to land a shaving foam pie in his face. On a daily basis, however, she has kept Murdoch to a strict fitness regime of vegetable juice and bicycle exercises. Few newly single husbands maintain the healthy lifestyles imposed by their departing wives.

In the meantime there is the reprise of Murdoch before the Commons media committee to look forward to. The last time he affected humility, interrupting proceedings to declare, “This is the most humble day of my life.” That is going to be harder to maintain after diminishing the importance of the scandals behind closed doors.

Changes in the complexion of the committee may also ensure he is given a rougher ride this time. The only member to defend him before was the Conservative Louise Mensch, who then resigned her seat provoking a by-election that gave the seat to Labour. She is now generously employed by Murdoch as a columnist at the Sun, the tabloid at the center of the phone-hacking and public-official bribery storm.

PHOTO: Rupert Murdoch, CEO of News Corp. and 21st Century Fox, arrives with sons Lachlan (L) and James (R) for the first session of annual Allen and Co. conference at the Sun Valley, Idaho Resort July 10, 2013.  REUTERS/Rick Wilking


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“big personalities” surround themselves with followers, and their children live lives without endeavor, and thus are incapable of any understanding. This is a good thing though. J.P. Morgan, John D. Rockefeller, William Randolph Hearst, Bill Gates, Michael Dell, and Steve Jobs despite the love of investers were/are all devoid of any human kindness. What they built will or already has gone away, and that’s a good thing. Murdoch, he’s a grade B industrial master, a flunkie to the real overlords. What he built will disintegrate much faster than all the rest because he never really had a product that wasn’t fluffy made up junk.

Posted by brotherkenny4 | Report as abusive

There is a great Greek expression that says “Fish rot from the head.” This certainly applies to these great men who see themselves as untouchable. Old Murdoch has a lot of explaining to do.

Posted by saeeda | Report as abusive