Exploring Strategy (10^th Edition)

116 CHAPTER 4 STRATEGIC PURPOSE ILLUSTRATION ILLUSTRATION 4.2 A family affair? News Corporation's governance crisis The governance chain at News Corporation seems to have failed at several levels, putting at risk family control. In 2012, Rupert Murdoch was 81 years old and still encouraged journalists to get the most sensational Chairman and Chief Executive of News Corporation, stories they could, and this often led them to break the international media conglomerate that he had into people's mobile phone and email accounts. It was launched in Australia in the 1950s. News Corporation's unclear when James Murdoch became aware of these assets included Fox News, the Wall Street Journal practices: he claimed in a British Parliamentary inquiry and the movie studio 20th Century Fox. The company that he did not know of them until much later. If James also owned several leading British newspapers, was unaware, he appeared not to be in close control of including the Sun, The Times and the Sunday Times, his own newspapers and to be very lax in investigating and a 39 per cent holding in the dominant United accusations of lawless behaviour by his employees. Kingdom pay-TV broadcaster, BSkyB. The Murdoch In early 2012, James Murdoch resigned all his family owned 39 per cent of the corporation's voting British responsibilities. But James continued as Deputy shares and a family friend, Prince Al Waleed bin Talal, Chief Operating Officer of News Corporation globally, held a further 7 per cent. Other important shareholders while retaining responsibilities for the company's included the Bank of New York, the investment Continental European interests. Shareholders were management company Invesco, and Calpers, the deeply unhappy with the Murdoch family's management, Californian teachers' pension fund. despite the strong performance of News Corporation's News Corporation was run as something of a shares relative to competitors' since 2009. In October family fiefdom. Rupert Murdoch's son Lachlan had 2011, more than half the independent shareholders been Deputy Chief Operating Officer until 2005, had either voted against or abstained on the re when he resigned abruptly for unexplained reasons. appointment of Rupert Murdoch as Chairman and a Murdoch's daughter Elisabeth had been Managing similar proportion had voted against the reappoint- Director of BSkyB before setting up her own television ment to the board of James. Of course, the family production company, Shine, with backing from BSkyB controlled enough shares to win the overall majority. itself. In 2011, Shine was bought by News Corporation However, Anne Simpson, Head of Corporate Govern- for 290 m (350 m; $440 m): Elisabeth personally ance for Calpers, said of the hostile votes: "This sends received more than half this sum, at the same time as a strong signal to the News Corp board that investors retaining her role as Shine's Chairman and Chief are looking for robust independence. It's a vote in Executive and joining the News Corporation main favour of board rejuvenation.' board. Some News Corporation shareholders accused Mal sources: Financial Times, 25 October 2011 and 3 April 2012- the company of paying too much for Shine. Another of Rupert's sons was James, who was News Corporation's Deputy Chief Operating Officer. At the Questions start of 2012, James was also Chairman of BSkyB 1 Referring to Figure 4.3, at what levels did and Chairman and Chief Executive of News Corporation the governance chain at News Corporation Europe and Asia, overseeing a range of international seem to fail? assets including the group's British newspapers. This last position placed James Murdoch in the 2 Given that News Corporation's share price was outperforming competitors', why would front line of the telephone hacking scandal that shareholders vote against the Murdochs engulfed News Corporation's British newspapers during 2011-12. In a fiercely competitive market, management at News Corporation? What else could they do? News Corporation's tabloid newspaper editors had