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Two Leading American Shareholder Advisory Groups Urge Shareholders To Vote Against Murdoch And Other Directors

October 11, 2011 11:18 am ET by Media Matters staff

Institutional Shareholder Services ("ISS") describes themselves as "the leading provider of corporate governance solutions to the global financial community." ISS specifically cites the recent hacking scandal and excessive executive pay in urging a vote against Rupert Murdoch, James Murdoch, and other directors.

From an October 10 Bloomberg report:

News Corp. (NWSA) investors should vote against the re-election of 13 out of 15 board members to establish more independent oversight of management, said the proxy advisory firm Institutional Shareholder Services.

News Corp. has suffered financial consequences from a phone-hacking scandal at one of its newspapers that reflect a lack of oversight, said ISS, which advises more than 1,700 investors on corporate governance issues. It recommended investors vote against Chief Executive Officer Rupert Murdoch, his sons James and Lachlan, and 10 other directors.

"The company's phone hacking scandal, which began its public denouement in July 2011, has laid bare a striking lack of stewardship and failure of independence by a board whose inability to set a strong tone-at-the-top about unethical business practices has now resulted in enormous costs," ISS said in its report.

ISS has recommended against 3.6 percent of the directors at companies in the Standard & Poor's 500 this year, according to ISS spokesman Ted Allen. Shareholders will vote on board members and other issues at News Corp.'s annual meeting Oct. 21.

Glass Lewis & Co., another proxy advisory firm, also said the company needs a more independent board. The firm, which advises institutions with over $15 trillion in assets, said shareholders should vote against James and Lachlan Murdoch and four other directors.

[...]

Phone-hacking at the company's News of the World tabloid in Londonis part of a "mosaic of failures" in the board's independence, oversight and responsiveness, ISS said. Executive pay is another area of concern, according to the firm, citing the elder Murdoch's cash bonus of $12.5 million in fiscal 2011, compared with $4.4 million the year before.

[...]

The hacking scandal has led to the loss of revenue and business deals, according to ISS. Closing the News of the World will hurt profit at the company's newspaper unit, the firm said. Dropping its bid for the remaining shares of British Sky Broadcasting Group Plc (BSY) caused News Corp. to pay a $63 million breakup fee and to lose out on potentially significant future earnings, it said. In addition, News Corp. in August lost a $27 million no-bid contract to build an education data-system tracking student performance for New York due to the scandal, the advisory company said.

"Despite the protestations of the Chairman/CEO in his Parliamentary testimony, ultimate accountability for the performance -- and particularly the self-inflicted wounds -- of the company must rest with the senior management and the board of directors," ISS said. 

This comes after, Glass Lewis, another shareholder group urged investors to vote against James Murdoch.

Glass Lewis describes themselves as "the leading independent governance analysis and proxy voting firm assisting institutions globally that have investment, financial or reputational exposure to public companies." Glass Lewis cites the lack of independence on the board in urging a vote against James Murdoch and others.

From an October 7 Adweek report:

As the News Corp. annual meeting approaches, shareholders are being advised to vote against the reelection of a number of current board members who appear to have been asleep at the wheel. On Friday, Glass Lewis, one of the top independent proxy advisory services in the United States, recommended that investors use their votes to keep six of the company's directors from serving further terms. In light of the phone hacking scandal that has plagued the company with intense legal and media scrutiny for three months, shareholders are being urged to push for proper oversight from the company's board going forward.

The biggest names that Glass Lewis is advising against reelecting are Rupert Murdoch's two sons, James and Lachlan. The other four directors Glass Lewis is recommending that investors vote against are Natalie Bancroft, David DeVoe, Andrew Knight, and Arthur Suskind. In its report, the company advises News Corp. investors to "carefully consider the nature of the relationship each director has with the Company and its controlling shareholder, the Murdoch family, in order to establish a board with proper independence levels and strong oversight."

These latest shareholder developments follow recent news that:

  • Pension Investment Research Consultants advised shareholders to not re-elect James Murdoch as a director;
  • UK's Parliament plans to recall James Murdoch to determine if he told the truth after some of his initial claims were called into question by testimony from subsequent witnesses;
  • Additional members of Congress are pushing for a congressional investigation into News Corp.'s alleged hacking;
  • A group of shareholders filed new charges in their U.S. based lawsuit against News Corp.'s management and board of directors for "repeated failures to correct illegal conduct that has severely battered the company's reputation and market value."