Rupert Murdoch and the Corruption of the British Media

[Douglas Caddy]

Pension Investor to Vote Against Murdochs on News Corp. Board

The New York Times

By JULIA WERDIGIER

October 14, 2011

LONDON – Hermes Equity Ownership Services, which represents British Telecom and other large pension funds, said Friday it planned to vote against the re-election of Rupert Murdoch and his sons to News Corporation’s board at next week’s shareholder meeting.

Hermes EOS, indirectly owned by the BT pension scheme, Britain’s largest, said News Corporation’s directors failed to react to concerns about the composition of the board. The institutional investors also raised concerns that calls for an independent investigation into corporate governance and the culture at the media conglomerate went ignored, following the phone hacking scandal at one of its publications were also ignored.

Jennifer Walmsley, director of Hermes EOS, said she had a number of meetings with the independent directors of the board to discuss the demands but that they have “not reacted with sufficient urgency.” Hermes EOS, which represents about 0.5 percent of News Corp., plans to withhold support for Rupert Murdoch, his sons, James and Lachlan Murdoch, as well as Arthur Siskind and Andrew Knight.

“They’ve made some very minor changes to the board so far, which is rather a tinkering around the edges,” Mrs. Walmsley said. “To know why the change isn’t happening, you only have to look at the composition of the board.”

“Members are either family members, owe their position to a relationship with the family or are somehow linked to the family,” she said. “We want to see family members and affiliated directors to be replaced.”

It’s a sign of the mounting pressure on the board. On Monday, Institutional Shareholder Services, a major investor advisory firm, recommended Monday that investors vote against the vast majority of the company’s board at the shareholder meeting on Oct. 21.

Still, such efforts may not have much sway. Mr. Murdoch, who is the company’s chairman and chief executive, controls about 40 percent of the voting shares.

Concerns about the management grew after the phone-hacking scandal in Britain that has led to the arrests of several News Corporation executives earlier this year. Institutional Shareholder Services criticized ”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 — financial, legal, regulatory, reputational and opportunity – for the shareholders the board ostensibly serves.”

Additional revelations this week of a controversial circulation deal at the media company’s Wall Street Journal Europe that lead to the resignation of the newspaper’s publisher were just the latest proof that an independent investigation into all of News Corporation was needed, Mrs. Walmsley of Hermes EOS said.

[Douglas Caddy]

News Corp. Hits a Bump as Investors Prepare to Meet

The New York Times

By AMY CHOZICK and TANZINA VEGA

October 13, 2011

The European edition of The Wall Street Journal accounts for less than 1 percent of total business at its parent company, the News Corporation. But the controversy this week over an unorthodox circulation deal that resulted in the resignation of the newspaper’s publisher could carry outsize influence among investors already concerned about ethical practices at the company, analysts said Thursday.

The revelation of another journalistic lapse at News Corporation — though minor compared with the phone hacking scandal in Britain — further complicates matters for the leadership at News Corporation as it prepares for its annual shareholder meeting next Friday.

“No news of impropriety at News Corporation is a blip when they’re under such scrutiny,” said Doug Creutz, a senior research analyst at the Cowen Group. “This adds to the general question of how the company is being run.”

He pointed to several independent investor advisory groups that have recently recommended that shareholders vote against some members of the News Corporation board, “especially those whose name ends in Murdoch,” he said. Rupert Murdoch is the chairman and chief executive of News Corporation, and his sons James and Lachlan, have large roles in the company.

The scrutiny on the company increased on Thursday when the bureau that audits newspaper sales in Britain said it was reviewing new information about The Wall Street Journal Europe’s circulation arrangement that could lead to further investigation. Under the deal, The Journal used a third party to channel money to a Dutch consulting firm, which bought thousands of copies of The Journal each day for as little as one euro cent (1.37 American cents). The practice helped bolster The Journal’s subscription rate in Europe.

The publisher of The Wall Street Journal Europe, Andrew Langhoff, resigned on Tuesday after an internal investigation revealed that the circulation deal also led to an agreement that provided the Dutch company, Executive Learning Partnership, with two positive articles in exchange for its financial support.

“We have always been transparent with the A.B.C., and they have certified this program over recent reporting periods,” Dow Jones & Company, which owns The Journal, said in a statement, using an acronym to refer to the circulation auditing agency in Britain. “We plan to meet with them soon and review all the details with them again.”

The incident at The Wall Street Journal Europe also puts the spotlight on how newspapers report circulation numbers, which are crucial to determining how much publications can charge for advertisements. At a time when the industry is struggling, many newspapers rely on heavily discounted copies to prop up circulation numbers.

Last year, the Audit Bureau of Circulations, the regulatory agency in the United States, added a new category on how publications should report copies that are sold to schools, bought by businesses for their employees, or bought in bulk by third parties, like advertisers, which include promotional inserts or wraps and distribute the copies free. The new category, called “verified,” is separate from paid circulation totals that include home delivery and newsstand sales.

Michael J. Lavery, the president and managing director of the Audit Bureau, said the popularity of the third party bulk sales that are considered verified had waned over the last several reporting cycles. He said the bureau no longer included third-party sales as a paid category that could determine advertising rates.

“There are other distribution channels that helped media buyers and advertisers get their message to their target audiences,” Mr. Lavery said, citing new programs, like Sunday Select by the Gannett newspaper division, where nonsubscribers could opt to have advertising circulars delivered to them directly.

The New York Times does have third-party agreements but does not include those sales in its report to the bureau, the company said Thursday. Around 9 percent of The New York Times’s print and digital circulation of 917,000 comes from verified subscriptions, though that figure does not include Web site subscriptions.

Dow Jones said that in the six months that ended in March, 26,687 of The Wall Street Journal’s print and digital United States circulation of 2.1 million — which does include Web subscribers — came from verified papers or copies distributed inexpensively at places like universities.

News Corporation has invested in The Journal’s foreign editions in Europe and Asia with the hopes of gaining a stronger international presence. But expanding The Wall Street Journal Europe has proved tough, and the paper’s circulation, even with tens of thousands of papers sold cheaply in bulk, has remained flat at around 75,000 since 2008, according to the British audit bureau.

The New York Times Company’s overseas edition, The International Herald Tribune, distributed globally, had a daily circulation last year of 217,700, according to a Times spokeswoman, Eileen Murphy. She did not immediately have information on third-party agreements by the I.H.T. The paper, based in Paris and audited by the French circulation bureau, accounts for 28 percent of its circulation through subscriptions, 16.5 percent on newsstands and sells heavily to hotels and airlines.

“The I.H.T. does not engage in unethical practices with regard to our circulation or any other part of our business,” said Stephen Dunbar-Johnson, the paper’s publisher. “We would never enter any commercial contract that puts our journalistic integrity at risk.”

Mr. Langhoff took over at The Wall Street Journal Europe in 2009. During his tenure the paper engaged in aggressive marketing tie-ins. In 2008, it established “Future Leadership Institute” seminars for students. The Dutch firm, Executive Learning Partnership, sponsored the events through which thousands of copies of the Journal were given out.

“Any suggestion that E.L.P. was involved in a scheme to artificially boost the circulation of W.S.J.E. is not based on facts, not in line with the ethical standards of E.L.P.,” Nick Van Heck, a partner at Executive Learning Partnership., wrote Thursday in an e-mail.

Still, comparing circulation practices to phone-hacking is “apples to oranges,” said Barton Crockett, director and senior media analyst at Lazard Capital Markets.

“All sorts of magazines and newspapers boost circulation,” Mr. Crockett said. “You can’t expect that the board of directors would be auditing circulation practices at The Wall Street Journal Europe at a company the size of News Corporation.”

Eric Pfanner contributed reporting.

This article has been revised to reflect the following correction:

Correction: October 13, 2011

An earlier version of this article misstated the price of the discounted papers. It was one euro cent, or 1.37 American cents, not $1.37.

[Douglas Caddy]

News Corp faces revolt by quarter of shareholders

Advisory bodies and campaigners urge investors to oppose up to 13 of media firm's 15 directors amid phone-hacking allegations

By Jill Treanor

guardian.co.uk,

Friday 14 October 2011 13.58 EDT

Up to 25% of shareholders are expected to protest against Rupert, James and Lachlan Murdoch retaining their positions on the News Corporation board at the embattled media group's annual meeting in Los Angeles next week.

A string of advisory bodies and corporate governance campaigners have issued recommendations to vote against up to 13 directors on the 15-strong board, the composition of which has been the subject of shareholder concern for some time.

The phone-hacking allegations have further focused investors on the structure of the board – where there are concerns about the limited power and influence of independent directors.

Rupert Murdoch is both chairman and chief executive, which is reasonably common in the US but often unpopular with UK-based investors.

The Murdochs control around 39% of the votes at the company, which means the directors would not be voted off even though they own just 12% of the company, because of the complex share structure.

Hermes Equity Ownership Services, which votes on behalf of the BT pension fund and other investors, became the latest shareholder advisory service to advise its clients not to support all the directors on the NewsCorp board.

Explaining its decision to withhold support from five directors – Rupert, James and Lachlan Murdoch, Arthur Siskind and Andrew Knight – Jennifer Walmsley, director of Hermes EOS, said: "News Corp has not reacted with sufficient urgency to investor concerns about its board composition and corporate culture.

"The time is right for the company to appoint an independent chairman to rebuild trust, help correct the governance discount, and ensure that the interests of all investors are properly represented," she said.

The firm, along with others, is considering sending a representative to the meeting in Los Angeles where a small shareholder, Christian Brothers Investment Services, intends to table a resolution from the floor calling for Murdoch to split his role of chairman and chief executive.

Industry sources believe that opposition to the directors could reach 25%, given the array of other investor bodies and advisory agencies that have also made recommendations to oppose directors."It is possible we could see a significant protest vote of 25% or so," one source said.

Other comments have been made by the following bodies:

• The Local Authority Pension Fund Forum (LAPFF) wants Rupert and James Murdoch to be replaced by former British Airways boss Sir Rod Eddington.

• Pirc, the UK advisory service, is advising a vote against 11 directors.

• The Australian Council of Superannuation Investors (ACSI) wants Rupert Murdoch to be replaced as chairman by someone "genuinely independent".

• Calsters – the California State Teachers' Retirement System, one of the largest public sector pension funds in the US – has already voted against 13 directors on the News Corp board.

Well-known US advisory firms are also recommending voting against the Murdochs. Glass Lewis, which advises institutions holding $15tn (£9.6tn) worth of investments, has recommended that investors vote against the re-election of James and Lachlan Murdoch, while Institutional Shareholder Services, a major advisory agency for shareholders, has recommended voting against 13 of directors on the News Corp board.

News Corp said it "vehemently disagrees" with advice from the advisory firms about failing to back its directors and pointed to its strong fiscal performance for 2011, with revenues up 2% to $33.4bn and operating profit up 23% to $4.85bn.

The company also stressed that it had a "strong board of directors".

"Our slate of director nominees consists of sophisticated, world-class directors who serve to enhance our board of directors … We disagree with recommendations that stockholders should vote against our directors. We respectfully request that stockholders vote for all directors as the board has recommended," News Corp said.

[Douglas Caddy]

Crispin Odey fears over Sky chairman’s US move

James Murdoch faces fresh questions over his position as chairman of BSkyB after one of his key backers admitted that his imminent move to America could make him too “hands-off”.

Hedge fund manager Crispin Odey has a 2.7pc share of BSkyB.

Daily Telegraph

8:30PM BST 15 Oct 2011

Mr Murdoch has come under heavy fire over his position, amid fears that his involvement in the News of the World phone-hacking row will take its toll on the broadcaster, and that the Murdoch family, which owns 39pc of BSkyB, exerts too much control.

Crispin Odey, the hedge fund manager who has a 2.7pc share of BSkyB and is one of Mr Murdoch’s strongest champions, has now expressed fears that the furore will make Mr Murdoch too distant from BSkyB.

“There has to be a risk with all this [shareholder anger]. If he’s a bit too non-executive, we’ll see about that, I hope he’s up to it,” he told The Sunday Telegraph ahead of the broadcaster’s first quarter results next Wednesday.

Asked if he thought Mr Murdoch was looking forward to moving to the US in his role as deputy chief operating officer of News Corporation, Mr Odey added: “That’s what I worry about actually, that he might be over there too much.”

Analysts expect a strong set of results despite the lack of Premiership football driving demand during the first quarter.

Consensus figures project a slight increase in revenues from £1.53bn to £1.63bn, and adjusted earnings before interest and tax of £287m.

Laurie Davison and Mark Braley at Deutsche Bank predicted a “dull” increase of around 2.6pc in BSkyB’s pay-TV customers while telephony line rental and broadband were likely to push its average revenue per user up by around 5pc.

1 comment

cohonescaramba

Today 10:19 AM

Talk about angry shareholders...

The next crash-candidate is Sky Deutchland. The company is quickly running out of money and has enormous debt to service. The burn rate is frightening and they may even loose the right to broadcast the important Bundesliga if they don't have a strong enough balance sheet to be credible and pay up for the renewal rights. This might be Murdochs next headache as he has kept SkyD alive so far with capital increases and shareholder loans.

It will be an interesting thriller to watch already in the next month or so perhaps. SkyD will have no more cash in the beginning of next year and still have an enormous debt burden and a scary burn rate...

But maybe James Murdoch will guarantee a new capital increase like he did last year

[Douglas Caddy]

News Corp Knew of WSJ Circulation Issue-Report

By REUTERS

October 18, 2011

(Reuters) - News Corp was made aware of plans to boost the circulation numbers of Wall Street Journal Europe almost a year before its publisher resigned at the height of the company's phone-hacking scandal, a Bloomberg report said, citing a former employee and internal documents.

Les Hinton, the former CEO of News Corp's unit that publishes Wall Street Journal in Europe and Todd Larsen, president of the Dow Jones & Co unit, were alerted to the plans, the report said, citing former circulation manager Gert Van Mol and emails he provided to Bloomberg News.

News Corp and Dow Jones were not available immediately for comment.

(Reporting by Vidya L Nathan in Bangalore)

[John Simkin]

A lawyer who advised News International has said the company was told in 2008 there were three journalists other than Clive Goodman involved in phone hacking.

Julian Pike told the Commons culture committee he had "not done very much" to dispute the firm's claims that only "one rogue reporter" was involved.

But he insisted he was "not party to any cover-up".

Goodman was jailed in 2007 for hacking phones belonging to royal aides.

Mr Pike, who works for solicitors Farrer and Co, advised News International in its phone-hacking case with the Football Association's Gordon Taylor.

His case is seen as key to the dispute over how widespread hacking was.

Mr Taylor settled out of court with the News of the World for a reported £425,000.

But an email handed to his lawyers by the police - known as the "For Neville" email - has been at the centre of a disagreement during previous committee hearings.

When the News of the World's royal editor Clive Goodman was jailed for hacking into phones of the royal household in 2007, the paper insisted the practice was not more widely used.

But the "For Neville" email is said to have implied that the News of the World's chief reporter Neville Thurlbeck was also implicated in malpractices.

Former News of the World legal manager Tom Crone has told MPs he is "certain" he informed News Corp boss James Murdoch about the email.

However, Mr Murdoch, who is the European chief executive of News Corporation - the parent company of News International, which owned News of the World before it was closed in July 2011 - has insisted he was never told about it.

Mr Pike told the committee the email was a "critical piece of evidence" relating to phone hacking.

"It was quite clear having seen the For Neville email... that there was involvement of News of the World journalists other than Goodman," he said.

The lawyer also said that in 2008, at the time of the Taylor case, the advice given to News International was that there were "three journalists other than Goodman involved in phone hacking".

"They were also advised by counsel and ourselves that there was a powerful case to support [the existence of] a culture of illegal accessing of information to get stories," he added.

Mr Pike said there was no obligation for him to report to the police that he knew phone hacking was more widespread at the News of the World than the company was claiming.

Committee chairman John Whittingdale said in September he wanted to hear from Mr Pike before recalling Mr Murdoch to give further evidence.

The committee will also hear from Mark Lewis, the solicitor who represents many of the alleged victims of phone hacking, including the family of Milly Dowler.

Next week, the MPs will hear evidence from News International's former executive chairman Les Hinton.

He will appear via videolink from the United States, where he lives.

http://www.bbc.co.uk/news/uk-politics-15365316

[Douglas Caddy]

In Rift Between Murdochs, Heir Becomes Less Apparent

The New York Times

By JEREMY W. PETERS

October 19, 2011

LONDON — It was a striking display of unity: Rupert and James Murdoch, father and son, walking side by side through central London as they faced a crisis that had laid siege to their company. Pushing through a crush of paparazzi on a street not far from Buckingham Palace, James reached out to place a reassuring hand on his father’s back.

But behind that facade, the disclosure of widespread phone hacking at News Corporation’s British newspaper division was only the latest and most serious episode to test a father-son relationship that has frayed over the last few years, leaving both men at times not even on speaking terms. And that rift, which has been known only to those closest to the company, has opened up a question central to Rupert Murdoch’s legacy — can one of his children ever take the helm of his $62 billion media giant?

Their disagreements, which were described in detail by more than half a dozen former and current company officials and others close to the Murdochs, stemmed in large part from the clashing visions of a young technocratic student of modern management and a traditionalist who rules by instinct and conviction. The tension grew worse as the gap between the New York headquarters and James’s London operations, where he oversees the company’s European and Asian holdings, proved difficult to bridge.

The elder Mr. Murdoch reached his boiling point last winter, said one of the former officials, and delivered a blunt ultimatum to his son.

“You’re coming back to New York, or you’re out.”

The son consented. But now, as investors place more pressure on the Murdochs to disentangle themselves from the company they have tightly controlled for three generations, his role in the company is under threat. Shareholders will meet on Friday in Los Angeles to decide whether to re-elect the News Corporation board, which includes Rupert, James and Lachlan Murdoch, the eldest son. Though the family holds a 40 percent stake, giving the Murdochs effective control, and most analysts expect them to be re-elected, several large shareholders and a prominent investor advisory firm have recommended voting against them.

James Murdoch, 38, who approved a settlement in 2008 of more than $1 million to help resolve allegations of voice mail hacking at News of the World, the tabloid that News Corporation shut down in July, faces additional pressure back home in London. He is scheduled to testify before Parliament for a second time next month to address questions about the payment, with several ministers suggesting that it was part of an intentional cover-up of the phone hacking.

Within the company, James’s position became tenuous enough at one point this summer that he and other senior executives considered whether he should step aside, said one person with knowledge of the conversations.

Both Murdochs, through representatives, declined interview requests.

Rupert Murdoch, now 80, has long said he hopes one of his children will eventually run the company he built from an Australian newspaper franchise into one of the world’s most powerful and profitable media empires. With his daughter Elisabeth focused on her television production company in London, and Lachlan determined to continue running his media business in Sydney despite the elder Murdoch’s desire to bring him back into the company, James has been the heir apparent. But the hacking scandal and the simmering animosity with his father have destabilized his once inexorable ascent within the company.

“Rupert always thought of News Corp. as a family company because it had been given to him,” said Barry Diller, who helped the elder Mr. Murdoch build Fox into a formidable rival to the traditional networks. “It had been given to him through a tiny newspaper in Adelaide, but nevertheless it was his father’s company. I think that meant to him that tradition should continue. If, as he’s always said, his children were worthwhile.”

Succession Twist

James was not always viewed as the Murdoch who would end up running News Corporation. That mantle, it seemed to everyone inside the company, belonged to Lachlan. James, the youngest of Rupert’s four adult children, was a willful child. When he was served last at dinner, as was the family custom for the last born, James strenuously objected and, according to the Murdoch biographer Neil Chenoweth, repeatedly tried to rearrange the seats around the table.

He attended Harvard, but in 1994 dropped out to start a hip-hop record label, Rawkus, which News Corporation bought two years later.

But once inside the corporate fold, James made a rapid ascent. At 24, he was put in charge of the digital publishing business in the United States. At 27, he was named executive chairman for Star TV, News Corporation’s Asian satellite television service, and three years later, he was installed as chief executive of BSkyB. Even by independent assessments, his stints leading both satellite providers were successful. He expanded Star’s businesses into India and subscribers to BSkyB soared.

Those successes helped him earn acclaim as an executive in his own right. Today he is widely recognized as having transformed News Corporation’s pay television business into one of its strongest assets, a feat that has given him credibility on Wall Street. “He’s one of the more seasoned executives among media conglomerates when it comes to international markets,” said Aryeh Bourkoff, head of investment banking at UBS. “And he grew up where technology and innovation were integral to media consumption and trends.”

When Lachlan Murdoch, who is one year James’s senior, left News Corporation in 2005, Rupert began looking for places where his only remaining child in the business could gain more experience. Lachlan’s exit was particularly fraught. He became ensnared in a feud with Roger Ailes, the Fox News chairman, and Peter Chernin, News Corporation’s president and chief operating officer at the time. Lachlan, who ran the company’s American television stations and publishing divisions, felt boxed out and undercut by the two.

Rupert was eager to avoid getting his youngest son into the same mess. He began to look across his vast company for the best proving ground for James. The film and television businesses in Hollywood were not an option. Mr. Chernin had too much interest there. The Australian businesses did not seem to be a good fit. So the solution was to put James in charge of News Corporation Europe and Asia, a promotion he received in 2007. The responsibility was immense: James was able to hire his own legal counsel, chief financial officer and chief operating officer, creating a new layer of senior management that he said was necessary for a company that generates about half its revenue outside North America. And his new portfolio included the British newspapers, an area of the business with which James had little experience and almost none of the sentimentality his father held for it. Nonetheless, Rupert was insistent that he learn the trade.

Even before James took on his new role, he began making some bold moves. He had one of his executives in London moved to New York to head a new global human resources division. The appointment, which represented just the kind of management restructuring James was eager to make at News Corporation, made some at headquarters who were already wary of James suspect he was trying to install a shadow regime there, those with direct knowledge of the company dynamics at the time said.

‘One Company, Not Two’

Those suspicions were only reinforced later, after James tried to move one of his closest advisers, Matthew Anderson, to New York as well, a move Rupert rebuffed. Mr. Anderson has said he never sought to move to New York. The tensions between the power centers also claimed one of the elder Murdoch’s closest advisers, Gary Ginsberg, the company’s communications strategist, who seldom saw eye to eye with James.

Early this year, this perception of the company as having two head offices became a more pressing issue, and his father gave James the ultimatum to return to New York or leave the company altogether.

“This is one company, not two,” Rupert told James, according to one person told of the exchange. “And it is run out of New York.”

James acquiesced and said he would move. In a skillful spin job that masked the melodrama behind the scenes, News Corporation emphasized that the move was a promotion, and James received a new title of deputy chief operating officer.

It was the newspaper business that would ultimately prove the point of deepest fissure between father and son. After taking control of News International, the company’s British newspaper subsidiary that publishes The Times of London, The Sun and News of the World until it was shuttered this summer, James made some abrupt course corrections.

In September 2009, as a major Labour Party gathering was under way, The Sun, News Corporation’s mass market, populist tabloid, stunned the British political establishment by switching its allegiances to the Conservative Party after more than a decade of Labour support. The audacity of the move was reinforced by the fanfare with which it was announced. The Sun featured a blaring front-page headline “Labour’s lost it,” floodlit its printing plant in Conservative blue and pumped blue smoke from a smokestack at its complex in Wapping, on London’s east side.

Rupert, who was still quite close to Prime Minister Gordon Brown and his wife, Sarah, had cautioned his son against supporting David Cameron ahead of an election more than six months away. The endorsement severed the longstanding friendship between the Browns and Rupert and his wife, Wendi, a development that one person with knowledge of the family dynamics said upset Rupert deeply. The reversal also made News International a willing political combatant, a status that seemed only to embolden its critics when the hacking crisis broke. Indeed, a major force in the revolt against News International has been Tom Watson, a member of Parliament and a loyal Brown ally.

It was in his role as head of the newspaper division that James approved a 2008 settlement with Gordon Taylor, head of an organization representing Britain’s professional soccer players, over allegations of voice mail hacking. That settlement is now at the center of a significant public dispute between James and two former News Corporation executives in London, who offer a conflicting account of events leading to the payment. The executives claim that they had informed James that the voice mail hacking went beyond the work of a lone “rogue” reporter and a private investigator that the company had acknowledged at the time. If that was the case, then law enforcement could argue that the settlement was intended as an attempt to buy the silence of victims, which legal experts say could provide the basis for British prosecutors to pursue criminal charges.

James has forcefully denied their assertion, saying the men did not tell him about a broader pattern of phone hacking. Some who know him have suggested that the most he is guilty of is listening to advisers who told him the settlement would be less costly than a court fight.

“James is one of those guys who, unlike his father, trusts his advisers,” said Alan Sugar, a British entrepreneur who sold his electronics manufacturing business to BSkyB.

Moving to New York

James, whose family is firmly established in London, has yet to comply with his father’s order to relocate to New York. He visits the headquarters on Sixth Avenue in Manhattan typically once a month. And when he is there he works from a visitor’s office on the side of the eighth floor occupied by Dow Jones managers, not the side where his father and other News Corporation executives have their offices.

His new office, which he plans to occupy more regularly by the end of the year, will be a couple of doors down from his father and outfitted with the same kind of standing desk he has in Wapping. Sitting while working, he believes, is inefficient.

In March he bought a townhouse on the Upper East Side for $23 million. His longtime friend Jesse Angelo, who now edits News Corporation’s tablet-only newspaper The Daily, signed the property transfer for him through a limited liability corporation, helping to mask the sale. He declined a $6 million bonus this year, and has been keeping a low profile around London. Most Murdoch watchers say they believe the top job is still his to lose among his siblings. Lachlan is said by friends to be perfectly happy in Australia, the first time in his career he has been truly out of his father’s shadow.

Elisabeth, the older sister, returned to the company this year after News Corporation acquired her television production company Shine in April. She runs her part of the business not from Wapping but from Shine’s offices across town. Because she was not part of the company when the phone hacking took place, and changed her mind about becoming a member of the board this summer, she remains more removed from News Corporation’s trouble than her brothers. “She very elegantly or ruthlessly created a definitive separation for herself,” said a person who has known her for years, speaking on the condition of anonymity to protect their relationship.

The person said that Elisabeth was “very competitive with her brothers,” but was skeptical whether she would push for the top job, speculating that she instead might prefer a top creative position supervising the entertainment units. Rupert’s eldest child, his daughter Prudence, is not involved in the company.

Short-term plans call for Chase Carey, the chief operating officer, to take over for Mr. Murdoch whenever he departs. But for a company where the belief in the immortality of the chief executive is almost sacrosanct, James might be waiting a while if his career survives intact.

“Can you detoxify the company without de-Murdochizing, or is something more fundamental needed?” said Mathew Horsman, who has covered News Corporation and the Murdochs for two decades, first as a journalist and now as director of Mediatique, a consulting firm in London.

“Even though Rupert is often criticized for running his company like a fiefdom, there is a custodial role he must play,” he added. “And he realizes that. So I don’t know if succession can involve a clean anointment of a Murdoch.”

Bill Carter contributed reporting.

[Douglas Caddy]

Rupert Murdoch's Tax Play: News Corp. Lobbied For Trade Pact With Favored Tax Haven

First Posted: 10/19/11 11:23 AM ET Updated: 10/19/11 11:57 AM ET

www.huffingtonpost.com

WASHINGTON -- Rupert Murdoch's media conglomerate News Corp. lobbied in favor of the new Panama free trade pact, according to federal lobbying disclosure forms -- a pact that will make it more difficult for the U.S. government to crack down on Panama-related tax abuses. Panama is a notorious tax haven, and News Corp. also operates a subsidiary there. The company's flagship American news outlets -- The Wall Street Journal and Fox News -- reported extensively on the three free trade deals passed by Congress last week without disclosing the parent firm's lobbying activity.

In fact, News Corp. operates a total of 136 subsidiaries in nations identified as international tax havens by the Government Accountability Office -- jurisdictions where wealthy Americans and corporations can stash money to avoid paying U.S. taxes. One of those subsidiaries, Twentieth Century Fox Films, S.A., is located in Panama.

News Corp. is not alone, of course. Panama has a total annual economic output of just $26.7 billion, according to the World Bank -- less than two-tenths of one percent of the size of the U.S. economy (and about 45 percent less than the $44.75 billion stock market value of News Corp.). Nevertheless, Panama has attracted more than 400,000 offshore corporations thanks to its zero-percent tax rate and some of the strictest bank secrecy laws in the world.

The Securities and Exchange Commission requires U.S. corporations to disclose the names and locations of all their subsidiaries. But companies do not have to disclose other information that is critical to determining whether an offshore subsidiary exists for any purpose other than tax avoidance, such as the total assets and liabilities of the subsidiary.

So while News Corp. operates just one subsidiary in Panama, compared to 16 in the Cayman Islands and 26 in the British Virgin Islands, SEC filings do not indicate how significant the company's Panamanian activities are.

"A long list of tax haven subsidiaries might indicate a lot of nefarious activity, but you really only need one," said Rebecca Wilkins, senior counsel at the nonprofit Citizens for Tax Justice. "News Corp. might use a single Panama subsidiary to avoid taxes on $3 or on $3 billion. We need sales, profits, tax payments and employees reported on a country-by-country basis to get a good picture of what the multinational is really doing."

According to the company's latest annual SEC filing, News Corp. has $8.6 billion in "undistributed foreign earnings" that it plans to keep stashed abroad "indefinitely." Meanwhile, the company routinely has a U.S. federal income tax bill much lower than the oft-cited 35 percent corporate rate. Since 2003, the first year of tax data available in News Corp.'s SEC filings, Murdoch's company has paid an average federal tax rate of 15 percent, with rates below 5 percent in every year from 2003 to 2006 being offset by a big loss in 2009 and a 25 percent tax rate in 2011 (see note on calculations below).

Several other major news outlets operate subsidiaries in tax havens. CBS, for instance, has 72 subsidiaries in tax haven nations, while AOL, the owner of The Huffington Post, has two (AOL also has $15.7 million in undistributed foreign earnings permanently reinvested abroad). Neither lobbied directly on the trade deals.

The Panama trade deal was initially negotiated by President George W. Bush in 2007, but sparked a host of criticism for granting Panamanian exporters access to U.S. markets without combating the nation's tax avoidance schemes. Indeed, the trade agreement effectively bars the U.S. from cracking down on this activity. Under the agreement, the U.S. is not allowed to treat Panamanian financial services transactions differently from transactions in nations that are not known tax havens, and it cannot pursue some standard anti-money laundering techniques in Panama.

President Barack Obama attempted to assuage these concerns by reaching a Tax Information Exchange Agreement with Panama, but as HuffPost has reported, the deal relies on an outdated model that is unlikely to provide the Internal Revenue Service with enough information to crack down on abusive tax schemes, in part because it does not require that U.S. tax authorities be automatically notified when Americans deposit money in Panama.

In addition to its Panamanian subsidiary, News Corp. operates two subsidiaries in Colombia and three in South Korea, the two other countries with which Congress passed trade deals on Oct. 12. News Corp. lobbied on the Korea and Colombia agreements as well, according to lobbying disclosure forms.

Both Fox News and the Journal have reported extensively on the Panama and Korea deals without disclosing that their parent company was lobbying in favor of them. The Journal has also published multiple op-eds and editorials advocating for the agreements without disclosing its parent company's lobbying. The Journal declined to comment, and a spokesperson for Fox Broadcasting referred HuffPost to News Corp.'s corporate spokespeople, who did not respond to requests for comment.

Note: HuffPost calculated News Corp.'s tax rates by dividing the "current federal income tax" number reported in SEC filings by the company's total U.S. profits minus state and local taxes. In 2007, for instance, total state and local taxes of $69 million were subtracted from News Corp.'s total U.S. profits of $4.586 billion, resulting in a profit net of state and local taxes of $4.517 billion. Current federal income tax paid was $281 million. Divide $281 million by $4.517 billion to arrive at a 2007 federal income tax rate for News Corp. of 6.2 percent.

[Douglas Caddy]

Phone hacking: NI lawyer says he knew its 'rogue reporter' defence was wrong

Farrer & Co partner tells MPs he was aware company had misled parliament but did not act because of client confidentiality

By James Robinson

guardian.co.uk,

Wednesday 19 October 2011 09.51 EDT

A lawyer who acted for News International (NI) over phone-hacking claims has told MPs he knew the company had misled parliament about the affair but he had not spoken up because of client confidentiality.

Julian Pike, a partner at Farrer & Co, the law firm whose clients include the Queen, told MPs on the Commons culture, media and sport select committee on Wednesday that he was aware the company's often-repeated "rogue reporter" defence was untrue.

Pike said he had seen evidence in 2008 that suggested there was "a powerful case" that an additional three News of the World journalists were "illegally accessing information in order to obtain stories" and had informed NI of this.

When asked by Labour MP Paul Farrelly how he would feel about newspaper headlines that might read "Queen's solicitors knew News of the World was lying and did nothing about it", Pike replied: "That sort of headline is obviously not ideal." But he insisted that Farrer & Co was not part of a cover-up and denied he was embarrassed professionally by his decision to stay silent.

In evidence to MPs on the committee two years ago and in 2007 NI executives said phone hacking was the work of a single journalist, former royal editor Clive Goodman. It has emerged since then that the practice was more widespread.

Pike also told MPs that former News of the World editor Colin Myler had met with James Murdoch, who is now deputy chief operation officer of News Corp, in May 2008 to discuss a phone-hacking claim brought by Gordon Taylor, chief executive of the Professional Footballers' Association.

It is the first time that a second meeting to discuss a possible payment to Taylor has been referred to.

MPs were told in July that Myler and Tom Crone, the News of the World's former head of legal, met with Murdoch on June 10 2008, after which Murdoch authorised a payment to Taylor of £425,000 plus costs to settle the claim.

But Pike said Myler also met James Murdoch on 27 May 2008 after fresh evidence had emerged in the Taylor case that suggested hacking at the News of the World went beyond Goodman.

Pike represented the News of the World's former owner during its negotiations with Taylor, who was suing for breach of privacy, in 2007 and 2008.

He said he had been emailed a copy of a briefing document prepared by Crone for Myler ahead of the 27 May meeting, which made it clear that more News of the World journalists had been implicated and recommended the case should be settled.

It is understood that Murdoch has said he has no recollection of that meeting. But he is certain to be quizzed about it when he appears before the same committee for a second time next month. The subject could also come up in Friday's News Corporation annual general meeting, at which a group unhappy shareholders are expected to voice concerns at the way the hacking crisis was handled.

Murdoch has been recalled because his evidence in July directly contradicts that given by Myler and Crone. The two former News of the World executives claim they told Murdoch about the existence of an email sent by a journalist at the paper "for Neville".

It is believed to have been sent to Neville Thurlbeck, who was the paper's chief reporter, and contained transcripts of messages left on Taylor's mobile phone. Murdoch denies he was told about the email.

Pike said in his evidence on Wednesday that the briefing document sent before the earlier meeting in May did not make a direct reference to the "for Neville" email.

He condeded that "he hadn't done very much" after he realised News International had misled Parliament. Asked why the firm did not drop NI as a client or tell the authorities about the extent of the criminal activity at the group, Pike said. "We have obligations to the client we work for." He added: "I don't think it's caused me any professional embarrassment."

In July 2009, News of the World editor Colin Myler told the culture select committee that an email trawl had recovered no evidence that hacking went beyond a single reporter.

Former NI chairman Les Hinton, who will be questioned once again by the committee next week via satellite link, also told MPs that hacking was the work of a single reporter in evidence in March 2007.

Farrer & Co acted for NI subsidiary News Group Newspapers, which published the News of the World, in the numerous legal cases being brought by hacking victims in the high court until last week, when it was replaced by rival firm Olswang.

Taylor's lawyer Mark Lewis, also appearing before the culture select committee on Wednesday, said he been told by Pike that the Taylor case was being handled by Murdoch.

He claimed that Murdoch knew all the details of Taylor's claim. "Mr Murdoch would like you to believe he is mildly incompetent," Lewis said. In fact, he added, Murdoch had been "wildly dishonest".

[Douglas Caddy]

[Poster's note: The article below at its end states, "Mr Lewis said he is now representing clients about possible hacking cases carried out by News International employees on "American soil".

"The two cases potentially involve four people, he added."

The Poster believes that the U.S. Dept. of Justice and FBI are well aware of these illegal wiretapping cases that have taken place on American soil. Indictments in the U.S. may follow in coming months.]

--------------------------------------

Phone hacking: lawyer knew MPs misled

A partner in the law firm that represents the Queen admitted today that he knew Parliament had been misled about the phone-hacking scandal but did not take any action.

Daily Telegraph

PA5:27PM BST 19 Oct 2011

Julian Pike, a partner with Farrer and Co, told a Commons probe he became aware that the "one rogue reporter" defence being used by the News of the World in the wake of the initial scandal was wrong.

Quizzed by MPs on the Culture, Media and Sport select committee about at what stage he realised previous evidence given them was not true, Mr Pike said it "would have been at the point it was given to you".

Pressed by Labour MP Paul Farrelly on what action he had taken since, Mr Pike admitted: "To be honest, I haven't done very much."

Mr Farrelly said: "I'm just imagining a headline – Queen's solicitors knew the News of the World was lying to Parliament but did nothing about it. Do you think that reflects well or badly?"

Mr Pike said: "We have obligations to the client we are acting for.

"That is a headline that is obviously not ideal."

But Mr Pike said it would be "very unfair of me to tell you that someone deliberately misled" the committee.

The lawyer insisted there had not been a "cover-up" of the phone-hacking scandal because the police had all the relevant documents they needed to launch a wider investigation.

Mr Pike advised News Group to pay £425,000 – despite the highest compensation for breach of privacy he had previously been involved in being no more than £30,000-£40,000 – to Gordon Taylor because the Professional Footballers Association boss had evidence that his phone had been hacked.

He said Mr Taylor was given "the ability to negotiate a strong settlement" because he had obtained a copy of the so-called "For Neville" email, which included a transcript of his phone messages.

The committee, which is carrying out an investigation into the phone-hacking scandal at the now-defunct News of the World, heard that Mr Pike obtained authority from News International's European chief executive James Murdoch to reach a settlement with Mr Taylor.

Acknowledging the settlement in 2008 was "an unusual case", he insisted "there was no precedent for this sort of case".

"The risk of it being more than we had seen prior to that was greater."

Mr Taylor had been demanding £250,000 even before he had the key email, said Mr Pike, adding: "having then received evidence which did support his case, it was obvious that he was not going to settle for less than when he had no evidence."

Mr Pike said part of the advice he submitted – in writing to former News of the World legal adviser Tom Crone – included a warning there was a "powerful case" that there was a wider use of the "illegal accessing" of information by reporters working at the newspaper.

Solicitor Mark Lewis, who represented Mr Taylor, told MPs he knew there was "something wrong" when Mr Crone visited him in Manchester to discuss the case.

He said that in the 17 years he had been in practice at the point, the newspaper's legal adviser had "never left Wapping".

Mr Lewis, who represents many of the News of the World's alleged victims, including the family of murdered schoolgirl Milly Dowler, dismissed claims that the newspaper eventually made such a large settlement because the original demand – before the "For Neville" email emerged – was for £250,000 for his client.

"The idea that any negotiation would start by what I had asked for in the first place is inconceivable."

He told the committee that there was "no way" the case was worth that much, adding that it was strange that the company also paid his costs in full.

"They didn't knock a penny off my costs. That's unheard of in litigation."

Mr Lewis said he is now representing clients about possible hacking cases carried out by News International employees on "American soil".

The two cases potentially involve four people, he added.

[Douglas Caddy]

News Corp to be challenged by Tom Watson over 'surveillance'

Murdochs face ranks of investor critics at LA event as Labour MP claims type of snooping distinct from hacking

By Ed Pilkington in New York

Dan Sabbagh guardian.co.uk,

Thursday 20 October 2011 16.30 EDT

Tom Watson, the Labour MP who has been a leading figure in parliament's investigation into the News of the World phone-hacking scandal, plans to make dramatic allegations about News Corporation's use of surveillance at the company's annual shareholder meeting.

Watson, who sits on the Commons culture, media and sport committee which has investigated the scandal, said he would be giving News Corp's shareholders details of previously undisclosed surveillance methods used by the firm that were technologically quite distinct from the phone hacking carried out by NoW staff. He refused to go into details about the allegations he would be making or to offer any evidence to corroborate them.

He said: "I want to leave investors in no doubt that News Corporation is not through the worst of this yet and there are more questions for the Murdochs to answer."

Watson has flown to Los Angeles to attend the shareholders meeting, which he will gain access to having been given a proxy vote by the US trade union umbrella group, the AFL-CIO. News Corporation is bracing itself for independent shareholders to vote in considerable numbers at the meeting against the reappointment of Rupert Murdoch and his sons, James and Lachlan, in the wake of the phone-hacking scandal.

The scale of the protest outside the Murdoch family is expected to be substantially over 20% of independent shareholders, with several expected to raise questions at the meeting at Fox studios. But their protest will not be enough to topple the family, because Rupert Murdoch controls 40% of the voting shares.

Nevertheless, before the meeting there were clear signs of tension at the upper levels of News Corp, with particular emphasis on security at the event and worries about what sort of tone the 80-year-old media mogul will strike in front of those who, alongside him, have a stake in the empire he built.

Murdoch's opening address is expected to show less of the contrition than in London in July, when he told MPs: "This the most humble day of my life." Instead he is expected to strike a more combative tone, although there are worries that this will alienate some investors and outsiders.

The language is understood to reflect the sentiments expressed 10 days ago in a stock exchange filing in which News Corp, in response to the growing army of concerned shareholders, accused its critics of having a "disproportionate focus on the News of the World matter" which was in turn "misguided".

That approach has unsettled some in the company who believe there is a risk that Murdoch's rhetorical defiance will play badly.

Murdoch is frustrated that for all the considerable political and legal problems News Corp faces, the company continues to perform well, with operating profits up by 12% by almost $5bn (£3.2bn), after legal costs, helped by the box office success of the film Rio and the continued growth of US TV channels such as Fox News. Set against that is the £20m settlement fund promised to phone-hacking victims.

There was an unwelcome reminder of the difficulties in the print sector with a separate announcement that News Corp would cut 150 editorial posts at the loss-making Times and Sunday Times, through compulsory and voluntary redundancies and cuts to casual staff. A critical indicator in LA will be whether more than half of the non-family shareholders will vote against the reappointment of the Murdochs. The family is likely to receive support from the Saudi investor Prince Alwaleed – whose Kingdom Holdings has a further 7% of the voting shares and who is close to James Murdoch.

News Corp expects something of a circus at the event, with shareholders and press being bused into the venue - which the company says is aimed to "ease the security issues of getting onto a studio lot".

Watson joins some of the most critical investors, such as Calpers, which manages money for California's public employees. News Corp chose to hold the meeting in LA, rather than New York where the business has its headquarters, in the hope that it would reduce the attendance of critical fund managers.

Calpers is particularly unhappy with the two-tier voting structure, – which it calls a "corruption of the governance system" which means that about a third of News Corp shares have voting rights.

The Murdochs control 40% of the votes by owning about 12% of all shares..

In the runup to the meeting, News Corp has had to endure growing speculation about rifts at the top of the company. with the New York Times reporting several disputes between Rupert and his heir apparent James, and even talk that James, the deputy chief operating officer, had briefly considered stepping down. But despite Rupert's advancing years, and the pressure mounting on James as the phone-hacking crisis continues, neither is prepared, nor will they be forced, to step aside as a result of tomorrow's meeting.

[Douglas Caddy]

Murdoch Makes Payment to Family of Murdered Schoolgirl

The New York Times

By AMY CHOZICK

October 21, 2011

Hours before Rupert Murdoch, chairman and chief executive of News Corporation, faces shareholders at the company’s annual meeting, the company announced Friday that it will pay $3.2 million to the family of Milly Dowler, the murdered British teenager whose phone was hacked by the News Corporation’s News of the World tabloid.

News International, the company’s British newspaper unit, said in a statement that in addition to the payment to the family, Mr. Murdoch will personally donate $1.6 million to charities of the Dowler family’s choosing.

In July, Mr. Murdoch apologized to the family after it was revealed that reporters had hacked into the kidnapped and murdered 13-year-old’s cell phone and erased voice mails. Those actions led her family to believe she was still alive and confused police.

“The behavior that the News of the World exhibited towards the Dowlers was abhorrent and I hope this donation underscores my regret for the company’s role in this awful event,” Mr. Murdoch said in a statement. “I also hope that through the personal donation something positive can be done in the memory of their daughter.”

On Friday afternoon shareholders will gather at News Corporation’s Fox Studios in Los Angeles to vote on the company’s board members and to question Mr. Murdoch. Although the hacking scandal and the shuttering of the “News of the World” tabloid has not had a significant impact on the company’s share price, investors are expected to press Mr. Murdoch about the company’s corporate governance.

The personal donation to “charities chosen by the Dowler family that represent causes close to Milly and those that provide support to other victims of crime” could help cushion the blow and assure investors that News Corporation and its leader are remorseful.

In a statement released Friday, the Dowler family said “Nothing that has been agreed will ever bring back Milly or undo the traumas of her disappearance and the horrendous murder trial earlier this year. The only way that a fitting tribute could be agreed was to ensure that a very substantial donation to charity was made in Milly’s memory.”

[Douglas Caddy]

Murdoch warned of 'Mulcaire 2' at News Corp shareholder meeting

Some large investors vote against CEO's re-election to board, but full details won't be available until Monday

By Dominic Rushe in Los Angeles, Dan Sabbagh and Jason Deans

guardian.co.uk,

Friday 21 October 2011 19.03 EDT

Rupert Murdoch has been dealt a blow by shareholders who called on the News Corp chairman and his sons to resign from the scandal-torn media empire.

At the company's annual meeting in Los Angeles on Friday Murdoch made a defiant and uncompromising address, insisting News Corp's history was the "stuff of legend." However, he was berated by shareholders and some of the world's largest investors voted against his re-election, and that of his sons, to the News Corp board. They also did not approve of the $33m (£21m) he was paid as chairman and chief executive this year.

Murdoch owns 12% of the company but controls about 40% of the votes because of News Corp's two classes of shares. But the fact that major investors voted against his re-election and that of his sons and other directors is a major blow for the 80-year-old chairman and chief executive.

News Corp plans to release the full details of the vote on Monday. Before the meeting, shareholders told the Guardian that James Murdoch was likely to receive the biggest vote of no confidence. If the votes go against him, it will cast further doubts on his future at News Corp. The youngest Murdoch son is already facing questions about evidence he gave to a parliamentary inquiry into the News of the World hacking scandal and shareholders at Murdoch-controlled BSkyB have called for his resignation.

At the meeting Rupert Murdoch said he was "personally determined" to clean up the phone hacking scandal that had led to the closure of the NoW, but said the issue needed to be set in context at a company that had faced "understandable scrutiny and unfair attack".

He argued that the business had a famous history – from the time he took over a single newspaper in Adelaide in 1953 – which had to be set against the revelations that several reporters at the NoW had been engaged in hacking into voicemails left for crime victims, their families, public figures and celebrities.

Speaking at the start of the company's annual shareholder meeting, Murdoch offered no fresh concessions. With most of the votes in his control, there was no prospect of him or his heir apparent James, being voted off the board. However, the scale of the rebellion was expected to exceed 20% of non-family shareholders.

Those attending included Edward Mason, secretary of the ethical investment advisory group of the Church of England, which owns about $6m worth of News Corp shares. "There needs to be decisive action in terms of holding people to account," he said before the event, noting that it was the first time his group had attended a company annual meeting. At the meeting, Murdoch criticised the church's investment track record, describing it as "not that great".

Julie Tanner, assistant director of Christian Brothers Investment Services (CBIS), which represents more than 1,000 Catholic institutions worldwide, was the first at the meeting to question Murdoch's track record, saying that the "extraordinary scandals" in the UK required corporate overhaul.

Tanner proposed a motion that News Corp appoint an independent chairman, "to empower the board in relation to the Murdoch family", and asked that the company launch a "truly independent investigation" into the phone-hacking allegations, instead of the work by its London-based internal management and standards committee.

The Labour MP Tom Watson, a persistent thorn in Murdoch's side, travelled to Los Angeles to attend the AGM. He commented on the "deepest irony" of the opening presentation, which included images of Prince William – whom he alleged had been targeted by former NoW private investigator Glenn Mulcaire – and Kate Middleton, whom he claimed had been targeted by another private investigator employed by the now closed Sunday tabloid, Jonathan Rees.

Watson warned News Corp investors that they were facing "Mulcaire 2" in the UK as victims of alleged computer hacking took action against its subsidiary News International.

"You haven't told any of your investors what is to come," he told Murdoch, although the News Corp boss insisted that his company was co-operating fully with police inquiries.

Watson told Murdoch that he had evidence that the Metropolitan police was investigating computer hacking by private investigators who had worked for the NoW as well as other papers. Murdoch said he had no knowledge of the situation.

"What happened a few years ago was absolutely wrong and I have said so, and I have said that we're all ashamed of it," Murdoch said, adding that "recent rumours" Watson mentioned were under investigation by the police.

After the meeting, Watson said: "If my concerns are founded then this company is going to experience even more litigation in the future than it faces now."

Investors, critics and the press were bussed into the high security event from a parking lot in Century City to the Zanuck Theatre at Fox Studios, where a collection of Oscars

were on display outside. Outside about 200 protesters had rallied with signs that read "Stop the Lies" and "News Corp Board Has to Go."

Stephen Mayne, an Australian shareholder and long-time critic of Murdoch, said it was an "extraordinarily paranoid" meeting. "I think he's losing it," he commented. "He comes across as a paranoid control freak."

A few hours before the meeting began, News Corp confirmed it had reached an agreement to pay the family of murdered teenager Milly Dowler £2m in compensation, with Rupert Murdoch personally donating an additional £1m to six charities.

The settlement relates to the hacking of the missing schoolgirl's phone messages by the tabloid after she went missing in March 2002. "Nothing that has been agreed will ever bring back Milly," the Dowler family said. "The only way that a fitting tribute could be agreed was to ensure that a very substantial donation to charity was made in Milly's memory."

[Douglas Caddy]

At Annual Meeting, Murdoch Spars With Investors

The New York Times

By AMY CHOZICK and BROOKS BARNES

October 21, 2011

In his first public address to shareholders since a phone-hacking scandal in Britain, News Corporation’s chairman and chief executive, Rupert Murdoch, apologized Friday for the unethical practices at the company’s British newspaper unit, defended the company’s financial performance and sparred with opponents of the company’s leadership.

“We cannot just be a profitable company. We must be a principled company,” said Mr. Murdoch, looking both rested and combative in a black suit and blue necktie. “We must admit to and confront our mistakes and establish rigorous and vigorous procedures to put things right.”

The annual shareholders meeting, held at the company’s 20th Century Fox Studios lot in Los Angeles, gave investors a chance to publicly confront Mr. Murdoch about the phone hacking imbroglio and ask questions about the future leadership of a company with a market capitalization of $44 billion.

Investors also voted to retain News Corporation’s board. Although the Murdoch family controls 40 percent of the voting shares, stockholders had a chance to send a message by voting for or against re-electing Mr. Murdoch, his sons James and Lachlan, both in attendance, and other board members.

Julie Tanner, a representative of Christian Brothers Investment Services, a shareholder, presented a proposal to force the company, in light of the hacking scandal, to establish an independent board to oversee corporate governance. “This pervasive and value-destroying scandal requires stronger independent leadership on the board,” she said.

The proposal set off a series of heated questions, the most contentious of which came from Tom Watson, a British Labour Party legislator who has led the investigation into phone hacking at News International, the company’s British newspaper unit.

Mr. Watson asked Mr. Murdoch if he had heard reports that journalists at the now shuttered News of the World tabloid had hacked into computers, in addition to phones. Without presenting fresh evidence, Mr. Watson said a paid investigator had hacked into a former army intelligence officer’s computer, among others. “You haven’t told any of your investors what has to come,” Mr. Watson said.

Mr. Murdoch said he was not aware of reports of computer hacking. “If you have further evidence, please let us know,” he said. “I promise you absolutely that we’ll stop at nothing to get to the bottom of this and put it right.”

Viet D. Dinh, a member of the company’s board and a lawyer, who is in charge of the internal investigation into phone hacking, told Mr. Watson he would “welcome any information you have” to assist the investigation.

Later, Mr. Murdoch mentioned that Mr. Watson had given an interview to News Corporation’s cable television channel, Fox News.

“That’s fair and balanced,” Mr. Murdoch said, echoing the network’s catchphrase and drawing laughs from the crowd.

In a 476-seat theater on the Fox lot just past where Shirley Temple once rehearsed, Mr. Murdoch sat next to Chase Carey, the company’s chief operating officer. Investors filed through metal detectors and past stacks of two publications owned by News Corporation, The New York Post and The Wall Street Journal.

A scattering of protestors, including one wearing an oversize Rupert Murdoch mask, picketed outside the studio’s Pico Boulevard gate. One sign carried the simple message: “Lying is wrong.”

Activists and longtime Murdoch gadflies dominated the meeting, since large institutional investors do not typically air their grievances in such a public forum.

In addition to questions about hacking, investors asked about executive compensation and the company’s abandoned $12 billion bid for the portion of British Sky Broadcasting Group that it does not own. They also used their limited time at the microphone to ask Mr. Murdoch about animal rights and helping teachers acquire digital tools in classrooms.

Mr. Murdoch, 80, grew impatient at times and asked the speakers to limit their questions to one minute.

When Edward Mason of the Church of England stood up to criticize the company’s corporate governance, Mr. Murdoch interrupted: “Your investments haven’t been all that great, but all right.”

[Douglas Caddy]

Tom Watson: There is little doubt that Murdoch's Rosebud moment is approaching

Comment

The Independent

Saturday, 22 October 2011

Charles Foster Kane in that Orson Welles epic says: “I don't think there's one word that can describe a man’s life.”

When he appeared before the Media Select Committee earlier in the summer, Rupert Murdoch wanted you to believe that his defining word was “humble”.

Mr Murdoch Snr failed to display the absent-minded humility of a kindly octagenarian when he addressed the shareholders of News Corp Annual General Meeting, in the Zanuck Theatre of the Fox Studios campus, just off the Avenue of the Stars in Los Angeles, yesterday morning.

Instead, he was ebullient; even a little chippy. There was chatter about “coming out fighting," which at times he did. But whatever you think of his performance at the 90-minute meeting, there can be little doubt that Rupert Murdoch’s Rosebud moment approaches.

Instead of being known as one of the twentieth century’s great media innovators, Murdoch’s personal reputation and the media brands he’s lovingly nurtured over a lifetime of being professionally-curious are now in tatters. If you don’t believe me, just look at the reaction on Twitter to the front page of yesterday’s Sun newspaper.

The disruptive power of the Internet is chipping away at the credibility of the sensationalist and over-editorialised news reporting style that characterises his brand. And when, a few years ago, he saw the damage the Internet was causing his company, he did what he knows best – he tried to buy it (with disastrous consequences). Investors know that to their cost: News Corp recently had to offload MySpace for a firesale price. He apologised to investors for that yesterday, admitting “we made a huge mistake.”

I’m sure the army of communications experts now advising Mr Murdoch would like these same investors to believe that the hacking scandal is about a little local difficulty relating to mobile phone messages at the News of the World.

They would no doubt like us to forget about the scale of the investigation into criminality at the company. It now encompasses nearly 200 police, and (as I revealed when speaking at yesterday's AGM) the handiwork of at least three other private investigators, in addition to Glen Mulcaire. The scale of alleged potential wrongdoing at News Corp includes perjury, computer hacking, commercial espionage and bribing the police.

That’s why the corporate governance of News Corp needs urgent attention. The board has let investors down. The company is returning healthy profits. But they mask a Murdoch "deficit" that will hurt their bottom line for years to come. News Corp is a complex trams-global media company which is being run like a dysfunctional family firm. Yet because of the two-tier division of shareholding that leaves Murdoch control of 40% of the votes, he is confident of being able to resist the modernising resolutions of independent and activist shareholders.

In flying out to Los Angeles to attend the AGM, I hoped to do something to change that. I hoped to make him explain to investors why he allowed a culture to exist that lead to poor Milly Dowler’s phone being hacked. If those investors heard what I had to say and were are still happy to vote for the status quo, then so be it. We will at least know they are complicit in defending anachronistic corporate governance arrangements.

But I wouldn’t want to be the fund manager with that on my CV.