Rupert Murdoch, the chief of News Corporation, and his son James, in 2010. Both have testified before a parliamentary panel.
By DAVID CARR
If you sat on the board of a company that was raked over the coals by a British parliamentary committee in a 121-page document, accused of a pattern of corporate misconduct that included widespread phone hacking and an ensuing cover-up by senior officials, you might want to pause for a moment and consider all the implications.
But there was little reflection last week by the board of News Corporation, which met quickly the day after the committee’s report and announced “its full confidence in Rupert Murdoch’s fitness and support for his continuing to lead News Corporation into the future as its chairman and C.E.O.” before the ink was even dry on the report. (While the board expressed unanimous support for Mr. Murdoch, it’s worth noting there were no such words for his son James.)
There are many reasons Rupert Murdoch has avoided any serious consequences from the scandal despite hundreds of British citizens having had their phones hacked, dozens or more being bribed in law enforcement and several dozen more of his employees having been arrested.
The market, of course, has no conscience. News Corporation’s share price has risen about 30 percent in the last nine scandal-ridden months and investors might have decided that the bad news from the print division in Britain was really good news for those who believe the company should abandon newspapers altogether.
Further, Mr. Murdoch runs a large, multinational company with some 50,000 employees, so he has a certain plausible deniability, even though several of his most trusted lieutenants were accused by the committee of playing a central role in the growing scandal and cover-up.
Mr. Murdoch also remains mostly unscathed because much of News Corporation’s business and most of its profits lie here in the United States, where the scandal is viewed as something happening on a distant island.
There have been reports of corporate misdeeds in America, including computer hacking at its News America Marketing division, but other than some faint rumbles in Washington about further investigations, it’s been mostly smoke, no fire.
“Ask anyone’s mother here who Rupert Murdoch is and you will get blank stares,” said Rich Greenfield, an analyst at BTIG, adding that other News Corporation assets seem unaffected by the scandal. At parties for the White House Correspondents’ Association dinner last weekend, many reporters remarked on how the hacking scandal had very little traction or traffic among readers.
But the primary reason Mr. Murdoch has not been held to account is that the board of News Corporation has no independence, little influence and no stomach for confronting its chairman.
Like many media companies (including the one I work for), News Corporation has a two-tiered stock setup that gives the family control of the voting shares. The current board includes family members and several senior executives; the independent slots are filled by a host of familiars.
Viet Dinh, a former Bush administration official, is godfather to Lachlan K. Murdoch’s son. Roderick Eddington was deputy chairman of a division of the company in the late 1990s. Andrew S. B. Knight and Arthur M. Siskind are both former senior executives, and John L. Thornton, the former Goldman Sachs president, served as an adviser to News Corporation on several major deals.
The board also includes Natalie Bancroft, a trained opera singer who made a great deal of money when her family sold Dow Jones, which included The Wall Street Journal, to Mr. Murdoch in 2007, and José Maria Aznar, a former prime minister of Spain, who is a friend of Mr. Murdoch’s.
Being a board member of News Corporation is not a bad gig; it pays over $200,000 a year and requires lifting nothing heavier than a rubber stamp. The directors apparently haven’t asked why the company maintained its “rogue reporter” defense after it became clear that “rogue enterprise” was a more apt description. They appeared to sit silently by while Mr. Murdoch and his son James waited for law enforcement officials to finally ferret out employees of the company’s British newspaper division who were accused of engaging in criminal conduct.
Still, the board may regret being quite so quick to throw its full support behind Mr. Murdoch and the current management. The parliamentary report, as scathing as it was, is only the first of many dominoes expected to fall in the next few weeks and months. Ofcom, the British broadcasting regulator, is assessing whether News Corporation should be allowed to continue to hold its stake in British Sky Broadcasting. For its part, BSkyB was quick to get out the 10-foot pole, reminding everyone that the two companies are separate even though News Corporation owns a 39 percent stake.
Next week, Rebekah Brooks and Andy Coulson will appear before the Leveson Inquiry in Parliament, offering another peek under unseemly blankets. The British Supreme Court will soon hear a case that could decide whether Glenn Mulcaire, the private investigator who pleaded guilty to charges that he had hacked phones for The News of the World, is to be freed from a confidentiality agreement he made in return for payment of legal fees.
He reportedly has 11,000 pages documenting his work for News Corporation. Three separate police investigation are under way — into phone hacking, computer hacking and bribes — and the results of Operation Weeting, the phone hacking inquiry, will be disclosed in the next few months. Soon enough, there could be a parade of criminal trials that could produce new evidence that those accused of misdeeds were hardly rogues but rather following a corporate culture formed to win at all costs.
It was never going to be one single thing that would loosen Mr. Murdoch’s grip, but rather the steady accretion of damage from a ticktock of criminal, civil and governmental inquiries that will go on for months and years.
At some point, the artfully crafted statements from the company and expressions of support from a board in lock step will begin to sound silly.
“We wonder how many more of these issues have to surface before the board takes a more assertive oversight role over the activities of News Corporation management,” Anne Sheehan, director of corporate governance at the California State Teachers’ Retirement System, which owns 5.9 million shares of nonvoting stock in News Corporation, said in a statement the day the parliamentary report came out.
Nothing will stop News Corporation’s remarkable run as a successful enterprise, because a great deal comes from lucrative cable and broadcast properties that are not at risk in the current scandal. But the Rupert Murdoch that we have known — untouchable and evasive — has become a man falling down stairs, slowly but surely. Continued profits and a compliant board can check the fall, but they can’t stop it.
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