The Sulzbergers control The New York Times, the Grahams control the Washington Post, and the Bancrofts controlled The Wall Street Journal with dual-class structures. It’s no accident that our last best papers were protected under such ownership structures.
Still, let’s face it, some families are better stewards than others. When The New York Times got in real trouble a couple of years ago, the Sulzberger family killed the dividend that helped line its pockets. The Bancrofts strangled The Wall Street Journal, insisting on $83 million a year in dividends in good times and bad.
Combine an antidemocratic voting structure with a board composed to keep it under Murdoch’s rule, and you get a corporate governance nightmare. You get a NotW. Colvin:
Ultimate responsibility for protecting News Corp.’s 48,000 total shareholders thus rests with a board comprising three directors named Murdoch (Rupert plus sons James and Lachlan; daughter Elisabeth is scheduled to join next year), four additional News Corp. employees (COO Chase Carey, CFO David DeVoe, executive VP Joel Klein, and senior adviser Arthur Siskind), two former News Corp. employees, and seven other directors, including a 31-year-old opera singer, Natalie Bancroft, from the family that owned Dow Jones, which News Corp. bought in 2007. News Corp. says her “youth” and “female perspective” bring value to the board. Under such guardianship, it’s unsurprising the stock has disappointed investors; it has underperformed the S&P 500 over the past five and 10 years…
The effects are insidious and more far reaching than you might imagine. “It creates a culture with no accountability,” says Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. In companies where directors are genuinely subject to the shareholders’ will, CEOs get fired; BP’s (BP) board fired Tony Hayward last year, for example, and Hewlett-Packard’s (HPQ) board fired Mark Hurd. The message cascades down through the organization: Bad behavior gets you fired here. But at companies where the CEO can fire the board, a different message cascades down: We don’t answer to the shareholders, we answer to just one person. It’s the rule of man, not the rule of law.
Is this an overreach by Colvin? Read this and see what you think:
To see the results, consider the most infamous scandal companies of the past several years - Enron, Worldcom, Healthsouth, Adelphia, Parmalat. Like News Corp., each had risen from nothing to huge success under one man, and through various means he had maintained total effective control. Employees felt they were beholden to a person who was beyond outside governance. The results were devastating to shareholders, employees, customers, suppliers, and communities.
While this is anecdotal, certainly, and it leaves out companies like Tyco and the mortgage-bubble predators, it’s fascinating all the same. Combine it with the goings on at its UK newspaper arm, the coverup facilitated by his executives, including his son, the sordid tale of News America, and the corruption long documented in Murdoch’s behavior with despots like the Chinese, and the bigger picture emerges.
And it’s ultimately why Rupert Murdoch can’t—and won’t—escape responsibility for the crimes of his underlings.