THE CALIFORNIA Public Employees Retirement System, the largest US public pension fund and an influential campaigner on corporate governance, has taken aim at the dual-class share structure that preserves Rupert Murdoch’s family power at News Corp.
The two-tier structure that gives the Murdoch family almost 40 per cent of the voting rights in a global media company, where it owns about 12 per cent of the equity, was “a corruption of the governance system”, said Anne Simpson, senior portfolio manager of Calpers Global Equity and its corporate governance chief.
“Power should reflect capital at risk. Calpers sees the voting structure in a company as critical. The situation is very serious and we’re considering our options. We don’t intend to be spectators – we’re owners,” Ms Simpson said.
“Dual-class voting is one way to pervert the alignment of ownership and control.”
Calpers owns almost seven million shares in News Corp, worth about $110 million in a company with a market capitalisation of almost $42 billion. Although it has held one-share-one-vote as a core principle for several years, it has not introduced any shareowner resolutions at corporate meetings on the issue to date. News Corp shares levelled off yesterday after a partial rally on Tuesday, up 13 cents at $15.92 in afternoon trading in New York.
One large global fund manager with a holding in News Corp said Mr Murdoch’s performance at a parliamentary select committee on Tuesday highlighted a common flaw in US governance models, where an octogenarian chairman and chief executive held, in effect, a controlling bloc of voting shares.
The dilemma for News Corp’s board was how to establish its independence, the fund manager said.
“Where the founder is still in control, as at News Corp, it is hard to see him running the board as a hands-off chairman or letting an independent chairman in to run strategy and the board – and the worst of all worlds would be to bring in a puppet chairman.”
Lord Rothschild, a former deputy chairman of BSkyB, told the Financial Timesthe hacking scandal was "an incredibly sad chapter in his [Mr Murdoch's] extraordinary career". He added: "Whether you like him or not – I happen to like him – Rupert Murdoch was one of the great figures of entrepreneurial life of the last 50 years." – (Copyright The Financial Times Limited 2011)