Governance Issue: News Corp.

GMI Ratings
Governance Issue | News Corp.
Region:   North America
Sector:   Cyclical Consumer Goods / Services
Industry:  Media Diversified
Market Cap:  $32,656.3mm (Large Cap)  

ESG Rating:   F
AGR:   Aggressive (18)
News Corp. is in trouble again this week, with more arrests related to its bribery investigation
and the disclosure that foreign investors were holding too much of its stock.  Nonetheless, the
media conglomerate’s chairman Rupert Murdoch remains supervised by a mostly friendly board. 

London police reportedly arrested three suspects and raided their homes early Thursday,
including The Sun’s royal editor Duncan Larcombe, in the latest rash of headlines about an investigation
into allegations of corruption involving journalists and British police. Meanwhile News Corp. said
Wednesday that foreign investors held 36% of its voting stock, exceeding a 25% limit under a U.S. law,
and suspended some of their voting rights as a result. Britain’s media ethics watchdog, the Leveson
Inquiry, said it will question Murdoch and his son James next week into revelations that journalists at
the now shuttered News of the World used hacking as a reporting strategy, news reports said Thursday. 

GMI Ratings has given News Corp. an F on its corporate governance. Although the scandal
erupted in the summer of 2011, News Corp.’s board has failed to take action against senior executives.
After James Murdoch stepped down from his role as executive chairman of News International, a
company statement explained this February that he had moved to New York and will focus on expanding
the international TV businesses. 

News Corp.’s board lacks the independence to criticize objectively. It includes eight long-tenured
directors – five of whom have served at least 20 years – six insiders and three Murdoch family
members.  The company established a committee in July to undertake an internal investigation
supervised by director Viet Dinh, who also happens to be the godfather of Lachlan Murdoch’s son.
News Corp. did not respond to a request for comment within press time.

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