Murdoch, Sons Draw Substantial Negative Vote

Oct. 25, 2011 — -- A third of News Corp. shareholders voted against the election of Rupert Murdoch's sons to the board, the company reported Monday. Although the sons will stay on the board after a phone-hacking scandal, the negative ballots are highly unusual in corporate America where directors almost always win election with overwhelming pluralities.

The son with the most negative votes at 35 percent, James Murdoch, 38, deputy chief operating officer, was most closely linked to the wrongdoing at the company's London newspaper. He testified before Parliament over the summer about his role and has been asked back a second time next month.

Lachlan Murdoch, 40, got a 34 percent negative vote and Rupert himself tallied a 14 percent negative vote from shareholders. There was little danger any of the Murdochs would be thrown off the board because the elder Murdoch controls 40 percent of the Class B voting shares.

But the non-Murdoch shareholders voted loudly for more oversight at the company, which owns such ventures as Fox News. According to the company, 67 percent of non-Murdoch shareholders voted against James and 64 percent against Lachlan. Of those votes, three other directors didn't get a majority.

On Friday, the company stated: "All Directors were elected, the advisory vote was in favor of executive compensation, and the other management proposals were approved," according to a news release. "The floor proposal regarding an independent Chair of the Board was not approved."

At the News Corp. annual meeting in Los Angeles on Friday, shareholders had time on the floor to voice their opinions in favor of new board oversight for the media conglomerate.

Representatives from the Christian Brothers Investment Service, the Church Commissioners of England and the California Public Employees' Retirement System (Calpers) made the requests in front on the meeting floor.

"It is an investment risk to have a weak board with a conflicted chairman," Julie Tanner assistant director of socially responsible investing for Christian Brothers Investment Services, said. The organization manages about $4 billion for Catholic institutions.

Rupert Murdoch was both courteous and combative, telling one disgruntled investor: "I hate to call you a liar but I don't believe you."

Tom Watson, a member of Britain's Parliament in the Labour Party who has led investigations into the phone-hacking allegations, attended the meeting by obtaining a shareholder proxy.

Watson said he hoped Murdoch "would respond to some of the independent investors, readers and customers" in the U.K. and "put this right."

Murdoch reiterated his regret over the hacking scandal.

Murdoch said he wanted "to reaffirm the seriousness of what is going on in London as well as putting the controversy in context" though "there is simply no excuse for such unethical behaviors." He said the company has been under both "understandable scrutiny and unfair attack."

The Murdoch family owns 40 percent of the company, though some shareholders have urged others not to re-elect Rupert Murdoch, founder, chairman and CEO, and his sons who sit on the 15-person board.

Murdoch's son, James, oversees the company's operations in Europe and Asia. Lachlan Murdoch, Rupert's first son, is "frictionless, affable, constant" which makes "in the eyes of many Murdoch-philes, not Murdoch enough" according to author Michael Wolff in his book, The Man Who Owns the News.