The Murdoch family brawl playing out in a courtroom in Reno, Nevada, has rattled investors in both Fox and News Corporations, and now the sharks are circling.
It’s a perilous moment for one of the world’s most powerful media empires.
The family is bitterly divided over the governance of the secret Murdoch Family Trust (MFT) which gives them control of Fox and News, and is facing a revolt from News Corp shareholders mounting a direct challenge to the mechanism by which the Murdochs run the empire.
At the next annual meeting of News Corporation in a few weeks’ time, investors will vote on a resolution to abolish the so-called dual-class share structure.
As it stands, there are two classes of News Corp shares: voting shares and non-voting shares.
Although the MFT only has a 14 per cent economic stake in News Corp, the family can control the company because it owns 41 per cent of the voting shares.
Activist hedge fund Starboard Value, which has accumulated a substantial stake in News Corp over the past year and put forward the resolution, has proposed a one-share-one-vote system.
Background Briefing has spoken to a number of institutional investors likely to vote in favour of the resolution.
While the result is non-binding, a majority in favour would put the board, chaired by Lachlan Murdoch, under significant pressure to strike a deal with shareholders.
A finance industry source told Background Briefing that News Corp, which opposes the Starboard resolution, is arguing to investors that if the resolution succeeded, a one-share-one-vote system could only be introduced by striking a deal between voting and non-voting shareholders.
With founder Rupert Murdoch, who retired last year, now 93 years old, industry experts say the vote could mark the beginning of the end of the century-old Murdoch dynasty.
Sharks are circling
Starboard Value points to the ongoing MFT dispute in its proxy resolution, and takes aim at Rupert’s squabbling children.
“The situation at News Corp is a textbook example of one of the worst forms of a dual-class share structure — one that extends beyond any reasonable timeline and one in which super-voting rights are moving from a visionary founder to the founder’s children,” the resolution reads.
“The four Murdoch siblings with voting rights within the MFT are reported to have widely differing world views, which, collectively, could be paralyzing to the strategic direction of the Company. More importantly, we are not sure why their perspectives should carry greater weight than the views of other stockholders.”
Background Briefing has reached out to News Corporation for comment, and has approached or spoken to a number of institutional investors, whose votes could sway the result.
The Australian Council of Superannuation Investors, whose members include Australia’s biggest super funds, has a long-standing position in favour of one-share-one-vote, and voted in favour of a similar resolution in 2015.
Back then, it was supported by more than 90 per cent of non-Murdoch shareholders and 49.5 per cent of all voting shareholders — just short of success.