Threat to NewsCorp by US Investment Giant

12 October 2004

News Corporation has not gone far enough in its corporate governance concessions [WAMN 08-Oct-04], complains Institutional Shareholder Services, the USA's largest shareholder advisory body.

Although ISS in principle supports NewsCorp's plan to reincorporate in the happy hunting grounds of Delaware, there is an implied threat it may change its mind unless the Murdoch family – which effectively controls the media giant via a thirty percent stake with preferential voting rights – takes "concrete steps" toward best practice, going beyond concessions outlined by patriarch Rupert last week.

In particular ISS cites NewsCorp's share framework, criticizing the family's failure to redress the issue as a "lost opportunity". In a report to its members – primarily insurance companies and pension funds – ISS says: "In evaluating this proposal, ISS had to balance the economic benefits of the transaction with the potential loss of shareholder rights and other corporate governance concerns that shareholders will face."

ISS is equally disgruntled at NewsCorp's stacked board structure. Of the group's ten non-executive directors, only five are independent; while each of the board's key committees has one or more non-independent 'affiliated' directors.

The shareholder body is further demanding that NewsCorp appoints a 'lead director' to represent shareholders; also to lower for the second time the share threshold at which investors can call a general meeting. NewsCorp last week reduced this to 20%; ISS wants to halve that percentage.

Data sourced from; additional content by WARC staff