News Corp. (NASDAQ: NWS ), which is embroiled in a phone hacking scandal that
grows more embarrassing by the hour, has decided to ask shareholders for
suggestions on how to improve its corporate governance and to address other
concerns. This is so absurd it's almost laughable. According to Bloomberg
News, some big-name shareholders have taken the New York-based media
conglomerate up on its offer , including the California State Teachers'
Retirement System. Interestingly, the discussions are being led by the
company's well-liked chief operating officer, Chase Carey, and not any member
of the Murdoch family. The meetings are a publicity stunt. Carey knows very well
what shareholders are concerned about: the phone hacking scandal and the lack of
succession plan. CEO Rupert Murdoch is 80 years old and repeatedly has
apologized for the bad behavior of the News of the World's bad behavior. He
also can't decode which one of his children to put in charge of the parent of
Fox News Channel and 20th Century Fox. Rupert Murdoch's supposed favorite was
first thought to be his eldest son Lachlan, who quit News Corp. in 2005, His
younger son James was next. He worked his way up the executive ladder before he
assumed control of the firm's businesses in Europe and Asia in 2007. James
Murdoch's reputation was sullied after he allegedly gave misleading testimony
before the U.K. Parliament about the News of the World scandal. The younger
Murdoch has denied any wrongdoing, but reports are rampant that his departure is
imminent. Of course, there is daughter Elisabeth. News Corp. acquired her TV
production company, Shine Group, for $663 million. Originally, she was expected
to join News Corp.'s board in 2012. Later, the company thought better of it .
She supposedly blames her brother for helping wreck the company. In most
companies, that would be a full agenda for a shareholder meeting, but News Corp.
is not most companies. One topic that is bound to come up will be the
company's newspapers. Murdoch loves the publishing business beyond all
rationality. The company gobbled up Dow Jones & Co., the publisher of The Wall
Street Journal , for $5.6 billion in 2007. That was a 67% premium for a company
nobody else wanted. Maybe it's worth hanging onto, but why does the News Corp.
need "three national news brands in the U.K., almost 150 national, capital
city and suburban news brands in Australia, the New York Post and Community
Newspaper Group in the U.S."? The company does not break out the performance
of its individual papers, but some, such as the Post , have been widely reported
to be money-losers. The publishing business accounted for 26% of News Corp.'s
revenue in the last quarter and 20% of its operating income. Yet for months, the
business has gobbled up a huge amount of management's time. News of the World
, for instance, was barely a rounding error for News Corp. Though it is trivial
financially, the former tabloid has managed to cost the company billions in
market capitalization. Shareholders are bound to ask how such a thing could have
happened. Maybe the purpose of these meetings is to see whether one or both
Murdochs should go. I vote for both. James' reputation has been tainted
forever because of the hacking scandal. He needs to be shown the door and given
the chance to pursue other career opportunities. Rupert is no prize, either. The
elder Murdoch, who built the company into an international media powerhouse,
would have been tossed aside by the board following the MySpace fiasco. News
Corp. acquired the pioneering social media site for $580 million six years ago,
then watched it get pummeled into roadkill by Facebook, among others. The
company unloaded the site for $35 million in June. Remember, MySpace was
supposed to be the cornerstone of News Corp.'s web strategy. Interesting how
News Corp. discovered the real meaning of shareholder value at this late hour.
It's the reason why this stock should be avoided. Jonathan Berr does not own
shares of the companies that are listed.
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