News Corp. (NASDAQ: NWS ) wouldn't exist in its current form if it weren't
for its controversial dual class system of share ownership that has recently
come under fire and neither would other media companies. But shareholders might
be worse off without it. If his family didn't control 40% of the New
York-based media conglomerate, CEO Rupert Murdoch would have never been able to
convince the naysayers 15 years ago that Fox News Channel would be able to
topple CNN as the ratings leader in cable news. He also probably wouldn't have
been able to keep Fox Business Network on the air as what he viewed as a more
pro-business alternative to CNBC. In addition, his purchase of Dow Jones, the
publisher of The Wall Street Journal , would have never happened. After all,
what shareholder in their right mind would green-light acquiring a company that
no one else wanted for a 67% premium ? Come to think of it, Murdoch also
encountered plenty of skepticism when he launched Fox Broadcasting in 1986 over
whether the U.S. was ready for a fourth network which, of course, it was.'
Maybe the recent U.K. phone-hacking scandal has highlighted the board's lax
oversight over the founding family. At times, Murdoch looked tired and confused
in public. His continual apologies for the bad behavior of his employees
aren't helping his case, either. Indeed, there have been media reports that
Chief Operating Officer Chase Carey is being groomed to replace Murdoch that
probably would be welcome relief to shareholders. But a Murdoch-less News Corp.
would be like Apple (NASDAQ: AAPL ) without its late visionary CEO Steve Jobs.
It just wouldn't be the same place. What makes Murdoch's tenure so
remarkable besides its longevity is how often his instincts were proven
correct. One of the few times he blew it was with the $585 million acquisition
of MySpace, which News Corp. unloaded for $35 million earlier this year . Amid
the latest serious blunder in the U.K., News Corp. already has paid a steep
price when it scrapped its plans to acquire the remainder of BSkyB that it
didn't already control for 8 billion pounds ($12.6 billion). Having such an
iron grip over News Corp. gave Murdoch a level of freedom to experiment and let
businesses develop that most CEOs would envy. Shareholders who bet on Rupert
Murdoch and his management team have been well rewarded. During the past decade,
shares of News Corp. have gained more than 21%, outperforming rivals such as
Viacom (NYSE: VIA ), which has barely budged. With no end in sight yet to the
U.K. scandal, pressure on the Murdoch family is intensifying.
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