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Monday
Oct172011

Some Investors Call for Rupert Murdoch to Step Down as News Corp Chair

WILLIAM WEST/AFP/Getty Images(LOS ANGELES) -- A chorus of investors is calling for a house-cleaning of the board at Rupert Murdoch's News Corp. ahead of the company's annual meeting in Los Angeles later this week.

The Murdoch family owns 40 percent of the media conglomerate, 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. The company has been under investigation regarding phone-hacking scandal allegations against its former tabloid newspaper in London, News of the World, which closed on July 7 amid the headline-making scandal.

Proxy advisory firm Institutional Shareholder Services (ISS), whose clients are investors including pension and mutual funds, recommended that shareholders vote against the re-election of 13 News Corp. board members at the board meeting Friday in Los Angeles.

ISS said in its report: "The company's phone hacking scandal, which began its public denouement in July 2011, has laid bare a striking lack of stewardship and failure of independence by a board whose inability to set a strong tone-at-the-top about unethical business practices has now resulted in enormous costs."

ISS also made negative recommendations against certain members of the News Corp. board in 2005, 2008 and 2009.

In response, News Corp. issued a note to stockholders on Oct. 11 defending the 15 directors, re-elected annually, and the other proposals in the company's proxy statement for 2011.

News Corp. said ISS' "disproportionate focus on the News of the World matter is misguided."

"Our litigation exposure to the News of the World matter could affect News Corporation's results of operations and financial condition, and we are taking this matter very seriously," News Corp. stated to shareholders. "However, our broad, diverse group of businesses across the globe is extremely strong today."

According to published reports over the weekend, The California State Teachers' Retirement System (CalSTRS) as well as the California Public Employees' Retirement System (Calpers) have called for the Murdoch family to step down from the board.

Glass Lewis & Co., another proxy advisory firm, said shareholders should vote against James and Lachlan Murdoch and four other directors, adding that the company needs a more independent board.

Britain's Local Authority Pension Fund Forum is also asking that Rupert and James leave.

A spokeswoman for News Corp. and a spokesman for ISS declined to comment.

Despite the clamor, David Joyce, analyst with Miller Tabak + Co., said it is "highly likely" shareholders will re-elect Rupert Murdoch.

"His sons James and Lachlan are more of a question mark," Joyce said.

Jeffrey Logsdon, analyst with BMO Capital markets, said he agrees there is a high probability Murdoch will be re-elected because he controls over 40 percent of the vote and "the opposition has been fairly civil." He said some investors have for years resisted the notion that a family member will succeed Rupert Murdoch as chairman one day.

"Some have looked at the issues out of the U.K. as a last straw," Logsdon said. "Some just don't line up well politically with Mr. Murdoch or the Fox News perspective. Perhaps the compounding effect might make it "closer"?"

Logsdon said investors do not usually show their concern about management through elections.

"They vote by selling their stock," Logsdon said.

Copyright 2011 ABC News Radio

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