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4/4/2012

Shareowner Resolution Calls for Independent Board Chair at News Corporation

Christian Brothers Investment Services resubmits proposal introduced at the media giant's annual meeting last October, citing the company's inaction in implementing reforms in the wake of phone hacking scandal.

SocialFunds.com -- The Risk List of GovernanceMetrics International (GMI) includes 14 companies that the corporate governance research firm has identified as the poorly rated in North America.

Prominent among those companies is News Corporation. That the company does not have an independent Chair is one reason why GMI consistently cites it as having one of the worst corporate governance ratings of all North American companies.

News of the phone hacking scandal at News Corp. broke too late last year for Christian Brothers Investment Services (CBIS) to file a shareowner resolution with the company, calling for the separation of the positions of Chairman and CEO, both of which are held by Rupert Murdoch. Instead, CBIS introduced the resolution from the floor of the company's annual general meeting in October.

The resolution was defeated, which is something of a foregone conclusion when companies like News Corp. employ a dual stock class structure. At News Corp., 40% of the company's proxy voting power is held by members of the Murdoch family. However, in a statement delivered at the meeting, Julie Tanner, Assistant Director of socially responsible investing (SRI) at CBIS, pointed out that support for the proposal was considerable among influential institutional investors.

"The resolution has been supported by proxy voting firm Glass-Lewis, and by prominent investors with over $400 billion in assets under management, including CalPERs, the Church of England, and the UK's Local Authority Pension Fund Forum, who believe, like many of us in this room, that the pervasive and value destroying scandal at our company requires stronger, independent leadership on the board and a more thorough response from the entire board," Tanner said. "An Independent Chair can play a pivotal role in leading a coherent, long-term response to the challenge of restoring the company's reputation."

Tanner told SocialFunds.com in October, "If nothing is changed at the company in a significant way, we'll probably refile in accordance with the SEC so all shareholders will get to vote their independent shares."

Tanner updated the status of engagement with News Corp. this morning. She told SocialFunds.com, "There really has been no substantive engagement since October, although when we filed I did speak briefly with the corporate secretary at News Corp. We highlighted some of the issues we addressed in our letter. In addition to an independent chair, there are other things we'd like to see from the company."

In its letter to News Corp., CBIS identified additional governance reforms that it considers important. They include a substantive code of ethics, the posting on the company's website of information relating to its internal investigation, the appointment of independent directors, a reduction of excessive executive compensation, and the elimination of a dual class structure.

In response to the company's inaction, CBIS announced this week that it has filed a shareowner resolution calling for an independent board chair at NewsCorp.

"This pervasive and continuing scandal has led to an erosion of public confidence, helped to scuttle a critical business acquisition, and threatened the journalistic reputation and viability of News Corporation's UK publications," the resolution states. "That these revelations took years to uncover and are only now being addressed suggest a lax ethical culture and a lack of effective board oversight."

An independent board chair is necessary, the resolution states, "To steer the company through a process of reform."

The resolution was filed well in advance of a May 3rd deadline, Tanner said, "in hopes that that board will take immediate steps in this direction."