Murdoch may be leaving the News International board, but don’t regard it as anything more than a symbolic gesture
Other companies deal with scandal through a precise playbook of public contrition and accountability: mea culpas are rendered, defensiveness is swallowed, ranking executives purged.
It can’t quite happen like that at Rupert Murdoch’s News Corporation: its natural combativeness and fierce self-righteousness color any apology; and with his absolute control over the company’s voting shares and board of directors it’s virtually impossible to fire the person with whom accountability most truly and symbolically lies: Murdoch himself.
And yet, deal with the scandal it must. News Corp is aggressively doing this through an enigmatic internal reorganization more typical of a troubled despotic regime – read Putin’s Russia, or the current Chinese leadership imbroglio – than a transparent public company.
Earlier this spring, James Murdoch, Rupert’s son, heir apparent, and the London executive in charge of the company’s international businesses, resigned from all his UK-centered posts, and took up a nebulously defined role in New York. Then, last month, the company made the dramatic announcement that the tainted newspaper arm of the company, Murdoch’s great legacy and passion, would be spun off from the entertainment side. And, now, in a memo issued in London on Saturday evening, Murdoch’s British employees were told that their patron and proprietor had, a few days before, formally exited from his role as a director at his British companies.
Other than that these moves are obviously precipitated by scandal and are defensive in nature, it requires nothing less than an intelligence agency type Kremlinology to divine their ultimate purpose and effect. Andrew Neil, a former Murdoch editor and one of his most diligent observers, writing for the Daily Beast, says nothing has changed; Howard Kurtz, a US media commentator, also writing for the Daily Beast, says Murdoch’s grip on his papers is irrevocably loosening; Neil Chenoweth, an Australian Murdoch expert, sees tremors spreading throughout News Corporation.
All of those views may be in some part true, and yet have little effect on any of Rupert Murdoch’s primary goals. Those goals, I’d argue, are obvious and overarching:
1. Advancing the dynastic ambitions of this children (or his ambitions for them).
2. Moving himself and his children as far out of harm’s way of British investigators as possible.
3. Protecting his own position within his company at this moment of apparent vulnerability.
In achieving these goals, he will, of course, try to sacrifice as little as possible (the Neil view). But if achieving them requires (as Kurtz and Chenoweth suggest is happening) giving up on his newspapers, abandoning his long-time attachment to Britain (including his interest in BSkyB), and perhaps even dispatching one of the three children who might succeed him, he will.
Neil is certainly right in the particulars: leaving the directorships of his British newspapers alters nothing about his influence over them – they remain controlled by a subsidiary (NI Group Limited) of a company (News Corporation) which Rupert Murdoch entirely controls. He will still be able to call into the newsrooms at the Times, Sunday Times and Sun and have everybody jump. Indeed, people who have spoken to him recently say he describes plans and campaigns for his British papers that stretch at least through the next election in Britain.
Still, by vacating these board positions both he and his son have now moved their technical presence out of Britain – a step removed (although by no means out of reach) from subpoenas, further regulatory actions, and the “fit and proper” standards. While there has been sudden, excited talk, about how this might portend a sale, the move does not, in any meaningful way, aid News Corp’s ability to sell these papers, except in one minor but lawyerly aspect: Murdoch himself no longer has to officially know of conversations that these boards might be having – say with potential buyers. Options, in other words, can more conveniently be considered.
Leaving the boards, too, is a symbolic gesture. It is one that suggests, artfully, both retreat (good for the public and for lawmakers who want to be able to claim Murdoch’s head) and saber-rattling. While the prospect of him picking up and leaving may seem like a great victory for his antagonists, it also threatens a power vacuum that the political and media establishment will want to avoid.
Britain with the Times, Sunday Times, and Sun in uncertain hands is a more complicated place, Murdoch is saying. Is that what you want? At the same time, his gesture appeases his US executives, who largely blame James (and, by implication, Rupert’s management-parenting skills) for the London debacle – just get rid of the British business, is their view. And maybe he will. Keeping everyone guessing about his real intentions, even the people closest to him, is a signature tactic.
The symbology goes further. His surprising, puzzling, dramatic moves are a way of saying: I’m back. And, indeed, in the past few months he has been out more (from Sun Valley, to dinners in Manhattan, to Hollywood parties), growling more, and, now, counter-punching more. The split of the company was a defensive move, which he’s now, apparently, embraced as the ultimate counter-punch – seeing the prospect of a late-in-life second empire.
And, in the saddle again, he’s said to be back actively planning his children’s futures – whether they want him to plan them or not.
At immediate issue is his son, Lachlan. Getting his oldest son back into the company has been a Murdoch obsession since Lachlan left News Corp in a dispute with Murdoch’s other executive in 2004 and retreated to Australia. With his son, James, in disgrace and largely shunned within the company, getting Lachlan to return to the family business is all the more important. Murdoch has pressed Lachlan to run the new company; so far, Lachlan has demurred.
But the new, newspaper-focused company, appears to becoming ever more an Australia-focused company. News Corp’s interest in Australia’s biggest pay-TV company, FoxTel (News Corporation owns 25% and has recently made a $2bn bid, now before regulators, to buy up to 50%), and Sky New Zealand are, apparently, set to become a part of News Corp. With or without the British papers, Australia will be the dominant force in this new company. It’s a company that seems custom designed for Lachlan (who, according to friends, has cultivated an Australian disdain for Britain and become an advocate for selling the British papers), and one that is ready to run in the Murdoch model: using the cash flow from newspapers (there is intensive cost-cutting at all of the Australian papers in an effort to maximize profits) to buy television assets.
Murdoch also sees his London-based daughter, Elisabeth – whose company, Shine, one of the largest independent television production companies, News Corp bought last year – spending more time in the US and becoming increasingly involved in the running of News Corp’s entertainment assets. Another internal bit of wrangling: how to get Elisabeth on the News Corp board. She was scheduled to take a seat, but then asked to stand down during the crisis. But with two companies and two boards, there’s a greater excuse for shuffling and even more room for his children. (Prediction: his wife Wendi takes a board seat.)
The sentimental and geopolitical Murdoch has long seen London as a significant power center in his empire. But with the company’s strong share price despite the brouhaha in London, the phone-hacking scandal’s lack of traction in the US, and the company’s continued acquisitions around the world (the company’s failure to overcome British resistance to its bid for 100% of BSkyB means it has an overflowing war chest), Murdoch increasingly sees London as no longer relevant to News Corp’s ambitions and power.
It is a way of dealing with your enemies, disdaining those who would judge you. A quintessentially Murdoch way.
He has more pressing matters to attend to than little London: there will soon be two megacompanies for which he’ll have to maneuver his children into control.
• This article will be closed to comments for legal reasons
Penny Stock Picks