LONDON (Reuters) - Rupert Murdoch's multi-million dollar campaign to win back the hearts and minds of News Corporation's independent investors suffered a new blow on Friday after another key shareholder group called for his eviction from its board.
Hermes Equity Ownership Services (HEOS), the shareholder advisory service affiliated to Britain's largest pension fund, issued a rallying cry to investors to vote against all Murdoch family re-elections to the board of the embattled media group at next week's annual general meeting on October 21.
"The time is right for the company to appoint an independent chairman to rebuild trust, help correct the governance discount, and ensure that the interests of all investors are properly represented," Jennifer Walmsley, Director of Hermes Equity Ownership Services, said.
"We have a battle on our hands to demonstrate the strength of shareholder opposition because so many shares are held by the family or by people affiliated with the family," she told Reuters.
The organization, which votes on behalf of the BT Pension Fund and more than 20 other institutional clients running $140 billion of assets, has also called for an independent investigation into the phone hacking scandal that led to the closure of top-selling British tabloid The News of the World.
Besides seeking the removal of Murdoch and sons James and Lachlan, HEOS -- whose members hold 0.5 percent of News Corp's shares -- Hermes is also withholding support for the re-election of directors Arthur Siskind and Andrew Knight, citing concerns for their independence.
The statement from HEOS is the latest in a flurry of anti-Murdoch lobbying from corporate governance watchdogs and proxy voting companies all over the world.
Earlier this week, Institutional Shareholder Services Inc. (ISS) said Murdoch and 10 other News Corp directors should be ousted from board in the wake of the phone hacking scandal, which it said "laid bare a striking lack of stewardship and independence."
The ISS statement prompted News Corp, which has bought back more than $1 billion of its stock since August, to step up its appeal for shareholder support with a letter that reiterated its strong financial performance in the face of the flagging global economy.
But Walmsley said investors were growing impatient for fundamental change that would see the infamous 'Murdoch discount' gone for good.
News Corp shares typically trade below rival media groups because the market applies a discount to reflect Murdoch's tight control of the company and a tendency to make decisions that shareholders may not support.
"There's an enormous groundswell of opposition and I think there are a lot of investors out there who feel ... the governance structures in place are clearly not sufficient to safeguard the interests of minority investors," Walmsley said.
"There is a huge problem with shareholder democracy at News Corp -- it breaches what we see as a fundamental shareholder right of 'one share, one vote'," she said.
The war of words between News Corp and its shareholders over the need for a sweeping purge of its board is likely to revive a debate over whether James Murdoch should be forced to give up his role as chairman of British Sky Broadcasting.
Investors in BSkyB -- News Corp's erstwhile bid target -- will vote on the make-up of their board next month.
(Editing by Chris Vellacott and Hans-Juergen Peters)