UPDATE 4-Murdoch and sons survive News Corp annual meeting
* Murdoch and his sons reelected to board
* Shareholders had called for his resignation as chairman
* Company's ethical practices questioned
LOS ANGELES, Oct 21 (Reuters) - Using contentious barbs and comedic relief, Rupert Murdoch deflected attempts by angry investors to remove him as chairman of his News Corp empire at the company's annual meeting on Friday.
The 80-year-old media baron survived what was effectively a no-confidence vote and also managed to get his sons James and Lachlan reelected as directors.
The octogenarian began the meeting with perfunctory comments about being personally determined to right News Corp's wrongs, saying it must be an ethical company and that it had been subject to fair criticism and unfair attack. But that was as conciliatory as he got.
Unlike his sons Lachlan and James, who sat quietly during the 75-minute meeting, Murdoch stood defiant in the face of tough questioning about News Corp's corporate governance, a proposal to strip him of the long-held chairman role that goes along with his CEO title, and fresh allegations of computer hacking that piggyback off the phone hacking charges responsible for putting Murdoch in his precarious position.
In addition to the roughly 150 people inside the Zanuck Theatre on the Fox Studios lot in Hollywood, about 100 others stood outside, voicing opposition to the company and carrying signs that read, "Murdoch isn't above the law" and "Big Media, Big Money, Get Out."
Murdoch was feistier than he had been during questioning by a special committee of Parliament in July.
British member of parliament Tom Watson, Australian pension fund representative Stephen Mayne and Julie Tanner of the Christian Brothers Investment Service were among those who sparred with Murdoch. Mayne, a longtime News Corp antagonist, and Murdoch, who employed his familiar tactic of pounding the table to stress a point, circled each other like familiar opponents.
"It is time to get on the governance high road. You've been treating us like mushrooms," said Mayne, who has attended more than a decade's worth of these meetings.
Later, in response to Mayne's comment that he was not sure how he planned to vote his shares, Murdoch shot back, "I hate to call you a liar, but I don't believe you. I know how you're going to vote."
The real fireworks were supplied by Watson, who flew to Los Angeles to attend the meeting as the representative of 1,669 shares of nonvoting stock held by labor group AFL-CIO. At his first opportunity to speak, Watson noted the "deep irony" of News Corp using images of Prince William and Kate Middleton during its presentation since both were alleged phone hacking victims.
He said News Corp could face new investigations in the UK by the country's Serious Organised Crime Agency, stemming from the actions of at least three private investigators employed by News International, News Corp's UK newspaper publishing unit. Murdoch has failed to warn shareholders of the possibility of new civil lawsuits, Watson said.
"I promise you absolutely that we will stop at nothing to get to the bottom of this," Murdoch said in response to Watson.
Despite the animosity between the two, Murdoch jokingly defended News Corp's democratic voting process by pointing out that its Fox Business channel had featured Watson earlier in the day.
"We're fair and balanced," he said, referencing to the company's familiar slogan.
After the meeting, Watson told reporters that he was pleased to have had the opportunity to bring the issues to the attention of investors, even if board members "didn't choose to acknowledge the points I made."
"I made my serious points ... the board can choose to ignore me if they like," he said.
Watson said he was sure the issues brought up during the meeting would be put to James Murdoch when he returns to Parliament for more questioning next month.
Murdoch had some supporters in the crowd, among them Haim Saban, the billionaire creator of the "Teenage Mutant Ninja Turtles" franchise. Saban said he was shocked at investors' focus on corporate governance and said they should instead be looking at News Corp's strong operating performance. He also asked Murdoch if he had plans to revisit the abandoned $12 billion BSkyB deal.
In the wake of the phone hacking scandal, a group called Avaaz campaigned against News Corp's bid to take full control of UK satellite operator BSkyB .
Murdoch said the company does not have plans to put the deal back on the table, but added "never say never, though."
Another independent investor thanked Murdoch for creating "thousands of jobs across the world."
Since Murdoch controls 40 percent of News Corp's voting B shares and is supported by the next largest holder, Saudi Prince Alwaleed bin Talal, there was little chance that Murdoch, his sons James and Lachlan or any other long-time serving director would have been voted off the board.
Shareholders reelected the media conglomerate's board of directors on Friday and failed to approve a proposal to oust Murdoch from his chairman post.
News Corp did not disclose the specific results, including how many investors withheld their shares from voting or how many voted against the directors, saying in a press statement that the company would file the numbers with the U.S. Securities and Exchange Commission early next week.
News Corp board chairman Viet Dinh took pains to defend the company's dual class stock structure by pointing out that Comcast, Warren Buffett's Berkshire Hathaway and others feature the same structure. He also noted that shareholders voted to approve the structure as recently as 2007. Dave Devoe, News Corp's chief financial officer, pointed out that the company has not bought a single Class B share with the $1.6 billion it has spent on stock buybacks.
News Corp shares closed up 2 percent to $17.20 on the Nasdaq on Friday.
"The News Corp recovery in line with the market at the close would indicate that the Street approves of this status quo," said Collins Stewart analyst Thomas Eagan.
Separately on Friday, News International, the News Corp division that housed the News of the World newspaper at the center of the phone hacking scandal, said it would pay the family of murdered British schoolgirl Milly Dowler 2 million pounds (US$3.17 million). Murdoch will personally donate another million pounds to charities chosen by the Dowler family.
Dowler was abducted in 2002 and found murdered six months later. News this year that the tabloid had hacked into her phone after she disappeared caused widespread revulsion in Britain and elevated the hacking to a national scandal.
Among the many concerns for Murdoch aides is the possibility of further reputation damage and embarrassment.
Former News Corp executive Les Hinton, who resigned this summer, is due to reappear before Parliament for additional questioning on Monday.