* Growing unease at Murdoch controlled board
* B stock holders taking note of proxy advisors proposals
* Murdoch not likely to be shifted very soon
By Yinka Adegoke
NEW YORK, Oct 19 A growing number of News Corp shareholders with voting rights are considering
sending a strong message of discontent to Chief Executive
Rupert Murdoch by voting against several long-standing board
members including his sons James and Lachlan.
In the run up to Friday's annual general meeting, holders
of News Corp B stock including normally compliant supporters of
Murdoch and his family, are closely examining recommendations
by proxy advisory groups ISS and Glass Lewis to vote out as
many as 13 of the media conglomerate's current 15 directors.
"Ninety-nine percent of the time we vote with Glass Lewis
on these kind of matters," said Donald Yacktman, president and
co-chief investment officer of Yacktman Asset Management Co in
Austin, Texas referring to the proxy advisory firm.
Glass Lewis specifically recommended their fund clients
withhold their votes for six directors including James and
Lachlan Murdoch along with other News Corp insiders David
Devoe, chief financial officer, and Arthur Siskind, a senior
adviser to Murdoch.
While most major shareholders declined to comment publicly
on their specific voting strategy, several said privately that
the proxy advisory groups' comments would be an important
factor in their decision. It follows the high profile and
damaging fallout from the phone hacking scandal at News Corp's
now defunct UK paper News of the World.
The scandal has rocked the parent of Fox TV, Wall Street
Journal and The Sun in the UK, and raised serious questions
about the leadership of its News Corp founder Rupert Murdoch,
80. It has also undermined an unspoken succession plan once
thought to involve one of his children.
After the furor of the last few months, this year's
shareholder meeting is being more carefully stage-managed than
in recent years, with a strict and limited number of
shareholders only able to attend the meeting at the Zanuck
Theatre on the Fox Studios lot in Hollywood by using News
Simon Burge, Chief Investment Officer at Above the Index
Asset Management, a top 20 investor in News Corp's Australian
shares , said the fund is leaning towards voting
against James, Lachlan and Rupert Murdoch.
"We always try to make our own decisions," said Burge
referring to proxy advisors. But he added it would be silly to
vote against 13 out of 15 directors as recommended by ISS.
"If you vote against them all, you wouldn't have a board.
Then you'd really have a governance problem," Burge said.
News Corp declined to comment for this article.
The phone hacking scandal saw the company lose out on its
biggest ever deal with BSkyB and nearly 20 former
staffers and executives arrested in the UK has given even
strong Murdoch supporters pause for thought.
"This is one of those meetings that galvanizes shareholders
to have a closer look," said a senior person at one proxy
advisory group not permitted to talk about a specific case.
Major pension fund holders and advisory services including
Calpers and Calstrs in the United States, Hermes Equity
Ownership in the United Kingdom and Australian Council of
Superannuation Investors in Australia have come out against the
Murdoch-controlled board with similar criticism of poor
corporate governance and the need for a board shake-up.
Yet even though the rumbling of dissent is growing it is
unlikely to have an immediate impact on the board's membership.
Murdoch and his family control 40 percent of the voting stock
with the next largest B shareholder being Saudi Prince Al
Waleed with 7 percent. The prince has publicly thrown his
support behind Murdoch making it even more unlikely that
Murdoch or his family could be shifted.
But proxy watchers and shareholders said they'd be paying
attention to the percentage of the vote of non-Murdoch
affiliated B shareholders. If support for key board members
drops significantly below the usual 90 to 99 percent range it
could be a damaging signal for Murdoch.
"No one realistically expects any director to be voted off
the board at the AGM," said a person at a UK proxy advisory
firm. "What will be closely watched is whether a majority of
the non-Murdoch vote is cast against key board directors. If
that happens it will be an indication of major shareholder
News Corp and Murdoch are sensitive to suggestions of its
poor corporate governance and overpaying management. The
company hit back against criticism saying it "vehemently
disagrees" with ISS proposals. But the company acknowledged the
phone hacking scandal could affect the wider business'
In a letter to shareholders last week, News Corp pointed to
its strong performance despite the difficult global economy.
Revenue rose 2 percent to $33.4 billion in the year ended on
June 30, while operating profit increased 23 percent to $4.85