BOSTON News Corp faces a call to appoint an independent board chairman on concerns Rupert Murdoch's media company needs to pursue more reforms to deal with its phone-hacking scandal and other issues.
The proxy proposal, filed by Christian Brothers Investment Services, is likely to fan an ongoing controversy over governance at the company.
Although unlikely to get a majority of votes, the nonbinding resolution filed last month could put pressure on the board to remove Murdoch, currently News Corp's chief executive, from his other role as chairman of the company, the sponsor said.
With current arrangements, the company is "stepping into the scandal with a flawed corporate governance structure," Julie Tanner, who oversees socially responsible investing at Christian Brothers in New York, said in a telephone interview.
A News Corp spokesman declined to comment.
Separately, News Corp director Viet Dinh spoke on a panel on corporate boards at a Washington, D.C. event on Monday and defended his role overseeing an internal probe into allegations of bribery and phone-hacking.
Dinh acknowledged he is godfather to one of Murdoch's grandchildren, but said that should not make him less than independent.
"The key measures beyond the technical requirements of law is how you interact, how you act as a director, that is where true independence comes from," said Dinh, a former Justice Department official, speaking at an event sponsored by the Council of Institutional Investors.
"There is no obligation that we hate each other to be serving on the same board."
TARGETING INDEPENDENT CHAIRS
Christian Brothers manages about $4 billion, mainly for Catholic institutional clients. It is among a group of activists gaining traction in their drive to reform corporate governance. Last year, pressure from Christian Brothers convinced Goldman Sachs Group Inc to make the leading board role of presiding director more powerful.
This year, groups allied with Christian Brothers' work have made independent chairmen a priority for shareholder resolutions. The highest-profile is the American Federation of State, County and Municipal Employees, which recently won further changes from Goldman Sachs Group Inc and has targeted other companies, including JPMorgan Chase & Co and Janus Capital Group.
Under Murdoch, News Corp has grown to become one of the world's most powerful media companies, but also has drawn increasing scrutiny over news-gathering practices at some of its publications and questions about how much senior executives knew of abuses. Last week, it also faced reports that one of its television units had promoted piracy attacks on rivals, which the company denied.
Matters came to a head last July when News Corp abruptly closed the News of the World tabloid amid scrutiny of the use of private investigators, and several top News Corp executives left.
The events happened too late for Christian Brothers to file a proxy proposal related to corporate governance in time for News Corp's 2011 annual meeting, held in October, Tanner said.
But Tanner was able to offer a floor resolution at the 2011 meeting calling for an independent chair. Though it got few votes, it gained support from the proxy advisory firm Glass Lewis and public-sector investors such as the UK's Local Authority Pension Fund Forum.
Noting that support, and significant opposition from shareholders to the election of four directors last year, Tanner said she hoped the recently filed measure might gain more than 30 percent support at the meeting expected this fall. Such support could lead News Corp's board to reduce Murdoch's role, she said.
"I think a very strong vote will put them in a position where they should take some kind of action," she said.
(Reporting By Ross Kerber in Boston and Aruna Viswanatha in Washington; Editing by Andre Grenon and Phil Berlowitz)