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Narrow win for Fox shows restlessness with dual-class shares
November 15, 2017 / 11:04 AM / 8 days ago

Narrow win for Fox shows restlessness with dual-class shares

LOS ANGELES/NEW YORK (Reuters) - A shareholder proposal calling for Twenty-First Century Fox Inc to scrap its dual-class share structure was rejected on Wednesday, although the measure received significant support among voters outside the controlling Murdoch family.

FILE PHOTO: Rupert Murdoch, executive chairman of News Corporation, reacts during a panel discussion at the B20 meeting of company CEOs in Sydney, July 17, 2014. REUTERS/Jason Reed//File Photo

Fifty-seven percent of votes cast sided with the position of Fox’s board, which argued that the current share structure provided flexibility and enhanced the company’s ability to focus on long-term results, a Fox regulatory filing said.

The majority of Fox shares traded publicly are class A shares, which have no voting rights. The Murdoch family owns about 39 percent of the class B voting shares, according to a proxy from the company, which owns the Fox broadcast network, cable channels and a movie studio.

Critics argue that the current set-up concentrates too much power with the Murdoch family. Forty-three percent of votes cast were in favor of eliminating the two classes of shares and giving all shares a vote. The vote was advisory, so passage would not have forced any changes at the company.

Even so, it was noteworthy that more than half of shareholders outside of the Murdoch’s control voted in favor, said Paul Hodgson, an independent governance consultant. In addition to the family stake, 6.7 percent of the voting shares are held by ValueAct Capital, whose chief executive, Jeff Ubben, is also a Fox director.

“The message the public shareholders are sending management is get rid of the dual voting class of shares,” Hodgson said. The measure’s supporters may use the results to try to persuade Fox management to meet with them to discuss the issue, he added.

Kevin McManus, a vice president of proxy adviser Egan Jones, said the number of people voting against the dual voting class marked “a very significant percentage and puts pressure on the company.”

Laura Campos, a director at the reform measure’s sponsor, the Nathan Cummings Foundation, said Fox’s structure made change unlikely despite the result.

“At many companies, 43 percent would be more than enough to prompt serious action from the board. At a company with a dual-class capital structure, it’s less likely that we’ll see any sort of substantive response from the board,” she said via email.

Asked about the result, a Fox spokesman sent remarks by director Viet Dinh, who said at the company’s annual meeting that the board believed the current structure was valued by shareholders.

FILE PHOTO - 89th Academy Awards - Oscars Vanity Fair Party - Beverly Hills, California, U.S. - 26/02/17 – Actress Anjelica Huston, media mogul Rupert Murdoch and model Jerry Hall. REUTERS/Danny Moloshok

“The board believes that many are attracted to our stock by the dual class structure and stability and leadership provided by the Murdoch family, both of which have contributed to the long-term success of the company,” Dinh said.

Major mutual fund firms have been pushing the importance of equal voting rights as a way to improve the way companies are run.

Fund executives worry about cases like technology initial public offerings such as Snap Inc, which offered outside investors no voting rights. The fear is that unequal voting structures concentrate too much power in the hands of insiders.

At a 26-minute annual meeting on Fox’s movie and television studio lot in Los Angeles, shareholders on Wednesday also easily re-elected Rupert Murdoch and his two sons to the company’s board, suggesting continued support for the family even as its Fox News division is recovering from a series of costly sexual harassment settlements.

The Twenty-First Century Fox Studios flag flies over the company building in Los Angeles, California U.S. November 6, 2017. REUTERS/Lucy Nicholson

That issue has slowed Britain’s regulatory review of the company’s bid to take over broadcaster Sky Plc. Co-Executive Chairman Lachlan Murdoch, speaking at the annual meeting, said the company was confident the deal would close by the middle of next year.

Fox also has recently talked to Walt Disney Co about selling much of itself, according to a CNBC report. The company did not directly address that matter during the meeting but said it was confident in its current assets.

“We have the required scale to continue to execute on our aggressive growth strategy,” Lachlan Murdoch said.

The proposed new voting structure is aimed at beefing up investor oversight over Murdoch and his sons Lachlan and James, who are all Fox board members.

“This structure leaves some shareholders with disproportionate voting power and others with none at all. We think eliminating it would benefit the shareholders and the company,” said Roxana Tynan, speaking on behalf of the foundation.

The current structure, she said, “can create corporate cultures with no accountability.”

On another advisory measure, 78 percent of votes cast were in support of Fox executives’ annual compensation.

Reporting by Lisa Richwine in Los Angeles and Ross Kerber in New York; Additional reporting by Jessica Toonkel in New York; Editing by Tom Brown and Peter Cooney

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