The phone-hacking and police bribery scandal swirling around News Corporation (NSDQ: NWS) has revived long-simmering questions about Rupert Murdoch’s leadership of the U.S.-based conglomerate. To his critics, Murdoch is guilty of rampant nepotism, mismanagement, and even breach of fiduciary duty, as an ongoing shareholder lawsuit claims.
On the other hand, Murdoch’s business success and transformation into a global power-broker is undeniable. By many measures, Murdoch has been the most influential media mogul of the last decade, a man whose company’s assets touch hundreds of millions of people worldwide. But for News Corp. shareholders, Murdoch’s victories ring hollow for a simple reason: the company’s stock price is flat over the last decade.
For now, the scandal’s damage has been mostly contained to Britain, aside from a preliminary U.S. Justice Dept. investigation into whether company employees tried to hack into the phones of 9/11 victims. But fundamental and longstanding shareholder gripes – essentially that the Murdoch family has used the company as a private vehicle to advance their interests at the expense of the shareholders – might be more damaging in the long-run, because they go to the fiduciary duty of Rupert Murdoch, his executives, and the company’s board.
By the most basic measure of CEO performance — stock price — Murdoch’s tenure as News Corp. chieftain over the last decade has been a failure. The top fiduciary responsibility of any CEO is to the company’s shareholders who, after all, own the company, and in fact, shareholder dissatisfaction with News Corp.’s management is hardly new. The company’s stock is trading roughly where it was 10 years ago – about $16 per share. Over the last five years, News shares are down nearly 20 percent. Viacom (NYSE: VIA) shares, by contrast, are up over 60 percent, while Disney (NYSE: DIS) shares are up 40 percent. News Corp.’s under-performance relative to its peers is so well known on Wall Street, that it even has a name: “the Murdoch discount.”
A News Corp. spokesperson declined to comment on the shareholder lawsuit.
Of course, not all News Corp. shareholders are critical of Murdoch. Prince Alwaleed bin Talal, News Corp.’s second largest shareholder after the Murdochs, is a fierce defender of the mogul, (and has gone on a media tour defending him since the hacking scandal blew up). In an Financial Times interview, Prince Alwaleed, who owns seven percent of the company’s voting shares, dismissed the “Murdoch discount” as a result of family control, attributing “currently depressed values” to the problems of the newspaper industry as a whole.
Prince Alwaleed’s view seems somewhat curious, however. News Corp. is not, after all, primarily a newspaper company, although it owns newspapers. The vast majority of its revenue and profits come from its network, cable and satellite television interests, as well as its movie studio — the newspapers alone should not be enough to cause News Corp.’s significant under-performance relative to its peers. Even if that were the case, it could be viewed as evidence that Murdoch has allowed a small portion of the company’s business — the newspapers he adores so much — to drag down the whole enterprise’s stock price, hardly the conduct of responsible CEO.
(Of course, Prince Alwaleed, often