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Editor’s comment: Murdoch and News Corp, hacked to bits?
Shareholders can’t say they weren’t warned!
Anyone that still doubts the potential for ethical and ESG issues to batter a company’s share price need only take a look at News Corporation’s (News Corp) shredded ticker: down almost 7% in a week, wiping more than $3bn off the company’s value. The value destruction followed that of the values: the closure of the News of the World newspaper came as the tawdry phone hacking affair hit new lows when it was revealed that the paper’s journalists had, amongst other crimes, infiltrated the messages of a murder victim and targeted the families of dead soldiers. As coverage revealed the tabloid had transgressed public decency norms, so the retribution of the public and advertisers was swift and merciless. Public acceptability can appear elastic – and the News of the World had been stretching it for years – but beware when it snaps: it can be torturous to mend, if possible at all. Let’s not forget that the News Corp share price drop has come without any new prosecutions. Nor is it a result even of a rejection yet by the UK government of its bid for the 61% of shares that it doesn’t own in BSkyB, the satellite broadcaster; likely as that may seem now that the bid has been referred back to competition and regulatory authorities. Just a week ago BskyB shares were worth 850p each. Now, the shares are trading at 690p each, down by more than 17%.
The news will get worse. In journalist speak: the story has legs. There are new revelations daily, and there will likely be more people sent to jail; phone hacking is, after all, illegal in the UK as in most countries. And opponents of the ‘Murdoch Empire’ now smell blood as the apparent vested interest omerta between big media, politicians – and staggeringly – some police officers, splinters. Some are suggesting that News Corp’s complex web of offshore accounts in tax havens should be investigated. Others have opined that the US Foreign Corrupt Practices Act could get involved and make News Corp (a US-listed company) liable if any employee is found to have bribed a foreign official (for example, a member of London’s Metropolitan Police), even if no one at head office knew. In 2003, Rebekah Brooks, now Chief Executive of News International, the UK subsidiary of News Corp, told Parliament that The Sun newspaper had paid police for information. Under the Dodd Frank Act, potential whistleblowers on any such crime could win a percentage of the eventual fine if they report acts of bribery. There is even suggestion that Rupert Murdoch could be considered ‘unfit’ by law to run a UK company and the company broken up. And as Responsible Investor reported yesterday, US shareholders are already sharpening their knives with the assistance of class action lawyers: Link to story
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