Hermes Equity Ownership Services (EOS), the engagement arm of the fund firm owned by the BT Pension Scheme, is co-filing a proposal seeking to eliminate the dual share structure at Rupert Murdoch’s News Corporation media group to curb the media mogul’s “outsized influence”.
The motion has been filed for News Corp.’s annual meeting on November 13 in Los Angeles with the Nathan Cummings Foundation, the $408m New York-based body. Legal & General Assurance (Pensions Management) Ltd., which owns 3,798 of News Corp.’s Class B shares, is acting on behalf of Hermes EOS.
The investors want the company’s board to “adopt a recapitalization plan that would eliminate News Corp.’s dual-class capital structure” – meaning one share, one vote for all stock.
They argue that under the current structure, holders of Class A stock, or nearly 66% of the company’s equity base, have no voting rights. Murdoch controls 39.4% of the Class B shares and less than 1% of Class A shares.
“Thus, despite owning only about 14% of outstanding shares, Mr. Murdoch controls nearly 40% of the voting power, allowing him outsized influence on the outcome of shareholder votes,” the investors say, adding that dual-class structures “can distort incentives and increase agency costs by misaligning economic incentives and voting power”.The board says it is unanimously opposed to the proposal, arguing the dual-class scheme “is in the best interest” of the company and its stockholders by promoting “continuity and stability” and helping insulate the firm from short-term pressures.
News Corp. comprises publishing and Australian broadcasting assets that was split from the renamed 21st Century Fox in 2013. It points out that approval of the proposal would not itself eliminate the dual class capital structure. Rather it would be an “advisory recommendation” to the board to submit such a proposal to its Class B stockholders in the future.
The Nathan Cummings Foundation, which served on the Investor Group that helped to design the Principles for Responsible Investment (PRI), has filed more than 180 shareholder resolutions over the last 12 years, on issues ranging from climate change to executive compensation. It says a lot of them have been withdrawn following successful negotiations with companies.
According to advance voting intentions posted to the Proxy Democracy site, two investors, the AFSCME (American Federation of State, County and Municipal Employees) and Christian Brothers Investment Services have both voted against the entire 12-strong board slate at the company. News Corp. proxy