UK funds advisor withdrew Murdoch succession AGM filing at News Corp. just before crisis hit

Fund manager withdrew proposal after dialogue with company.

Hermes Equity Ownership Services, the UK activist boutique, withdrew a shareholder proposal on succession planning for Rupert Murdoch, Chairman and Chief Executive of media giant News Corp. on June 23, days before the News of the World phone hacking scandal engulfed the company, according to documents filed with the Securities and Exchange Commission (SEC).
The SEC documents show that Hermes wrote to News Corp. Secretary Laura Cleveland on April 27 – via Legal & General Pensions Management – saying it planned to submit a resolution calling on the firm “to adopt and disclose a written and detailed succession planning policy” for Murdoch at the company’s 2011 annual general meeting later this year. The hacking scandal at News International in the UK has subsequently led investors to question the dominance of the Murdoch family at the helm of News Corp. its parent group.
Rupert Murdoch, 80, has come under criticism for his handling of the crisis and for a faltering testimony to a UK Parliamentary Committee earlier this week. The Hermes/L&G letter shows serious concerns on the issue prior to the crisis. It called for dialogue with the company on its CEO succession policy, including a proposal for annual review, a formal assessment process and an annual report on the succession issue to shareholders.
On June 13, News Corp. wrote to the SEC seeking permission to omit the proposal from the proxy, saying it had already “substantially implemented” the request. Hermes subsequently withdrew the proposed resolution and on June 23, lawyers acting for the fund manager wrote to News Corp.’s lawyers confirming that it was dropping the AGM resolution.The letter said: “We appreciate the dialogue with the company regarding the issues raised in the proposal, as well as the commitment to an ongoing dialogue, including a direct meeting with Mr. Dinh”, a reference to Viet Dinh, Chairman of News Corp.’s Nominating and Corporate Governance Committee.

A Hermes spokesperson said: “At present, we are engaging with News Corp. both independently and collectively, with a group of major asset owners and representatives of asset owners, and will continue this dialogue until there is a satisfactory resolution.”
US shareholders had already filed suit against US-listed News Corp. prior to the latest crisis, alleging that Murdoch had abused his position at the company. In May 2011, the pension fund shareholders filed suit in the Delaware Court of Chancery challenging News Corp.’s $615m purchase earlier this year of Shine Group Ltd., a UK film and TV production company run and majority-owned by Murdoch’s daughter Elisabeth, whose windfall share of the sale, they say, came to $250m.
As the complaint notes, “[Rupert] Murdoch did not even pretend that there was a valid strategic purpose” for the Shine deal, as he proudly boasted that its goal was to bring his daughter back into the News Corp. fold so she could join his Board. The complaint adds: “Murdoch has treated News Corp. like a family candy jar, which he raids whenever his appetite strikes.” News Corp. denies the allegations.
US institutional investor, Christian Brothers Investment Services is also tabling an AGM petition calling for a separate chairman and CEO at the company (See separate story). News Corp.’s annual general meeting is likely to be held in October.