Leading Canadian ethical fund firm NEI Investments has sold its shares in media giant News Corp. because of the phone hacking scandal.
“We recently divested from News Corp.,” NEI says. “Scandal has surrounded the company for years, but recent revelations indicate very poor governance, a poor business culture and alleged illegal activities at the company.”
It says the decision follows the launch of a series of British parliamentary and police investigations into phone hacking, police bribery and “influence peddling” at the company. It also cited the Federal Bureau of Investigation’s probe into whether the company violated the Foreign Corrupt Practices Act.
Although investors have previously registered their unease over the scandal at News Corp. shareholder meetings, this is believed to the first time an investor has publicly exited the stock over the phone hacking scandal which has engulfed the US-listed company.
“We did make an effort to discuss our concerns with News Corp. (our normal practice) but, rather predictably, received no response to a letter sent last September,”said Robert Walker, Vice President, Ethical Funds and ESG Services at NEI.
NEI said the decision was reinforced by allegations that News Corp. chairman and CEO Rupert Murdoch intentionally misled parliament. It also observed “with some alarm” the series of arrests at News Corp. and its subsidiaries.
“We’ve also not been pleased by Mr. Murdoch’s refusal to assume personal responsibility for the scandal.
“Nor are we on board with Mr. Murdoch’s insistence on occupying both chair and CEO positions and what we see as a tendency towards nepotism at the firm.”
NEI was also “not terribly optimistic” about the prospects for change, as Rupert Murdoch and other family members maintain a controlling interest in the company.
NEI will monitor the UK government-backed Leveson inquiry into media standards and the ongoing investigations into News Corp. – “but given our divestment we’ll be watching from the sidelines”.
NEI, 50-50 owned by Desjardins Group and the Provincial Credit Union Centrals, has around C$4.7bn (€3.5bn) in assets under management.