News Corp. hits back at proxy firms as California pension giant votes against directors

Major institution rejects director candidates as company fights back

News Corp. has hit back at proxy advisory firms who have advised their institutional investor clients to vote against its directors in the wake of the phone hacking scandal. It comes as the $155bn (€112.6bn) California State Teachers’ Retirement System (CalSTRS) has voted against 13 News Corp. directors.

The media giant said it “vehemently” disagrees with firms such as Institutional Shareholder Services (ISS), which has advised shareholders to vote against Rupert Murdoch and his sons James and Lachlan.

And it said ISS’s “disproportionate” focus on the News of the World matter was “misguided”. The UK tabloid was closed in the wake of the scandal which erupted in the summer.

Meanwhile, according to CalSTRS’ proxy voting pre-disclsoure, the fund voted against directors including James Murdoch. CalSTRS’ votes for Rupert and Lachlan are not available. CalSTRS withheld its vote from the entire board of the media giant in 2010. The company holds its annual shareholder meeting on October 21 in Los Angeles in what is becoming a red-letter day for corporate governance.

UK-based PIRC has advised its clients to oppose the Murdochs while Glass Lewis is advising voting against James and Lachlan. Glass Lewis is also backing a proposal from the floor from Christian Brothers Investment Services (CBIS) calling for a separate chairman and CEO. In addition News Corp. is facing a barrage of opposition from the Local Authority Pension Fund Forum and the Australian Council of Superannuation Investors.And just yesterday, US advisory firm Egan-Jones Proxy Services also advised voting against James and Lachlan Murdoch. For a chart of voting recommendations, please go here

ISS had said the scandal “laid bare a striking lack of stewardship and failure of independence by a board whose inability to set a strong tone-at-the-top about unethical business practices has now resulted in enormous costs—financial, legal, regulatory, reputational, and opportunity—for the shareholders the board ostensibly serves”. ISS saw a “mosaic of failures” of board independence, oversight, and responsiveness to shareholder concerns.

News Corp. struck back in a filing, saying: “The proxy advisory firms’ disregard of the exceptional performance by News Corporation demonstrates a failure to recognize the value created for stockholders by News Corporation’s Board of Directors, members of management and employees around the world.”

Julie Tanner, Assistant Director of Socially Responsible Investing at CBIS, said she hoped the ISS recommendation would help to “galvanize” the investment community. She added she expects the News Corp. AGM to be well attended by institutional shareholders. She indicated CBIS plans to file a regular proxy proposal calling for a separate chairman/CEO for News Corp.’s AGM in 2012.

Meanwhile, the Financial Times has reported that two unnamed top 15 investors have called for James Murdoch to step down as chairman of satellite TV venture BSkyB, which holds its annual meeting on November 29.