CalPERS Emerges as Latest News Corp Shareholder to Withhold Support for Murdochs

(October 17, 2011) — The California Public Employees’ Retirement System (CalPERS) is the latest News Corp shareholder to oppose the Murdochs.

The largest public pension in the United States — which owned 1.5 million voting shares and 5.8 million non-voting shares of News Corp. as of September 30 — announced that it would vote against the reelection of Murdoch, his sons, as well as two other board members.

“Our most important protection as a minority shareowner in News Corp. is a robust and independent Board,” CalPERS spokesman Wayne Davis confirmed with aiCIO on behalf of the fund. “For that reason, we are withholding our vote from non-independent director nominees James Murdoch, Lachlan Murdoch, Arthur Siskind and Andrew Knight. The role of the independent directors is of particular importance because of the dual-class voting structure at the company. Furthermore, because there needs to be an independent chairman to oversee News Corp. at this critical juncture, we are withholding our vote for Rupert Murdoch, who is both the CEO and Chairman of the company. These are governance basics – we believe News Corp. shareowners will benefit from the company undertaking these reforms.”

The scheme added in a press release: “CalPERS expects the Board to continue its efforts to rejuvenate the News Corporation Board with new independent directors, and we will continue to engage with the company on this point.”

Despite the opposition from institutional investors against Murdoch over the alleged circulation scam at the European operation of his Wall Street Journal and the phone-hacking scandal in recent months, the Murdoch empire has continued to fight back. According to The Independent, analysts believe Rupert Murdoch will survive attempts by shareholders to remove him from his News Corp. board at this week’s Los Angeles annual general meeting. The Murdoch family has nearly 40% of the voting rights in the company. At the same time, it owns only 12% of the equity, ensuring control of the board, the newspaper reported.

A shareholder activist body in the UK has also urged News Corp to overhaul its board structure. The Local Authority Pension Fund Forum (LAPFF), whose 54 members have combined assets of £100 billion, issued a voting alert to its members in early October on News Corp. “Having undertaken extensive research into the phone-hacking scandal, and having engaged with News Corp directly, LAPFF has reached the view that board change is necessary. The Forum believes that lead director Rod Eddington is well placed to take this process further,” according to a news release on the firm’s website. The statement by LAPFF continued: “The Forum believes that the News Corp board must take responsibility for the hacking scandal and that this would be best achieved by a change to its existing membership and structure. LAPFF believes that James Murdoch’s continued presence on the News Corp board is causing significant reputational damage to the company and is no longer in shareholders’ interest. The Forum has therefore recommended that its members oppose James Murdoch’s election.”

In September, pension funds and other News Corp shareholders brought charges against the media firm stemming from its phone-hacking scandal. The shareholders — including the New Orleans Employees’ Retirement System and Central Laborers Pension Fund — stated that the “still unfolding hacking scandal is just a continuation of the board’s malfeasance.” Shareholders highlighted cases involving several News Corp US subsidiaries which suggested that hacking, privacy breaches, and anticompetitive practices were not restricted to the newspaper division. Additionally, the filing included wrongdoing at two more Rupert Murdoch-owned companies — News America Marketing and NDS Group.