News Corp in the news again!!

A recent, much publicised investigation by a UK parliamentary committee into voicemail interception carried out by staff at the now redundant News of the World Sunday newspaper in the UK has subjected its Chairman and CEO, Rupert Murdoch, to overwhelming scrutiny from a number of regulators across the world.

The Australian media regulator ACMA has stated that it is in the process of reviewing the committee’s report, while a US Senate committee has contacted British investigators to find out whether News Corp has broken any laws in the US.

The UK committee concluded in summary that, if Rupert Murdoch did not at all times take steps to become fully informed about phone-hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications. The committee went on to comment on the permeation of this culture from the top throughout the organisation duly exposing the lack of effective corporate governance at News Corporation and News International. The committee concluded that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.

Certainly, from a South African perspective if the King Report on Corporate Governance for South Africa 2009 had any jurisdiction, News Corporation would be found wanting on a number of points.

For starters, King III states unequivocally that the Board is responsible for corporate governance. It goes on to define corporate governance in essence as a company’s practical expression of ethical standards and culture. As a direct consequence of that statement, ethical leaders are urged to consider both the long term impact of their personal and institutional decisions on the economy society and environment. Additionally, the Board is tasked with ensuring that integrity permeates all aspects of the company and that management cultivates a culture of ethical conduct and sets the values to which the company will adhere.

Those familiar with the phone-hacking scandal would have immediately picked up the corporate governance failures especially in the wake of certain members of the management of the company who were detained and arrested for cultivating unethical conduct and failing to consider the long term impact of their institutional decisions on society. The buck however stops with the Board as per King III, or does it?

The Board of News Corp recently continued with its approval of Rupert Murdoch basing its vote of confidence on Rupert Murdoch’s vision and leadership in building News Corporation, his ongoing performance as chairman and CEO, and his demonstrated resolve to address the mistakes of the company identified in the UK Committee’s report.”Shareholders, too, appear to have been nonplussed by the Select Committee’s findings, with The Australian reporting last Wednesday that, while the cost of the phone-hacking scandal has so far been estimated at $385 million, “News Corp’s share price was up 38 cents to dollars $19.54 at lunchtime in New York, adding almost $1 billion to its market value”.

One should argue henceforth that neither regulation nor codes of best practice will be successful when it comes to preventing corporate governance failures as long as leadership is defined and measured primarily by the achievement of performance objectives and the ensuing maximisation of shareholder value and this, at the expense of society.

For assistance in training and advice relating to Governance, Strategy and Leadership please go to www.sinkorswim.co.za or contact us on roger@sinkorswim.co.za.

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