Rupert Murdoch and his sons James and Lachlan should be kicked off the News Corp. board along with 10 other directors when shareholders vote at this year’s annual general meeting, a corporate governance watchdog said on Monday.
The phone hacking scandal at News Corp.’s British weekly tabloid paper News of the World has rocked the entire company since it erupted in July. ISS said the scandal has “laid bare a striking lack of stewardship and failure of independence.”
The board had been unable to set a “strong tone-at-the-top” about unethical business practices, ISS said. ISS is a proxy firm that advises some of the largest institutional investors in the United States on shareholder votes.
The statement was particularly critical of the board’s decision to approve a 180-per-cent increase in chief executive officer Rupert Murdoch’s cash bonus to $12.5-million (U.S.) in the fiscal year to June, 2011, soon after the phone hacking fallout began.
Rupert Murdoch controls News Corp. through a 40-per-cent stake in the company’s voting stock.
Including the Murdochs, ISS recommended shareholders vote against re-electing 13 of the 15 directors at its annual general meeting on Oct. 21. It suggested votes against executives on the board including chief operating officer Chase Carey, chief financial officer David Devoe and former general counsel Arthur Siskind as well as independent directors including former British Airways CEO Rod Eddington and former U.S. assistant attorney-general Viet Dinh.
The only two directors ISS backed were veteran lawyer Joel Klein and venture capitalist Jim Breyer, “as neither has yet served on the board for more than a few months.” Mr. Breyer is set to join the board on Oct. 21, after fellow venture capitalist Tom Perkins announced he was stepping down last month.
News Corp. said it “strongly disagrees” with the ISS analysis.
“The company takes the issues surrounding News of the World seriously and is working hard to resolve them. However, ISS’ disproportionate focus on these issues is misguided and a disservice to our stockholders,” a company spokeswoman said.
“Moreover, ISS failed to consider that the company’s compensation practices reflect its robust performance in fiscal year 2011.”
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