Ever since he persuaded the ASX to ignore its normal “one vote, one value” rules and allow News Corp to issue non-voting bonus shares in 1994, Rupert Murdoch has controlled his media empire through an undemocratic gerrymander that would make Sir Joh Bjelke-Petersen blush.
It started with just one-third of the shares on issue having no voting rights and peaked at close to 70% in 2006 after News Corp cancelled the 19% voting stake amassed by rival mogul John Malone in exchange for selling him a controlling interest in US satellite company DirecTV.
As if that wasn’t bad enough, 93-year-old Rupert is now attempting an even dodgier undemocratic rort: cancelling the voting power of 75% of the shares in the Murdoch Family Trust after he dies by instead giving 100% of the votes to his preferred eldest son and successor, Lachlan Murdoch.
As Michael Bradley brilliantly argued elsewhere in Crikey, Rupert is obsessed with power and control, even from beyond the grave.
The apparent decision of the three shafted adult children — James, Elisabeth and Prudence — to fight the old man’s schemes not only through the Nevada courts but also by supposedly leaking sealed court documents to the hated New York Times looks like game over for enduring cordial family relations.
While the case wasn’t thrown straight out of court, come the September trial, it will be a very hard argument to sustain that just one of Rupert’s six children — Wendi Deng’s two daughters with Rupert get equal wealth but no votes — should be given absolute management control when the three other voting heirs are objecting to being stripped of their rights.
How will Rupert prove it would be disastrous for the heirs to not have Lachlan in complete control? How will he prove the other three would blow up the Fox News right-wing business model? Besides, Lachlan’s record is hardly flattering when you consider the likes of One.Tel, Super League, Ten Network Holdings and the $1.2 billion Dominion defamation settlement last year.
It’s hard to see Rupert and Lachlan persisting with this clearly outrageous scheme, and it’s not the first time they’ve been foiled either. In October 2022, Rupert and Lachlan proposed a merger between News Corp and Fox Corp but it was withdrawn in January 2023, reportedly after James Murdoch sent letters to both boards objecting.
One chess board is easier to manage than two, and since Rupert’s retirement as co-chair of both boards last November, Lachlan Murdoch has stepped up to chair both, a leadership overreach that many critics, including his adult siblings, believe he will be unable to sustain once his father passes.
Apart from phone-hacking in the UK, which ended as a practice in 2011, the ongoing journalistic debauchery of Fox News has long been the biggest ethical flashpoint within the Murdoch family.
Elisabeth’s then husband Matthew Freud was seemingly a spokesman for a majority of the adult children in 2010 when he told The New York Times:
I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes’s horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to.
I asked Rupert for a response at the 2010 News Corp AGM in New York 10 months later and he declared passionately that Freud “couldn’t be more wrong”.
With Freud now off the scene, the baton for publicly taking on Rupert over Fox News has clearly passed to James. But Elisabeth is no shrinking violet either, reportedly reeling off a string of expletives when her father pitched the “Lachlan gets all power” plan to her in London.
We’re in unchartered territory with the Nevada legal dispute, which is essentially a battle for control over these three distinct but separate assets in the Murdoch Family Trust:
- a controlling 43.4% voting stake in Fox Corp, owner of Fox News, which equates to 21% of all shares on issue with a current value of A$5.4 billion
- a controlling 40.5% voting stake in News Corp, which equates to 20.6% of all shares on issue with a current value of A$5 billion
- a circa 5% stake in Disney Corp, which, according to Neil Chenoweth in the AFR, is worth about A$12.4 billion.
If it was just about money, a settlement could involve a carve-up of the assets, with the dissidents receiving the Disney shares and Rupert and Lachlan getting the more politically powerful controlling stakes in Fox and News Corp.
But Lachlan’s adult siblings clearly want to remove his board and management control over both companies and appoint directors who will tame the wilder right-wing instincts of the empire, such as supporting Donald Trump, fanning climate denialism, backing Brexit in the UK and opposing the Voice referendum in Australia.
With Rupert no longer on either board, his instrument of power now comes from Lachlan doing what he says — and the ability to select the directors who will serve at each Fox and News Corp AGM.
Once Rupert dies and his control over those voting blocs transfers equally to a majority of the four adult children, the entire board of both companies could be reshaped at the next AGM. That would seemingly be the end of Lachlan’s short-lived reign.
Assuming no settlement is possible and Rupert fails in his attempt to rewrite the trust rules, the only other option would be for Rupert and Lachlan to ensure they’ve got loyalists like Tony Abbott inside the News Corp and Fox Corp boardrooms, and to then take steps to reduce the voting power of the Murdoch Family Trust before Rupert’s death.
The obvious way to achieve this would be to end the gerrymander by giving the vote to all current non-voting shares. After that, you could then issue more shares as part of merger proposals with third parties, which would further dilute the trust to the point where it would not be guaranteed success in any proxy battle over board composition.
However, these are increasingly desperate tactics. With Rupert seemingly in good health, the other option would be to simply withdraw the proposal, apologise to the kids, and hope that a few more years with Lachlan and Rupert in control will repair the rift.
The immediate issue is how both companies will play the divisive Donald Trump and the US election. From a family harmony point of view, the defeat of Trump once and for all in November would not only help bring America together; it would also be an important step in ending these Murdoch family feuds.
