By ALISTAIR MACDONALD And MARTIN PEERS
Reputations at Stake as News Corp. CEO Testifies Before U.K.
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| News Corp. is embroiled in a phone-hacking scandal that threatens the legacy of CEO Rupert Murdoch, left, shown with son James in 2010 |
Tuesday's scheduled appearance by Rupert Murdoch before a panel of U.K. lawmakers was prompted by a phone-hacking scandal dogging News Corp. But it is the culmination of a 40-year love-hate power struggle between the News Corp. chief and Britain
At stake is both the reputation of a global empire—which has 51,000 employees and annual revenue of $32 billion—and the level of support that the Murdoch family, particularly Rupert and his son James, will have among investors.
Rupert and James Murdoch and Rebekah Brooks
Public and political outrage mushroomed in the long-running saga earlier this month with the allegation that, in 2002, News Corp.'s now-closed News of the World weekly hacked into the voice mail of an abducted teenager who, it turned out, had been murdered.
But long before any reporter had even heard of a mobile phone, attitudes among British politicians and the public regarding Mr. Murdoch had veered between admiration and loathing. The Australian-born executive, now a U.S. citizen, is a household name and recognizable face in the U.K.
In the U.K.
Today News Corp. controls around 40% of print sales and, through its stake in British Sky Broadcasting PLC's news channel, 6% of the broadcast news audience.
To supporters, Mr. Murdoch brought TV choice through his BSkyB satellite operation and took on the print unions that had made the newspaper business unprofitable.
"He's is the lightning rod for all the ills of the press," said William Shawcross, a biographer of the tycoon.
Mr. Murdoch "had an enormous power over the British political system, and we should have never allowed that," said Chris Bryant, a Labour lawmaker, citing BSkyB and the newspapers. Mr. Murdoch's "newspapers were used to bully and intimidate political leaders and individual politicians," he said.
News Corp. declined to comment.
The scandal skewered News Corp.'s proposed offer to buy full control of BSkyB. News Corp. dropped the bid amid political resistance. News Corp. also owns The Wall Street Journal.
The ramifications of the hearing could be far-reaching. Even before the scandal erupted in recent weeks, the elder Murdoch had considered stepping down as CEO in favor of chief operating officer Chase Carey, according to people familiar with the situation. Under that scenario, Mr. Murdoch would remain as executive chairman. That switch—under consideration for more than a year, according to a person familiar with the situation—may have little day-to-day impact but it would have enormous symbolic significance.
Even if Mr. Murdoch decides to make this change, he wouldn't do it right now, the person said. Instead it would likely happen in several months' time, when presumably the furor had died down.
Monday evening, a News Corp. senior executive said the board has always had a plan for succession in place and that suggestions that the plan has been accelerated or implemented are inaccurate.
Mr. Murdoch has spent time trying to court and influence politicians himself, a task that many proprietors left to their newspapers. Alastair Campbell, Tony Blair's former director of communications, says Mr. Murdoch would seek a meeting with the then-prime minister around three to four times a year, while other proprietors either never tried or did so rarely. "He is more political," Mr. Campbell said.
Mr. Murdoch's tabloids trumpeted their political affiliations in dramatic gestures and headlines, backing or dumping party leaders with eye-catching front pages. The Sun switched to backing the Conservative Party on the eve of the 2009 conference speech by Labour Party incumbent Prime Minister Gordon Brown, with a front-page headline proclaiming "Labour's lost it." Now, Mr. Brown has been among the most virulent of critics against News Corp.'s British papers.
Some members of Parliament have been accused of being too close to News Corp. while others are said to hold a grudge. The composition of Tuesday's committee illustrates the hot and cold relationships that Mr. Murdoch and News Corp. often have with British lawmakers.
John Whittingdale, the committee's chairman, has said he is a friend of Les Hinton, the CEO of News Corp.'s Dow Jones & Co. unit who stepped down on Friday, and has dined with Ms. Brooks among other senior News Corp. employees. Fellow Conservative committee member Louise Mensch mingled with News Corp. executives and editors at a party thrown by the company at last year's Conservative Party conference.
Another committee member, Labour's Tom Watson, has felt News Corp.'s barbs. In 2009 the Sun newspaper ran an editorial asking then-Prime Minister Brown to sack "poisonous" Mr. Watson, whose position as minister in Mr. Brown's government was "a stain on the Prime Minister's judgment" and credibility.
Amid this recent scandal, a vocal Mr. Watson has been described as News Corp's "tormentor-in-chief."
A spokeswoman for the panel didn't return a request for comment.
For News Corp., the risk could be that comments from Messers. Murdoch and Ms. Brooks could further damage the News Corp. brand in Britain Britain
The four older Murdoch children—Prudence, Elisabeth, James and Lachlan—will control the bulk of the family's roughly 40% voting stake on the death of the elder Mr. Murdoch, who is 80. It would be up to them to decide who should take over, or whether they should let an outsider run the company.
At the current price of $15.05, News Corp.'s A shares are down 17% from the $18.06 on July 1, before the hacking scandal flared anew.
—Jessica E. Vascellaro contributed to this article
Source : wsj
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