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News Corp – a family business?

Ask News Corp’s communications team whether the media group is a family business and they will reply no. But if News Corp is to start rebuilding its reputation hurt badly by the hacking scandal in the UK, then maybe it should start seeing itself as a family business – and start following the best practices followed by family-run companies.

Ask News Corp’s communications team whether the media group is a family business and they will reply no.

But if you apply the standard definition of what constitutes a family business – 25% or more of the company is owned (voting or capital) by the same family, at least one family member is involved in management of the business, and the company is at least in its second generation of family control – then News Corp is a family business.

The Murdochs control 40% of the voting rights at News Corp, are involved in management, and Rupert Murdoch represents the second generation of family ownership.

Typically, when family businesses don’t want to be viewed as a family business it’s usually because they don’t want to be seen as nepotistic. Family business denial is likely to be even more the case when the business is partly listed, because being accused of being nepotistic can hurt the share price performance. In the case of News Corp, some analysts have talked about the “Murdoch discount” on the company shares because of the perceived excessive control the family exercises on the running of the business. Take that away and the share price would perform even stronger, say the analysts.

But if News Corp is to start rebuilding its reputation hurt badly by the hacking scandal in the UK, then maybe it should start seeing itself as a family business – and start following the best practices followed by family-run companies.

That would involve 81-year-old Rupert making public a coherent succession plan that would see a non-family member and News Corp outsider coming in as chief executive to distance the business from the past difficulties and corporate governance failures. That doesn’t mean family members can’t play a big role in the business in the future – but they may need to be Rupert’s grandchild or his youngest children.

In reality, that’s unlikely to happen. Seasoned News Corp observers say Rupert isn’t stepping down anytime soon. With his mother still alive, she’s 103 and still coherent, some have wryly said Rupert could be running the business for another 20 years. Also, News Corp’s share performance appears to be completely oblivious to problems in the UK over hacking – when a British parliamentary committee found that Rupert was “not fit” to run a major international company, News Corp’s shares went up.

It would seem family business denial is in for the long haul at News Corp.

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