Independent shareholders have voted overwhelmingly to abolish the dual class share structure of media empire News Corp at its recent annual meeting, but Murdoch family control means the company will stick with the status quo.
The Murdoch family holds 40% of the voting rights in the publishing empire, despite owning just 12% of shares, allowing it to effectively control the company with a minority shareholding.
However, investors at last week’s meeting have compared the structure to governance practices expected out of the likes of Cuba or North Korea.
Ninety per cent of non-family shareholders that voted said they wanted to wind down the company’s voting structure – with only 8.9 million independent votes against the proposal, compared to 79.1 million supporting the restructure.
However, the very structure that the shareholders were voting to abolish proved to be their main obstacle, with the Murdoch family’s votes accounting for 90% of all votes cast against the proposal.
The Nathan Cumming Foundation, a philanthropic organisation created from the wealth of the founder of food group Sara Lee, had put the motion forward.
At Thursday’s shareholder meeting, the foundation’s chief financial officer Bill Dempsey told Murdoch: "This kind of governing structure may be exactly what we'd expect in Cuba or North Korea, but it is at odds with good governance practices here.”
Australian shareholder Stephen Mayne also said the share structure would be more at home in North Korea.
Dual share structures are legal in many jurisdictions, including New York, where News Corp is headquartered. Other companies that employ such structures include Google, LinkedIn and Groupon.
News Corp shareholders – at least the non-family ones – are backed by the likes of the CFA, which endorses a one-share, one-vote standard. The organisation argues that a shareholder’s stake in a company should match the economic risk they are willing to take on.
Both Murdoch’s sons, James and Murdoch, were re-elected to the 12-person board, but were the least popular among shareholders.
Despite his lack of shareholder support, Lachlan was presented as the company’s heir apparent by Murdoch, who described him as “talented, successful executive in his own right here and in Australia”.
Murdoch told shareholders Lachlan would lead News Corp to a “very bright and prosperous future”.
Lachlan started in the family business aged just 22, moving swiftly up the ranks until he was appointed deputy chief operating officer in 2000.
Although he was widely tipped to succeed his father, he quit the company in 2005 to begin his own investment firm. James subsequently filled the role of heir apparent, but he tumbled from grace following revelations of phone hacking at one of the company’s newspapers News of the World.
Last year Murdoch appointed Lachlan co-chair of both News Corp and 21st Century Fox.