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Who’ll keep the seat warm now? Murdoch’s succession dilemma

The surprise announcement of the departure of Rupert Murdoch's right hand man earlier this week is not only a blow to News Corporation's immediate future, it also poses more questions about the 77-year-old media mogul's succession plan writes Marc Smith.

In many ways Peter Chernin, the president and chief operating officer of News Corp, was the son Murdoch never had. Next week marks the 20th anniversary of his career at the world's most powerful media group and tributes the two paid each in the statement announcing Chernin's departure demonstrated the importance and depth of their relationship.

"Peter is a valued colleague and a trusted friend. There are few executives, at any company, that combine his maturity, his experience, and his skills as a communicator and leader – I will miss him," said Murdoch of Chernin.

The departing executive was equally effusive of his boss. "This was a difficult decision for me. News Corporation has been a huge part of my life. I have had the great privilege to work for one of the true visionary leaders of our time, Rupert Murdoch. As a leader, Rupert is unparalleled. He is bold, entrepreneurial, innovative, creative and incredibly supportive. As a partner and friend he has been inspiring, fascinating, and most of all, tremendous fun," he said.

But beyond the backslapping, what can family business learn from this apparent match made in heaven. On the face of it, it looks a ringing endorsement of why you should bring in non-family management. As family businesses grow, there is the temptation to look on the inside, to the family, for people to run the company. Often however, the skills required to run a complex global business are not found within the family and the most successful business-owning families realise this.

That is not to say that integrating non-family members is easy, but Murdoch and Chernin made it work. Specifically, they seemed able to trust each other implicitly and Chernin benefited from the informality and close personal relationship of working with Murdoch.

However, there is a sting in the tail – Murdoch's stated desire to see one his children eventually succeed him at the head of News Corp. This contributed to Chernin leaving the company after realising his desire to succeed his boss was ultimately doomed. Unfortunately, while he acted and managed in the business better than any of Murdoch's children, he doesn't have the one thing that his boss most covets – family blood.

There is then an inherent paradox in Murdoch's grand plan. Despite having found a non-family executive who is both professionally capable and personally palatable to him, he is still betting on his offspring to triumph in the long term.

The News Corp share price tumbled on the news of Chernin's departure and the stakes have been raised even higher because Murdoch is effectively down to his last chip – 36-year-old son James. Eldest son Lachlan left the company in 2005 after a reported clash with his father while daughter Elisabeth quit in 2000 and went on to form her own successful TV production company.

Consequently, the pressure is very much on James who was promoted in December 2007 to chairman and CEO for News Corporation Europe and Asia with direct responsibility for the strategic and operational development of the firm's television, newspaper and related digital assets.

While he has won plaudits for his efforts so far, an interview this week with UK magazine Intelligent Life suggests he has put on hold any thought of rising further up News Corp's slippery pole. "Every child lives in their parents' shadow, until they're well into old age in many cases," he said. "I've always said the same thing, which is that I genuinely focus on the task in hand. That's fundamentally the best way to do my job."

The focus now shifts to who Murdoch will appoint to replace Chernin. His problem remains that any candidate will fear he is just keeping the seat warm until James is ready – a fear that would seemingly rule out recruiting the best possible candidate and risk the success of the long-term future of the business.

It remains a distinct possibility that the son he never had may become the son he should never have let go.

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