News Corp. is considering elevating Chief Operating Officer Chase Carey to chief executive officer to succeed Rupert Murdoch, people with knowledge of the situation said.
A decision hasn’t been made and a move depends in part on Murdoch’s performance before the U.K. Parliament today, said the people, who weren’t authorized to speak publicly. Murdoch would remain chairman, the people said.
News Corp. executives who watched Murdoch, 80, rehearse for his appearance had concerns about how he handled questions, according to three people, who weren’t authorized to speak publicly. Murdoch and his son James are scheduled to discuss the company’s role in the alleged phone hacking of murder victims, members of the royal family and others by the News of the World, which was closed on July 10.
“This will be a heavily reviewed performance,” said Laura Martin, an analyst with Needham & Co. in Pasadena, California. “Who would have thought this could happen two weeks ago?”
News Corp. (NWSA)’s Australia shares rose 2.5 percent to A$14.52 at 12:15 p.m. in Sydney, paring their decline to 15 percent since July 4, when the Guardian newspaper reported that News of the World had hacked into the voicemail of a murdered teenager, Milly Dowler.
Independent Directors
Standard & Poor’s said yesterday it may lower New York- based News Corp.’s corporate debt rating because of “business and reputation risks” created by the phone-hacking scandal.
Independent directors yesterday weighed naming Carey CEO, according to a person close to the board. The independent directors, who didn’t make a decision, discussed whether the stock market and investors would react favorably to a change, the person said.
There was no meeting yesterday to elevate Carey, said a senior News Corp. executive who sought anonymity because the matter is private. Existing succession plans get re-evaluated from time to time, and any suggestion they have been accelerated or implemented are unfounded, the person said.
Murdoch has the board’s support, Thomas Perkins, one of the independent directors, told the Associated Press. He said the board isn’t considering elevating Carey, the AP reported.
Board members and executives at News Corp. are concerned about Murdoch’s ability to contain the fallout from the hacking scandal, the people familiar with the matter said. Already, the company has closed the 168-year-old News of the World and abandoned its bid for full ownership of British Sky Broadcasting Plc.
Politicians, Police
News Corp.’s top publishing executive in the U.K., Rebekah Brooks, resigned last week and was arrested on July 17. She is also scheduled to give evidence to Parliament today.
The scandal has touched high-level politicians and police officials in Britain. Metropolitan Police Commissioner Paul Stephenson resigned over suggested police links to News Corp.’s U.K. unit and its hiring of a former journalist at News of the World as a consultant. Prime Minister David Cameron cut short a trip to Africa to prepare for a statement to Parliament on July 20.
A shift in leadership would end Murdoch’s almost six-decade run as CEO of a company that began with a newspaper in Australia and evolved into a media empire that controls Fox television and movie assets, HarperCollins Publishers, and newspapers including the Times of London, The Sun and the Wall Street Journal.
Board Control
Murdoch’s voting power suggests he can influence any board decision about his role and would retain clout even if there were a leadership change.
“Rupert Murdoch controls the votes of the company through the Class B shares,” Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said this week in an interview. “He can just replace them if he wants. They may do something, but it will be temporary. Maybe he becomes chairman, but this is still his company and he can do what he wants. When he controls the stock, he controls the board.”
Through a family trust, the Murdochs own 306.6 million shares, or 38.4 percent, of News Corp.’s Class B voting stock, according to the company’s proxy statement. Including other family holdings, Rupert Murdoch controls 39.7 percent of the voting power, giving him effective control, filings show.
The value of the family’s holdings has declined by almost $1 billion since the scandal erupted, according to Bloomberg data.
Carey’s Role
Independent directors must protect shareholders and act in their best interest, said Martin, who recommends buying News Corp. shares. Considering succession issues at this moment is “justifiable,” she said.
By installing Carey, 57, as CEO, News Corp. would be relying on a trusted Murdoch deputy to help get past the hacking scandal.
Carey worked for 15 years as a senior News Corp. executive before becoming CEO of DirecTV (DTV) in 2003. He returned in 2009 following the resignation of Peter Chernin as Murdoch’s No. 2.
News Corp.’s independent directors, who hold nine of 16 board seats, have expressed frustration over the quality and quantity of information they’ve received about the scandal and concern about management’s ability to handle the crisis given how slowly the company has responded, a person with knowledge of the situation said earlier.
Negotiating Stance
According to News Corp.’s proxy filing, independent board member Roderick Eddington, the former CEO of British Airways, is the company’s lead director. He has the responsibility to call meetings of the non-executive directors or independent directors and to serve as a liaison between the chairman and the independent board members.
In his first stint at News Corp., Carey served as co-chief operating officer and as an aide to Murdoch for about six years, helping Fox acquire rights to the National Football League, National Hockey League and Major League Baseball.
Carey, who played on the Harvard Business School rugby team while studying for his MBA, led News Corp.’s efforts this year to generate fees from its Fox broadcast affiliates, pressuring them to share more of the so-called retransmission fees that local stations get from cable and satellite operators.
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