Starboard Value, an activist investment firm, is intensifying its efforts to reshape the governance structure of News Corp by advocating for the elimination of its dual-class share system. This initiative signifies a direct challenge to the longstanding dominance of the Murdoch family, particularly in controlling the voting rights associated with the majority of the company’s stock.
The dual-class structure, as of September, allocated Rupert Murdoch control over approximately 40% of News Corp’s voting power. This concentration of authority has raised concerns among investors looking for a more democratic governance model that allows for equitable decision-making processes within the company. Starboard, holding about 2% of the Class A shares, is leveraging its small stake to influence a broader shareholder discussion about shifting the governance dynamics.
The Implications of Activism
Management team leader Jeff Smith has candidly expressed his views on corporate governance, stating that the declassification of shares deserves consideration. His sentiments reflect a broader desire within the investment community for companies to adopt structures that prioritize shareholder interests. By coming forward with a non-binding shareholder resolution, Starboard aims to pave the way for a more significant discourse on the value of dismantling dual-class structures.
Moreover, Smith has previously advocated for News Corp to divest its real estate investments, including its interests in Australia’s REA Group. These suggestions are part of a strategic push to unlock the intrinsic value of the company and to enhance overall shareholder returns. By promoting the potential for increased transparency and accountability within the organization, which a simplified share structure could provide, Starboard is signaling its intention to advocate for shareholders who are eager to see more direct management accountability.
Complicating matters for the Murdoch family is Rupert Murdoch’s ongoing legal struggle regarding control over the family trust that retains ownership of the family’s stakes in their holdings. This dispute raises questions about the stability of governance at News Corp and whether the transition of leadership to Lachlan Murdoch will bring about significant changes in strategy or a continuation of the status quo.
Having recently stepped down from his role as chair of both News Corp and Fox Corp, Rupert Murdoch has transitioned to a ceremonial role as chair emeritus. Lachlan Murdoch now spearheads News Corp as its chair while maintaining his executive position at Fox Corp. The family’s control over the company, however, has come under increasing scrutiny as activist investors begin to press for changes that prioritize shareholder interests over familial legacy.
The market’s response to Starboard’s announcements reflects a mixture of cautious optimism and skepticism. While News Corp shares experienced a slight decline shortly before the news broke, they showed signs of recovery as investors absorbed the potential outcomes of the proposed changes. It remains to be seen how seriously the company will take these calls for reform.
As seen in Starboard’s previous campaigns at other companies such as Autodesk and Salesforce, the firm is undeterred by resistance, indicating a trend of increased shareholder activism that seeks to challenge established corporate governance norms. Ultimately, the evolution of News Corp’s governance structure may serve as a benchmark for other firms navigating similar dynamics in the face of activist investor challenges.