What do we make of Rupert Murdoch, the 92-year-old patriarch of the Fox Corporation, at this moment?
We are post-Trump I but possibly on the precipice of Trump II. We are past the whopping $787.5 million settlement with Dominion Voting Systems but awaiting the denouement of a similar case brought by Smartmatic. We are past the departure of Tucker Carlson and his sky-high ratings, but we are still waiting to see how the new evening lineup will fare in the increasingly cutthroat world of partisan cable television news.
Where once upon a time kings controlled their empires through vast landholdings, armies and pledges of fealty, Mr. Murdoch controls his corporate empire through the ownership of a special class of stock that gives him the largest voting stakes in his two main companies, the Fox Corporation and News Corp, the parent company of The Wall Street Journal, Barron’s and other media properties.
In 2017, more than 40 percent of the shareholders in one Murdoch company voted to end the dual-class stock structure. But it was not enough to force the change. “It’s a corporate governance nightmare,” said Nell Minow, the vice chair of ValueEdge Advisors, a corporate governance consultancy.
As a result, there doesn’t seem to be anyone or anything at either company that can keep Mr. Murdoch from doing what he wants. That fact was less of an issue when he started Fox News nearly 30 years ago. But it’s clearly a problem now.
Fox seems like a company suffering from an out-of-control corporate culture. On-air personalities said things on national television that they did not believe. Top executives seem unable to control the anchors. As a result, Fox paid nearly $800 million to settle the Dominion lawsuit on the morning the trial was set to begin; a similar lawsuit brought by Smartmatic, for even more money, remains unresolved. The Dominion matter should have been settled for far less, months earlier.
And what kind of company fires Tucker Carlson, one of its leading anchors, without a clearly stated cause, without giving him the slightest hint that it was coming — and then continues to hound him legally as he attempts to move on? I don’t care for Mr. Carlson and his brand of propaganda one bit, but I do have some sympathy for him and for his public defenestration.
Then there was the highly unusual and ill-fated attempt by Mr. Murdoch to recombine the Fox Corporation, the holding company for Fox News, with the News Corporation. In a smoother-functioning operation, the prospects for such a combination would be explored privately, before a public announcement and the risk of embarrassment. Instead, the proposed merger was very publicly scrapped in January. Although Mr. Murdoch is the largest voting shareholder by far in both companies, even that wasn’t enough to withstand the significant objections from other, so-called Class B shareholders who had the right to kill the deal — a rare rebuke.
In April, Mr. Murdoch’s engagement to Ann Lesley Smith was called off after two weeks. It would have been Mr. Murdoch’s fifth marriage.
Apparently, dynastic succession is still a viable concept in corporate America. Mr. Murdoch’s heir apparent, Lachlan, defended Fox and the Dominion settlement when speaking to investors on May 9. “The settlement in no way alters Fox’s commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day,” he said. Comments such as these do not exactly inspire confidence that Fox News has any plans to try harder to stick to the facts in its reporting. “They’re doubling down,” Ms. Minow said. And that is downright scary, especially given the size of Fox’s audience and its influence.
The drama we’re watching play out at the Fox Corporation is an extreme example of how companies with a controlling shareholder can suffer — the stock is down almost 18 percent in the past five years — but it isn’t the only one. To a lesser degree, I see problems occurring at companies such as Comcast (controlled by the Roberts family) and Paramount Global (controlled by Shari Redstone), among others. When dual classes of stock are involved, a family’s voting power often far outstrips its economic ownership, leading to financially foolish, and even bizarre, behavior.
There’s a reason that a century ago the idea of professional management was introduced into American corporations. A professional manager creates a sense of distance between shareholders and management, which is held accountable to a board of directors, chosen to represent the shareholders. Professional managers are paid to look at problems objectively, accounting for what will theoretically be best for all stakeholders, including shareholders, creditors, vendors and employees. It may not be a perfect system, but the pas de deux between a professional manager and a board of directors has proved to be a durable way to create lasting wealth.
Contrast Mr. Murdoch with, say, Jamie Dimon, the chairman and chief executive of JPMorgan Chase, the nation’s largest bank. Or with Joaquin Duato, the chairman and C.E.O. of Johnson & Johnson, the health care behemoth, where there are no longer any Johnsons among the top brass. JPMorgan Chase is now run professionally, dispassionately and well by Mr. Dimon. He is powerful, yes, but he’s not all powerful. The JPMorgan Chase board of directors can fire him at any time, for any reason. The same goes for Mr. Duato. Does anyone at Fox or News Corp hold Mr. Murdoch accountable in the same way? Can anyone?
One way to rein in Mr. Murdoch may lie with Smartmatic. If it emerges victorious in its lawsuit, it could insist, as part of any settlement, on governance changes at Fox or even demand that the C.E.O. succession process include candidates outside the Murdoch family. Smartmatic, or even the recently filed shareholder lawsuit against Fox, could end up pressuring Fox, and indirectly News Corp, to scrap their dual-class stock structures.
Rupert Murdoch has had absolute power at both Fox and News Corp for far too long. That’s dangerous under any circumstances, but it’s especially troubling at a national news organization, such as Fox, where disinformation and lies, apparently, are the coin of the realm. And there doesn’t seem to be any way that will change if the Murdochs maintain their absolute power and absolute control. That fact alone further imperils what has become America’s fragile democracy.
William D. Cohan (@WilliamCohan) a founding partner at Puck, is the author, most recently, of “Power Failure: The Rise and Fall of an American Icon.”
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