NEW YORK — A corporate board is supposed to answer to shareholders. At News Corp., it answers only to the Murdoch family.
The 16-member board that governs one of the world's most powerful media companies is dominated by Rupert Murdoch's relatives, confidants and hand-picked executives — a group that has sometimes let him make questionable business moves.
The phone-hacking scandal at a British newspaper owned by Murdoch has focused new attention on the News Corp. board, which is so cozy with the Murdoch family that one corporate watchdog group gives it an "F" for governance.
"This isn't just a dysfunctional board. It's a non-functional board," says Paul Hodgson, a spokesman for GovernanceMetrics International, an independent research firm that rates corporate boards and has given News Corp. a failing grade since 2003.
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News Corp., which owns the Fox television network, 20th Century Fox movie studio, The Wall Street Journal and the New York Post, among other media properties around the world, is a public company. That would usually mean it's controlled by the investors who hold its common stock. But almost none of the shareholders of News Corp. has a say.
The company is one of just 44 in the Standard & Poor's 500 that divide stock into two classes. One is for select investors who have sole voting power. The other is for individual stockholders and institutional investors, who have no voting power.
Murdoch controls almost 40 percent of the voting stock, most of it through a family trust. Others own so little that they have no influence. The second-largest owner of voting stock, the investment firm of Saudi Prince Alwaleed bin Talal, has just 7 percent and no representation on the board.
"There is no management or leadership reason to have two classes of stock, except to retain control," said Sydney Finkelstein, a professor at Dartmouth's Tuck School of Business.
The board has seven insiders, including Murdoch, 80, his two sons, three News Corp. executives and one adviser to Murdoch. The other nine are considered independent.
On Tuesday, for example, the company put out a statement on behalf of the "independent directors," saying they were "shocked and outraged" by the allegations against Murdoch's News of the World newspaper. But the group of independent directors includes two former company executives and three people with whom Murdoch or his family has done significant business.
When the board has taken action, its efforts haven't been as independent as they might seem initially. The company this week named attorney Lord Grabiner as the new independent chairman of the company's management and standards committee. Instead of reporting to an independent director, the committee will report to Joel Klein, a former chancellor of New York City schools and assistant U.S. attorney general, who now works for News Corp. Klein will report to Viet Dinh, an independent director.
Some News Corp. investors think the board should at least start to loosen Murdoch's grip by separating the roles of chairman and CEO. That could add an independent voice to the board room.
Christian Brothers on Friday filed a shareholder resolution, to be voted on at the annual meeting, calling on News Corp. to separate the roles.
Murdoch also could step down as a way to draw attention back to the business and away from himself.
"To the extent that the legacy of this company means something to him, this could be a necessary step," Finkelstein said.