Rupert Murdoch’s 80th birthday celebrations were not the happiest of occasions. Reports from the US over the weekend reveal Rupert is deeply concerned at the family divisions. His failure to decide which of his children should succeed him means there would be total chaos if he were to die suddenly.
If Murdoch lives for an extended period, in the longer term the family tensions may affect his ability to run the giant News Corporation, which is currently capitalised at around $44 billion – the sixth largest company on the Australian list.
The situation threatens to become so serious that longer term shareholders in News Corporation have reason to be concerned. It’s always difficult for outsiders like me to accurately describe the relationships in what is a complex family situation and it would be only of academic interest if the divisions did not go straight to the News Corporation board table, given that the Murdoch family own some 40% of the voting shares.
Let me set out how New Yorkers now see the situation for Murdoch’s children – Lachlan, James and Elisabeth – from the union between Rupert and Anna, plus the situation with Rupert’s current wife Wendi Deng.
Firstly, the complex situation absorbs a great deal of Rupert’s thinking time and the combination of his age and difficult family situation must make being chairman and CEO of such a diverse media group with many challenges extremely difficult. I am a great admirer of Rupert Murdoch and his achievements and when working with the News Corporation, prior to helping to start Business Spectator, I had nothing but praise for the professionalism of the group. The current situation at the top does not change that but, in any family company, problems at the top can multiply down the line.
Strangely, concern over Lachlan Murdoch is an issue on which most of the family have similar views. Everyone was nervous when Lachlan embarked on the Ten Network exercise but there was comfort in the fact that he had James Packer alongside him.
The family recognises that Lachlan Murdoch has great talents but believe his weakness is that he occasionally makes bad judgement calls. The appointment of the Seven Network’s James Warburton as Ten CEO was one such call. It not only embroiled Lachlan in a court battle with Seven’s Kerry Stokes (in New York they see Stokes as akin to a vexatious litigant) but it caused his important partner James Packer to leave the Ten board.
Lachlan may get through it, but he is now facing a much higher risk situation because both Seven and Nine may step up their attack on the Packer-less Lachlan and his third-ranking Ten Network.
No one at News Corporation in New York wants to bail him out, which leaves a very difficult situation if he were to fail – he may even need to sell his News Corporation interests.
Lachlan is an important stakeholder in the Murdoch trust that holds the voting shares and he is on the News Corporation board. He was the heir apparent but he is now not in the running. In New York, they say his heart is not in News Corporation because the Ten situation totally absorbs his attention. The situation with Lachlan is an important concern for his 80-year-old father, but James and Elisabeth pose even more knotty problems.
Since Lachlan left the News Corporation executive ranks, his brother James has been the heir apparent. James was given BSkyB to run in the UK and he has done an excellent job. However, he has no real experience in the film business which is at the heart of News Corporation.
Nevertheless he has been the faithful son devoting his talents to improving the lot of News Corporation, while his sister in 2001 went off and developed her own business – Shine. All that was straightforward until last month, when News Corporation paid a very generous $670 million to buy Elisabeth’s Shine operation.
Shine in the UK makes and markets TV programs led by MasterChef and Merlin. She joins the News Corporation board but reports to Chase Carey, deputy chairman and chief operating officer of News, sidestepping her brother James, who is responsible for News Corp’s European and Asian assets excluding Shine.
Lachlan, James and Elisabeth are close to their mother Anna but Elisabeth is particularly close. While inaccurate, to some in New York Rupert’s decision to put Elisabeth on the News Corporation board was like putting his former wife on the board, except that Elisabeth is seen by many as the most talented of the Murdoch children.
In buying the Shine business, Rupert Murdoch would have known all the side issues and that he was paying top dollar, giving her independent wealth outside the Murdoch trust. Nevertheless, he still brought Elisabeth back. My guess is that Rupert Murdoch has seen talents in Elisabeth that he does not see in his other children which is why he acquired Shine and brought her back. James must fear that this is right, and that he is no longer the favoured one, despite his loyalty. And they all worry about Lachlan.
And just to make matters more complex, the children of his marriage to Wendi Deng have stakes in the trust although they have limited voting rights. And Wendi is now becoming a New York socialite in her own right – having a wife in the social spotlight is a new experience for Rupert Murdoch.
Somewhere in all the family complexity is the former News Corporation Australian boss, Ken Cowley, who chairs the Murdoch trust. New Yorkers say the children all respect him. It must be an extraordinarily difficult job for the 76-year-old.
The simple fact is that News Corporation is now in considerable long-term danger because of Rupert’s indecision and the fact that, at 80, he can no longer travel easily, which is not ideal for someone in charge of a global company. First he needs to set out his own exit program and he also needs to decide which of his children will succeed him and the long-term role of Chase Carey.
The sooner Rupert Murdoch makes up his mind, the sooner he will be able to enjoy his birthdays.
This article first appeared on Business Spectator.
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