Rupert Murdoch’s News Corporation has been hit with legal action from a group of shareholders who believe its purchase of television production company Shine from Rupert’s daughter Elisabeth Murdoch is an act of nepotism.
New Corporation announced the deal to buy Shine in late February for $US673 million, a price that media analysts explained at the time as being “full”.
Under the terms of the deal, Elisabeth would have personally received as much as $350 million from the deal and was also expected to join the News Corporation board.
However, the union-owned Amalgamated Bank of New York and the Central Labourers Pension Fund has taken issue with the close ties between Murdoch and his daughter, claiming the media magnate has used News Corporation as a “wholly-owned family candy store”.
”Murdoch’s admitted purpose in entering into the transaction is to bring Elisabeth back to the family business,” Amalgamated says in a 46-page claim lodged in a Delaware court.
”Once the prodigal daughter is back into the News Corp fold, she will vie with her brothers, board members James and Lachlan, for the position of successor to Rupert Murdoch’s global media dynasty. In short, Murdoch is causing News Corp to pay $US675 million for nepotism.”
News Corporation has described the claim as being without merit.
The suit doesn’t just address the acquisition of Shine – it also ranges over New Corp’s involvement in the News of the World phone tapping scandal (it claims senior executives have been allowed to “embroil News Corp in apparently illegal behaviour”) and Murdoch’s management style.
The suit underlines that while Murdoch owns just 12% of the company, he controls 40% of its voting stock, giving him an iron grip on the direction of the global giant.
“His record running News Corp is replete with questionable governance practices, excessive compensation and insider dealings, with little or no opposition or even apparent oversight from the board.”
“Throughout his tenure, Murdoch has treated News Corp like a wholly owned family candy store.”
Amalgamated Bank of New York manages represents groups that own over one million News Corp shares.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
