Report: Murdoch “Not a Fit Person” to Run News Corp.

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How did News Corp. get to this point? For the essential backstory on Rupert Murdoch’s empire — and the scandal that’s threatening to bring it down — watch our film Murdoch’s Scandal. Also take a look at our full interview with MP Tom Watson, a member of the Culture, Media and Sport committee. He explains what it was like to investigate News Corp., and talks of the extreme tactics the company took to monitor his activities.

In a much-anticipated report released today, a Parliamentary committee concluded that media mogul Rupert Murdoch “is not a fit person to exercise the stewardship of a major international company.” The finding, which was approved by a narrow 6 to 4 vote, pertains to Murdoch’s persistent claim — one he repeated last week during the Leveson inquiry into British press standards — that he was not aware of the rampant phone hacking at his now-defunct tabloid newspaper News of The World. Rather, Murdoch says, he, too, was a victim of its cover-up by those he trusted.

More than half the committee didn’t buy this argument, writing:

… at all relevant times Rupert Murdoch did not take steps to become fully informed about phone-hacking, he turned a blind eye and exhibited willful blindness to what was going on in his companies and publications. This culture, we consider, permeated from the top throughout the organisation
and speaks volumes about the lack of effective corporate governance at News Corporation and News International.

In addition, both Rupert and his son, James, failed to “investigate properly” the allegations and ignored “evidence of wrongdoing,” thus exhibiting “willful blindness.” Both men, the report states, “should ultimately be prepared to take full responsibility.”

The committee also found Colin Myler and Tom Crone, the former editor and counsel for News of the World, and Les Hinton, former CEO of News International had misled Parliament during 2009 testimony about how widespread the phone hacking was at the newspaper.

The committee will pass its report along to the full Parliament, where its findings and “whether the men are guilty of contempt of the legislature” will be voted on. It’s unclear as to how the this will shake out. “Select committee reports always carry more clout if they’re unanimous,” writes BBC Parliamentary correspondent Mark D’Arcy. “This one is clearly not — with key votes breaking down on party lines.”

The report also puts Ofcom, the British media regulatory agency, in the position of whether to take action against the company — and in particular, writes The Telegraph, its ownership stake in lucrative satellite TV network BSkyB:

The report leaves BSkyB vulnerable under Ofcom’s powerful “fit and proper” test, whereby the regulator can stake away the company’s coveted broadcasting licence if it does not regard its controlling shareholders or directors as suitable.

This is potentially a huge blow to News Corp. — and just the latest setback in its BSkyB dealings over the past year, including the April resignation of James Murdoch as CEO of the satellite television company. In Murdoch’s Scandal, former Deputy Prime Minister Lord John Prescott explained the significance of BSkyB to the Murdoch empire:

If you look about the money the Murdochs get from BSkyB, it’s money, money, money. And the money then keeps on keeping funding papers that don’t make money. But papers bring him influence more than television does. Ask yourself, does that sound to be a good business model? Whether it’s good or not, it’s certainly a business model.

Over the years, News Corp. has made less and less money from newspapers — and much more of it via satellite TV, cable programming and filmed entertainment.

But things might stay status quo, at least for a time, according to Businessweek:

On Tuesday morning, Ofcom released a statement that was quickly gobbled up by the press: “We note the publication of the Culture, Media and Sport Committee report, which we are reading with interest. Ofcom has a duty under the Broadcasting Acts 1990 and 1996 to be satisfied that any person holding a broadcasting license is, and remains, fit and proper to do so. Ofcom is continuing to assess the evidence that may assist it in discharging these duties. As part of this we are considering the Committee report.”

Translation: For the time being, News Corp. may carry on as usual.

Businessweek also notes that, since it was formed in 2003, Ofcom has only once revoked a license.

It’s unclear as to how News Corp. shareholders will react, though The Guardian reports that their advisers to major shareholders were “deeply troubled” by Rupert Murdoch’s recent testimony in front of the Leveson inquiry, particularly in terms of BSkyB and the “ethics of top management.”

In a press release, News Corp. says it’s “carefully reviewing the Select Committee’s report.” The company “acknowledges significant wrongdoing at News of the World and apologizes to everyone whose privacy was invaded.”

Update [May 1, 2012, 2:03 p.m.]: In a letter written today to Dow Jones employees and obtained by Jim Romenesko, Rupert Murdoch addressed the committee’s report:

I recognize that for all of us – myself in particular – it is difficult to read many of the report’s findings. But we have done the most difficult part, which has been to take a long, hard and honest look at our past mistakes. There is no easy way around this, but I am proud to say that we have been working hard to put things right.

Murdoch also notes that

the opportunity to emerge from this difficult period a stronger, better company has never been greater and I will look to each of you to help me ensure that News Corporation’s next 60 years are more vital and successful than ever.

News Corp. purchased majority control of Dow Jones, which operates the Wall Street Journal, in 2007.

Update [May 1, 2012, 2:10 p.m.]: News Corp. issued a press release responding to the committee’s report, stating that while “hard truths have emerged,” the company

regrets … that the Select Committee’s analysis of the factual record was followed by some commentary that we, and indeed several members of the committee, consider unjustified and highly partisan. These remarks divided the members along party lines.

News Corp. also says it has “already confronted and … acted on the failings documented in the Report.”

Photo: Rupert Murdoch being driven from The High Court in London with his wife Wendy Deng Murdoch and son Lachlan after giving evidence to the Leveson inquiry. (Rex Features via AP Images)
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