Acting Responsibly

I have enjoyed my several weeks in Blackhawk, but I am preparing to return to New York City on Monday. The first two weeks of July are normally a quiet time for news, with many families starting vacations that often go into August. In most years this is true for New York, Washington D.C. and London, but this year it has been very different.

Back in July of ‘07, I wrote, CRM from the Expert, Thomas Keller. In this entry, I wrote about an early July trip to the French Laundry and a wonderful several days Mary Claire & I spent in Napa Valley with friends. I concluded with, “Now I am back at work looking for ‘high growth’ media acquisitions, on the west coast for another week & I must admit that I find it a bit odd that Rupert Murdoch’s offer for Dow Jones has not been accepted by the Bancrost family or their representatives and the board of Dow Jones. I join the former CEO of Dow Jones, Peter R. Kann, in wondering why Ron Burkle, a supermarket magnate & Eric Greenspan, former CEO of Intermix, the original parent of MySpace, would make better owners than Mr. Murdoch, who has spent his entire career in the media space & clearly wants to invest and expand the Wall Street Journal franchise.”

We have learned over the past two weeks that the News of the World phone-hacking scandal has not only put the company that Rupert Murdoch and his family control, News Corp, at risk, but the coalition government of David Cameron and Nick Clegg also finds itself in a very difficult position. After some early stonewalling by Rupert & James Murdoch two weeks ago, we have seen the 150+ year-old Sunday tabloid fold with more than 200 employees losing their jobs. We have seen Rebekah Brooks try unsuccessfully to hang on to her position and finally resign from News Corp toward the end of the week (she was arrested on Sunday in connection with the scandal). And Les Hinton, a longtime Murdoch executive & confidant, ended the week by resigning from his CEO position at Dow Jones. (Many of the reported phone-hacking activities began on his watch as the executive responsible for News of the World.) By the end of the week the Murdochs had also withdrawn their bid to acquire the 60%+ of British Sky Broadcasting they do not own. Clearly, though, their 39% ownership has given them, up until now, effective control under James Murdoch. Both Murdochs have now agreed to testify before Parliament, after initially rejecting this approach, but only after being summoned. Damage control has also become necessary in the U.S., where their broadcast holdings require government licenses. (FT July 15, 2011) They have turned to the Washington D.C. firm, Williams & Connolly and their well-known criminal defense lawyer, Brendan V. Sullivan Jr. for advice & counsel. (NYT July 16, 2011)

I would not bet against the Murdochs remaining in control of News Corp, although some have speculated that Rupert Murdoch could be forced to give up the CEO title & abandon his dream of having his children succeed him in controlling the company he has built over the past half century. I sense, though, that the days of one man and his media holdings having so much influence & access to our political leaders in the U.K. & the U.S. are at an end. We need to hold the officers of our public corporations, particularly those that control significant media assets, to a high standard of behavior and the same is true of those that we elect to public office to represent us. We should never have to question if they have been acting responsibly, especially over long periods of time. In the end, Murdoch has been successful because he is tenacious & persistent and this will probably carry the day, but at 80 years old his reach & influence will be decreased and this will be at a real cost, not only to him & his family, but to his employees, his shareholders and the public’s trust, which has been betrayed.