The impetus for reform at News Corporation, indeed for rolling Rupert Murdoch as chairman, had dissipated months before the annual meeting at Fox Studios in Los Angeles this morning.
In the end, it was a subdued affair. Despite the predictable opposition to its prodigious pay and poor corporate governance, all motions were comfortably passed in the company's favour. Rupert Murdoch spoke for 40 per cent of the stock. He always had the numbers.
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Some companies will be nervous ahead of this AGM season as shareholders for the first time have the ability to vote to spill a board.
And the News Corp share price - that ultimate barometer of shareholder wellbeing – had sapped the momentum of dissent which was so pervasive last year as the high drama of the phone tapping scandal in the UK was unfolding.
After all, the stock, boosted by strong profit growth and by plans to split the media group's entertainment and publishing businesses into two separate publicly listed companies, is up nearly 40 per cent since the beginning of the year. It seemed almost churlish for shareholders to complain.
As Rupert Murdoch had tweeted last Thursday as he prepared for the meeting, “Signs pretty peaceful, but any shareholders with complaints should take profits and sell!”
In the face of questions this morning from disaffected pension fund reps and beleaguered shareholder activists, Murdoch and his lieutenants Andrew Knight and Viet Dinh politely elucidated again their “like it or lump it” philosophy.
How did Murdoch's tweeting square with comments by Viet Dinh, an independent director, about listening to shareholder concerns, asked a fund manager.
It didn't. Yet this was a forlorn “gotcha” moment.
“We always consider what shareholders have to say,” responded the chairman curtly, before fielding a final Dorothy Dixer about how wonderful News Corp's news was, and wrapping up the meeting in a slick hour and 21 minutes.
There you have it. You can run a systematically criminal enterprise, albeit unwittingly, which leads to multiple police probes and 60 arrests, but as long as the share price is up … well, like it or lump it.
It's all about the shares. And there can be no quibbling from a financial management perspective.
As the phone hacking scandal broke in the UK, News moved swiftly to head off any share price damage – and consequent exposure to a shareholder class action – by launching a massive share buy-back.
Signs pretty peaceful, but any shareholders with complaints should take profits and sell!
So far the scandal has cost $US224 million, not much for a company of this size, and its legal ramifications have so far been contained to Great Britain.
Then, in a deft strategic move a couple of months ago Murdoch announced plans to split the company into two, hiving off the publishing assets from entertainment, again sustaining the share price. The market adores a demerger.
If there is a nexus between governance and performance, it is not obvious in the case of News, or perhaps it is subject to a “lag effect”.
News Corp's pay has always been too high, its corporate governance a relic of the 1970s and its board is about as independent as your average Perth junior mining company.
But the 81-year old media mogul, despite his travails of the past two years, is safe for now, thanks to a buoyant share price and rising profits.
What really got the goat of Australian shareholders this year though was that they had even less say in the affairs of News than ever.
For 20 years they have had to tolerate News Corp 'super-share' structure. That is, while Rupert Murdoch has less than a 15 per cent economic interest in News Corp he controls the group with an iron fist thanks to its dual classes of shares.
The Murdochs own the Class B shares which carry a vote, unlike the Class A shares. They own nearly 40 per cent of this voting stock. Add that to the 7 per cent held by the Saudi Prince Alwaleed bin Talal, a friend of the family, and the result of the annual meeting was always academic.
For overseas shareholders, Australians for instance, there was another setback for shareholder democracy this year – the 'latest gerrymander' as the critics have dubbed it.
News has suspended half the voting rights of its B class shares who were not resident in the US. This was, rather conveniently, to comply with US federal laws requiring owners of a broadcast licence to have no more than 25 per cent of their shares held by non-US shareholders.
So what little say us foreigners enjoyed in the proceedings had already been chopped in half.
So how does News rack up against the rest on the governance front? Poorly, is the answer.
The resolutions to the meeting tell the story. As far as the resolutions to elect and re-elect directors go, the company once more ends up with a board which is independent in name only.
Of the 14 directors, five are executives. Two of the ‘‘independent directors’’, Lachlan Murdoch and Rod Eddington, are former executives, and a third, the opera singer Natalie Bancroft, has a voting agreement with the Murdoch family which arises from the News Corp acquisition of Dow Jones and the Wall Street Journal.
There has been opposition too to the election of Rupert Murdoch’s other son, James Murdoch, who had presided over the scandal-plagued operations in the UK.
Incidentally, one questioner at the meeting raised the irony of the appointment of a new director, the former Colombian president Alvaro Uribe, as Uribe had been subject to claims in Colombia about the illegal monitoring of the phones of his political opponents.
In any case, all were elected in accordance with Class B shareholder wishes.
As was the case last year, without the dual share structure, the Murdoch’s would have failed to win 50 per cent of the vote and many of the company resolutions would not have been passed.
The next matter in contention, Item 3 on executive pay, was precisely one of these.
Pay for key executives was up 24 per cent to $US92 million for the year in cash terms and up 6 per cent to $US125 million in total package terms. Respectively, Rupert Murdoch enjoyed a rise of 7.1 per cent to $US26.5 million cash while his total package was down 9.8 per cent to $US30 million.
Against that, the News’ share price was up 26 per cent for the year although net profit was down 57 per cent to $US1.2 billion, operating cash flow was off 15 per cent to $US3.8 billion and return on equity stood at 4.3 per cent, up 9.9 per cent on the prior year.
Despite the scandals, executives received 83 per cent of their targeted bonus levels, including $US10.4 million to Rupert Murdoch and $US5 million to James Murdoch – who had sacrificed his $US6 million bonus the year before thanks to the UK phone tapping.
Roger Aisles, the boss of Fox News, picked up a $US9 million bonus. News did adjust its bonuses lower to account for the phone hacking scandal but not punitively so. In fact the US$224 million in costs incurred by News Corp from the phone hacking scandal in 2012 were excluded from the earnings measures laid down to assess the overall performance.
In relative terms, as well as absolute terms, News pays. Total cash pay for the top executives in 2012 was $US65.5 million or nearly two per cent of operating cash flow.
Compare that with BHP, a company much larger than News. Its top nine were paid $US19.2 million in cash, one third of News Corp’s top five. Moving along, the all important Resolution 6, that the company’s dual share structure be eliminated went down in the vote, as anticipated.
In the US, dual share structures are far more common than in Australia where they are considered, in governance terms, paleolithic. In its defence, the board argued that the dual structure and consequent Murdoch control ensured flexibility and management focus to deliver for shareholders.
On last year’s performance, it is hard to argue against this. In terms of outlook though there is a fair consensus in the market that reform at News would enhance value in the longer term.
Once again, as evinced by the meeting today, the majority of News shareholders cannot hold management accountable for their decisions.
And so it is that, for another year, the media mogul Rupert Murdoch, with just six demonstrably independent directors on a board of 14, still controls the media empire he built, despite all the scandal, but with ownership of just 14 per cent of the stock.