News Corporation fires back at advisory services


In response to ISS and Glass Lewis advising institutional investor clients to vote against re-election of certain directors, the board of directors at News Corporation has send shareholders a note urging support for the entire slate. It also calls for yes votes on an advisory item regarding executive compensation.

The statement from the board of directors singled out ISS by name. “The ISS report itself shows News Corporation delivered extraordinary Total Shareholder Return (TSR) both on a stand alone basis and in comparison with the peer group selected by ISS,” the letter stated. That TSR, which the letter said was calculated by ISS, was 49.47% for one year, compared to 32.96% for Comcast, 21.85% for Disney, 37.39% for CBS, 19.39% for Omnicom Group and minus-5.34% for Dish Network.

“ISS’s disproportionate focus on the News of the World matter is misguided. Our litigation exposure to the News of the World matter could affect News Corporation’s results of operations and financial condition, and we are taking this matter very seriously. However, our broad, diverse group of businesses across the globe is extremely strong today. The drivers of our businesses are intact, our position is strong and our future is promising. Our fundamental goals at News Corporation are to produce sustained, meaningful value for stockholders, provide outstanding content and services to customers and consumers, and do it with integrity. These goals are interrelated and all three are critically important,” the letter from the board stated.

As for the advisory vote on endorsing the board’s compensation of top executives, the letter insisted that 67% of CEO Rupert Murdoch’s compensation opportunity for the past year was performance based and that the recent amendment of COO Chase Carey’s employment contract made it more “shareholder friendly” in that it reduced his base salary by 50% and increased the portion based on performance.

“Certain proxy advisory firms, including ISS, fail to adequately take into account the significant reductions in base salary and significant increase in at-risk compensation and performance-based long-term incentives resulting from the amendment to Mr. Carey’s employment agreement and therefore discount the overall benefit to stockholders from this amendment,” said the letter, again taking ISS to task for its recommendation to vote “no” on the executive compensation issue.

The News Corporation annual shareholders meeting is set for Friday, October 21 in Los Angeles.

RBR-TVBR observation: As noted before, “no” votes will be entirely symbolic. The executive compensation vote is strictly advisory and the directors need only a single vote for election since there is no competing slate. Still, it will be interesting to see how many of the 60% of votes not personally controlled by Rupert Murdoch are voted against the director slate and the compensation item.