Murdoch Yields on Option Plan
By John M. Higgins -- Broadcasting & Cable, 10/20/2003
In a rare reversal among closely held media companies, Rupert Murdoch bowed to minority-shareholder pressure and scrapped a rich stock-options plan for News Corp. executives.
News Corp. had been pushing a plan that would have granted stock options to six top executives, with no performance targets and stretching across 10 years. The beneficiaries included Murdoch's sons James and Lachlan, Peter Chernin, and David De Voe but not Murdoch himself. The deal would have given them options exercisable at $27.24 per U.S. share.
That would have followed options on 1 million shares issued last year.
Institutional investors objected and voted against the move as excessive. Murdoch disagreed, telling reporters at News Corp.'s annual meeting that there was a "crazy misunderstanding." But he withdrew the shareholder resolution.
News Corp. is one of many major media companies in which insiders use supervoting shares to largely control the company. Murdoch controls 31% of shareholder votes but just 19% of the company's equity. Outside shareholders generally own the non-voting, and ironically named, "preferred" shares, while Murdoch owns a big chunk of "ordinary" shares, which are in fact extraordinary because they carry votes.
Comcast, Cablevision, Viacom, Cablevision Systems and Adelphia Communications are similarly structured. They allow insiders to generally keep firm control of the board of directors and major corporate events.
Murdoch has been under fire in England over the governance of BskyB. News Corp owns 35% of the British DBS company, and investors see Murdoch as moving to install his son James as its CEO. That has raised protests of nepotism at a supposedly independent satellite arm and questions about the 30-year-old's experience for such a major job.
The News Corp. team won't be financially burdened without the proposed options, having received around $40 million in bonuses last year. President and COO Chernin was again the company's most highly paid executive, collecting $17.3 million in pay, including $8 million in bonuses.
