Rupert Murdoch’s controversial proposal to move to America is producing some fairly predictable media coverage, as Terry Television explains.
There’s a litmus test for business coverage in our papers and on television and that’s the move by Rupert Murdoch and News Corporation to the US. Mostly the stories and commentary in the News Ltd papers have been predictably partisan, especially Terry “His Master’s Voice” McCrann, Robert Gottliebsen and Bryan Frith.
An honourable mention for impartiality would have to be given to Jane Schulze, The Australian’s media business writer. She has tried to be down the middle within the constraints of where she works.
McCrann’s attacks have verged on the too personal, calling people ‘half brain dead’ or worse. He should know better. Such intemperate language from someone who knows better and has been insulted in the past in whispering campaigns against him, do not bring credit to him or his reputation.
At Fairfax, some of the commentary has been a touch rabid, with some boring even handedness and looking at the issues. Stephen Batholomeusz on The Age comes to mind. In contrast Alan Kohler has shown an ability to cut through and get to the point, as you can see from this piece in The Age and The Sydney Morning Herald on Saturday, October 2.
The ABC has veered from the predictable 7.30 Report to Kohler’s interviews and commentary on Inside Business.
In commercial television, the Nine Network’s Business Sunday is compromised by having HMV McCrann as its main commentator and Ross Greenwood isn’t up to the mark, largely because he is so over-committed.
This Sunday the program looked at the issue in a report by Ali Moore, and revealed its deficiencies. One of the interviews was the respected Bruce Teele, chairman of Australian Foundation Investment Co and former chairman at JB Were when it was independent and the real power in Australian money. And when it was Rupert Murdoch’s main adviser and fund raiser here and when he went overseas, one of the main supporters and cheer leaders.
AFIC is a big investor in News Corp. As Business Sunday said, a member of the company’s top 20 list. It is there for investment reasons of course, but also those historical and firmly entrenched personal links that reach back decades. Afterall, Bruce Teele still attends the same church in Camberwell each Sunday where Rupert’s grandfather was the local minister and where his father grew up.
Bruce Teele was at the centre of that relationship between News Corp and JB Were for years. And while his view is to be respected and to be admired, those close links should have been pointed out.
Therefore, it was no surprise that Teele was a strong supporter on Business Sunday this morning of the Murdoch/News move. So was Peter Morgan of 452 Capital, a strong corporate governance supporter, which would be a bit of a surprise, but he has always been a strong supporter of the Murdoch style of business.
But Business Sunday should have challenged his contention that shareholders (all) will be better off. Some won’t because if they have held any shares from before September 15, 1985 then they lose the capital gains tax exemption.
But this was the first go at this issue by Business Sunday. So where will they turn up on October 26, Adelaide for the News meeting or Sydney for the PBL meeting at the same time, or to neither?
On Seven and on Sky News, Michael Pascoe has also been sceptical of the US ambitions of Murdoch, quite rightly wondering about the richness of the Queensland Press deal, and the fact that the Murdochs benefit more than other shareholders.
On Inside Business today Kohler talked to Colin Melvin, the man in charge of Corporate Governance issues at Hermes, the big UK pension fund and one of the global fund managers behind last week’s criticism of News for failing to maintain Australian corporate governance standards in the shift to the US.
Far from being half brain dead or an investment outsider, Hermes for example manages the biggest pension fund in the UK, that of British Telecom and has around 200 big clients. Melvin said his fund had not made up its mind but was thinking of opposing the News move to shift its domicile at the meetings in October.
But he did make it clear how simple it could be for Murdoch (Father and Son) to get approval when he agreed that if News did decide to change its mind and adopt Australian corporate governance rules, that would be enough to win the approval of most fund managers.
Many commentators, especially in News Ltd outlets, have derided this approach saying that in the US News would be covered by the tough rules of the Sarbanes Oxley Act. And yes it would, for doing business in America, and for issues like audit independence and the independence of the board and disclosure.
But shareholder rights are controlled by state legislation. Companies do not register federally in the US (as they now do in Australia where there are no state laws covering the incorporation of companies), so big companies cast around for board-friendly states like Delaware. The Sarbanes Oxley Act, nor the rules of the New York Stock Exchange, do not and cannot force companies to change whatever constitutions they adopt under state law.
There are companies listed on the NYSE with different classes of shares with different rules and laws to entrench controlling shareholders, directors and management, often at the expense of minority shareholders or those hoping to push for control and board changes.
Those laws would not be allowed in Australia! They are allowed in the US, even under the Sarbanes Oxley Act. So claims by Murdoch the younger and his various HMV commentators that News is moving to a tougher corporate governance environment are just rubbish.
Australia has one set of laws covering corporate behaviour. The US has state and Federal laws and this allows companies in the US to arbitrage, agreeing to the tougher Federal rules that allows them to be listed on the stock exchanges, while being governed by the laws of the state in which they have incorporated.
Delaware, having weaker rules which favour managements and large shareholders, is the state of choice for many companies. For instance the rights of shareholders and what boards and directors can and cannot do are set by state laws, not Federal, as they are here.
For years American and local investors criticised Australian accounting standards for being weaker than the US in a number of areas, such as the accounting for and valuation of intangible assets. Those are changing in 2005-2006 to the much tougher international standards.
There is therefore no more reason to be based in Australia. News Corp could have gone to the US at any time in the past. The tougher accounting rules and the higher level of corporate governance here in Australia which is countrywide, meant there was no real reason to remain here.
That’s why I reckon Rupe and the family want to move out of Australia. They can no longer use our loser accounting rules to their benefit.
News has been an American company for years for all intents and purposes and has managed to do a number of big deals (Direct TV for example) while being based here. That wouldn’t have changed had it stayed here.
And finally it’s no wonder that local insitutions who are unhappy with the move or oppose it are reluctant to be identified. They know they will be bagged and attacked by the HMV commentators in the News Ltd papers. Such a sad thing, really, and just another example of the danger of giving one mogul so much power over the Australian media and public debate.