When a public company director unexpectedly resigns with immediate effect, shareholders deserve an explanation, particularly where there has been boardroom disagreements or a major incident around governance, business decision-making or policy.
On this score, James Murdoch deserves credit for insisting that News Corp file a copy of his two paragraph resignation letter with the US Securities and Exchange Commission (SEC).
Strangely, the separate statement from father Rupert and older brother Lachlan thanking James for his work and wishing him the best for the future was not included in News Corp’s official SEC filing. The company’s formal contribution was as follows:
On July 31, News Corp received a letter from James R Murdoch tendering his resignation from the company’s board, effective immediately. Mr Murdoch informed the company that his resignation was due to disagreements over certain editorial content published by the company’s news outlets and certain other strategic decisions.
The timing of the announcement was presumably deliberately placed in the dead zone straight after US markets closed on Friday night in New York which was around 7am on Saturday AEST.
In terms of whistleblower resignation statements, the single sentence from James — “my resignation is due to disagreements over certain editorial content published by the company’s news outlets and certain other strategic decisions” — was about as minimalist as you could get, but it was better than the usual silence or lies about wanting to spend more time with the family.
So, what are the likely editorial issues?
The global coverage has almost universally pointed to this Daily Beast piece from January where James went public with his criticisms about the climate denialism and bushfire coverage in News Corp’s Australian outlets.
But the climate change debate has disappeared with COVID-19, so what will have triggered the resignation now?
News Corp’s proximity to and support of Donald Trump is the most obvious trigger point. Neither The Wall Street Journal nor the New York Post have formally disowned Trump, or even applied serious and sustained editorial pressure.
Having donated almost $1 million to the Biden campaign in recent months, the last thing James wants is any proximity to media outlets which support Trump. Don’t blame him if Trump gets re-elected, that will be one for Lachlan and Rupert to defend.
Fox News has always been the most embarrassing outlet for the more moderate elements of the Murdoch family. Who can forget Elisabeth Murdoch’s then husband Matthew Freud telling The New York Times in 2010 that he was “ashamed and sickened by Roger Ailes’s horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to”.
Asked about these Freud comments at the 2010 News Corp AGM in New York, Rupert said: “My public and private response is that he couldn’t have been more wrong.”
Rupert’s children had long regarded Ailes as toxic, including eldest son Lachlan who badly fell out with the Fox News founder ahead of his dramatic 2005 News Corp resignation when he returned to Australia.
So when Lachlan quit as Ten Network chairman nine years later in March 2014 to rejoin the family firms as co-chairman of News Corp and 21st Century Fox, sacking Ailes was a joint project with younger brother James. They finally prevailed in 2016 as the sexual harassment claims mounted.
However, the rivalry between the brothers, which had been evident to News Corp insiders for many years, was never far from the surface.
It was James who pushed hardest for Fox’s entertainment assets to be sold to Disney for almost $100 billion last year. The deal triggered an agreement that saw Rupert’s six children each receive about $2 billion worth of Disney stock. From that moment on, James had permanent financial freedom and was a billionaire no longer dependent on his father.
When the Disney deal settled in March 2019, it was telling that James went from being joint CEO of 21st Century Fox with his father to not even serving on the slimmed-down Fox Corp board, which had Fox News as its most valuable asset. Lachlan immediately stepped up as Fox Corp CEO.
However, James hung on at News Corp as a non-executive director where at least he was helping to guide an independent CEO in Robert Thomson.
Lachlan was presumed to have his hands full running Fox Corp but he clearly remained extremely influential over the Australian newspapers housed within News Corp, along with Sky After Dark as it decisively pivoted to the right.
Indeed, when Malcolm Turnbull called to complain about the jihad News Corp’s commentators were running against him in 2018, Rupert pointedly told him to speak to Lachlan. He never tried James.
Toppling Turnbull and proposing to replace him with a hardcore right winger like Peter Dutton was presumably one of the many editorial issues which James objected to.
From a strategic point of view, the only significant pivot News Corp has made in recent months has been a continuing vigorous push into the gambling industry, which has been driven by Lachlan.
Lachlan has let it be known in the past that James had argued for News Corp to sell down its stake in REA Group, so the continuing retention of this $8.8 billion real estate advertising interest may be another point of strategic difference for James. News Corp’s market capitalisation is only US$7.5 billion so the investment in REA is easily worth more than all the company’s global newspapers and its 65% stake in Foxtel combined.
Being principled is only going to cost James about US$270,000 a year in lost News Corp board fees, but it is worth remembering that he pocketed a staggering US$70 million from 21st Century Fox in the two years to 30 June, 2018.
Having gone out with a bang on Friday night, the next question is just how vocal is James going to be now that he is free of all the constraints that come with serving on the News Corp board.
In relation to the re-election of Donald Trump, don’t be at all surprised if he chooses to be very vocal indeed.