After years of fevered speculation, Rupert Murdoch is finally to step aside as head of his media empire. Well, sort of. As expected, the Australian magnate will hand the title of CEO of 21st Century Fox to his son James. Another son, Lachlan, will be co-chairman.
However, the 84-year-old is hardly going to be spending more time with his pipe and slippers. He will remain as executive chairman, while his most senior non-family manager, the exuberantly mustachioed Chase Carey, will no longer be COO. According to the company, Rupert will remain the most senior person in the business.
On the face of it, this settles a debate about succession that has vexed shareholders for years, as Murdoch’s offspring have drifted in and out of favour, and the family business. (His daughter, Elisabeth, sold a production company to her dad for a large sum, but is currently not involved in the family firm.)
But the moves will not solve the deeper problems at the Murdoch empire, and could put the family on a collision course with powerful shareholders who want to break their companies up, believing that it is worth more in pieces than together.
Their argument is the familiar one that dogs large family businesses – that they are plagued by opaque decision-making, nepotism and that the interests of the senior management are not aligned with the shareholders. Shares in such firms regularly trade at a discount to other, similar ones with more transparent structures.
The Murdochs tacitly accepted that it should be broken up in 2013, when they split their group into two entities – News Corp and 21st Century Fox. This, however, has not placated shareholders. The focus of their ire is the dual-class share structure at both businesses, which give the Murdochs voting power out of proportion to the amount of equity they hold. At News Corp the family has about 40% of voting rights, despite them owning just 14% of shares.
In November 2014 the family narrowly fought off an attempt to change the system to a one-share-one-vote system, a vote in which an erstwhile Murdoch loyalist, Prince Alwaleed bin Talal abstained. In February he sold off almost all of his super-shares in News Corp. This is significant because the Saudi backed the family, and between them he and Murdoch could never have been outvoted. So far he has kept his 21st Century Fox shares.
If he leaves altogether, the Murdochs are exposed. They have a “poison pill” which gives them more power if anyone else’s holding reaches 15% of shares, but it is not likely that other shareholders would be happy if that ever came into play. Despite holding most of the senior positions at their business, the Murdochs’ control of their empire is weaker than it has been for years.