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NEW YORK – A group of institutional investors of Rupert Murdoch‘s News Corp., led by Amalgamated Bank and several municipal and union pension funds, said Monday it has filed an amended complaint alleging nepotism and failed corporate governance at the conglomerate amid the phone hacking scandal.
The updated allegations supplement a lawsuit originally filed earlier this year in Delaware Court of Chancery when shareholders challenged News Corp.’s $615 million acquisition of production firm Shine Group, which was run and majority-owned by Murdoch daughter Elisabeth Murdoch.
The recent escalation of the phone hacking issue is adding to their concern, they said. “These revelations should not have taken years to uncover and stop,” the shareholders argue in their complaint. “[They] show a culture run amuck within News Corp. and a board that provides no effective review or oversight.”
Past missteps have led to a “Murdoch discount” for News Corp.’s stock, the shareholders also argue.
The plaintiffs complained that editors implicated in the affair – including Rebekah Brooks – were consistently promoted even amid an unfolding scandal and charged that the conglomerate’s top executives must have had at least some knowledge.
“Although the scandal first came to light in 2005…it is inconceivable that Murdoch and his fellow board members would not have been aware of the illicit news gathering practices,” the plaintiffs argue.
A News Corp. spokeswoman declined to comment.
The shareholders have been seeking to block News Corp. from adding Elisabeth Murdoch to the company’s board and “to put an end to Rupert Murdoch’s use of company assets to serve personal and family agendas, without regard for public shareholders,” according to a statement.
“News Corp.’s behavior has become an egregious collection of nepotism and corporate governance failures, with a board completely unwilling to provide even the slightest level of adult supervision,” said Jay Eisenhofer, co-managing director of Grant & Eisenhofer and co-lead counsel to shareholders. “The result has been a piling on of questionable deals, a waste of corporate resources, a starring role in a blockbuster scandal, and a gigantic public relations disaster. It is way past time that the News Corp. board step in and initiate serious changes to the company’s corporate governance.”
Added Mark Lebovitch of Bernstein Litowitz: “The latest revelations serve as the final straw for News Corp shareholders, who are now fighting to keep another Murdoch family member from joining the board and perpetuating the culture that has made News Corp. a family fiefdom for so long.”
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