Learning To Run A Company By Running

Michael Hedges September 24, 2012 Follow on Twitter

Whether rules are meant to be followed or broken is more than a simple debate about economic theory. Media proprietors with competitive marketplace challenges regularly walk right up to the line. Even wiggling toes over the line is considered acceptable. There are consequences, usually, for plunging in.

“To date there is no evidence that (BSkyB) was directly or indirectly involved in any of the wrongdoing either admitted or alleged to have taken place a News of the World or the Sun,” reported UK media regulator OFCOM (September 20). “We do not consider, having taken into account all the relevant factors, that on the evidence available to date (BSkyB) is no longer fit and proper to hold broadcast licenses.” Under UK law the media regulator periodically reviews a broadcaster’s fitness as a licensee. A review of BSkyB, minority owned (39.1%) by News Corporation, commenced last July coincident with the closing of tabloid News Of The World by News Group Newspapers, a wholly owned subsidiary of News International, which is wholly owned by News Corporation, as certain “wrongdoings” became evident. News Corporation had sought to acquire shares in BSkyB it did not already own but withdrew that bid as insurmountable challenges also became evident.

But the OFCOM report was critical of James Murdoch, who had been BSkyB’s chairman until April 2012, News International chairman until February 2012 and News Group Newspapers chairman until November 2011. As the largest shareholder in BSkyB, News Corporation, its subsidiaries and executives were held to account in the regulator’s review for the now legendary scandal involving alleged phone hacking and bribery that took place when James Murdoch, youngest son of Rupert Murdoch, had at the very least titular authority. Said the OFCOM report, James Murdoch “repeatedly fell short of the conduct to be expected of as a chief executive and chairman.”

“OFCOM is right to conclude that (BSkyB) is a fit and proper broadcaster,” said the official BSkyB statement. “As a company, we are committed to high standards of governance and we take our regulatory obligations extremely seriously. As OFCOM acknowledges, our track record of compliance in broadcasting is good.” Nary a voice within the UK media sphere disagreed. BSkyB is well managed, well regarded and, well, highly successful, credited inside and out to CEO Jeremy Darroch.

News Corporation was “pleased that OFCOM recognizes BSkyB as a fit and proper holder of a broadcast license,” said its statement. “We disagree, however, with certain of the report's statements about James Murdoch's prior actions as an executive and director, which are not at all substantiated by evidence. As OFCOM itself acknowledged, James deserves credit for his role as chief executive, then chairman and now non-executive director, in leading (BSkyB) to an outstanding record as a broadcaster, including its excellent compliance record.”

As if to underscore disagreement with the UK regulator – and perhaps to further distance James Murdoch from the UK phone hacking trials, literal and figurative – the company is set to give him a new job, reported the Los Angeles Times (September 21), citing “people familiar with the plans.” Reportedly, he will take charge of much of News Corporation’s US television business, including the Fox Network, the FX channel, Fox International and the National Geographic channel. Not included in this new mandate are Fox News and the 27 local owned and operated television stations, which remain firmly under the control of former Republican Party political operative Roger Ailes. James Murdoch recently relocated from the UK to New York City and, it seems, will be spending more time in Los Angeles “to learn more about the television business.”

To date 80 people, many once or currently employed by News Group Newspapers, have been arrested, some charged with specific offenses, in the ongoing UK investigations. In November the Leveson Inquiry will submit its report on media ethics based on nearly a year of testimony and will not, according to the tea-leaves, be kind to the British newspaper publishers. Tighter regulation is widely expected. This past summer Rupert Murdoch indicated that News Corporation will soon be split into two companies; one for television and movies and the other, essentially, for newspapers. Shareholders were overjoyed.

There have been no criminal trials nor convictions of any person related to the UK phone hacking and bribery charges. Such legal proceedings may begin next year and, perhaps, add to the body of “misconduct” evidence. As that winds its way through British courts attention may well follow James Murdoch to the United States. The US Justice Department is conducting a low-key investigation of the “misconduct” under the Foreign Corrupt Practices Act, which has very sharp teeth. “Why hasn’t News Corporation been charged?” asked former New York Governor Eliot Spitzer, who made his chops chasing corruption as a Manhattan District Attorney, writing in Slate.com (September 21). The answer seems obvious with right-wing Fox News breathing fire during the US Presidential election campaign.

The arrest in August of former News International chief lawyer Tom Crone came from information supplied by the Management and Standards Committee formed by the News Corporation board. After the most recent arrest, of a tabloid Sun employee, current News International CEO Tom Mockridge told staff “there was no expectation we would still be in this process this much further down the line,” quoted by the Guardian (September 20).

Rules and regulations are meant to provide a social framework for commercial endeavors when pure market forces may be ineffective. At least that’s the generally accepted modern theory. Pizzerias follow hygiene rules lest creepy things start crawling over the sausage. Media businesses are no different.

See also in ftm Knowledge

Rupert Murdoch and News Corporation

News Corporation is a highly competitive media giant a global, multi-media footprint. From paywalls and pay-TV to tabloid troubles and new ventures the media industry watches Rupert Murdoch. Update includes family ties, succession plans and other News Of The World. 210 pages PDF (September 2012)

Order here