The “belligerent” attitude of News Corporation boss Rupert Murdoch towards governance reform has prompted First Super to exit its investment in the global media company, the first time the fund has ever screened out any company from its portfolio.
Michael O’Connor, chairman of the $1.7-billion First Super, told IM Online that the fund had been pondering the move since last year’s News Corporation annual general meeting, at which 30 per cent of shareholders voted for a motion calling for an end to the tradition of Murdoch holding both the positions of chairman and chief executive.
The motion would have been passed if Murdoch’s 317 million votes, representing 40 per cent of all votes under the company’s two-tiered share structure, had been excluded.
“We were proposing very reasonable changes to the corporate governance structure,” said O’Connor, whose fund has just over 70,000 members largely in the timber, paper, furniture and joinery industries.
“It was nothing too radical and it was not only the rejection of the proposal, but also the way it was done which stunned us.
“The chief executive made it very clear there would be no changes and said that if we didn’t like the way he was running the company then we could go, so we thought that we would take his advice.”
First Super’s News Corp investment is worth around $7 million and is held through direct mandates with a number of fund managers who have now been asked to sell the shares.
“Investors in our situation have choices to make,” said O’Connor. “We could either seek to campaign for changes or we could withdraw our investment, and that is what we are doing.
“We have never screened anyone out like this before, but this company’s ongoing rejection of attempts to improve its governance is something we cannot ignore.”
O’Connor said that while the decision was prompted directly by the governance vote, he believed that issues such as the UK phone-tapping scandal were also indicative of News Corp’s approach.
“The company’s behaviour and the way it approaches various issues is reflective of its governance,” he said.
“As a super fund, we are interested in long-term investments and we are firm believers that if a company does not have a high level of governance then this will come back and haunt investors in the long run.”
The governance push at News was spearheaded by the Australian Council of Superannuation Investors, which is continuing to agitate for change at the company.