May 29th 2017

Taming the Murdochs’ Toxic Corporate Culture


The commentary by Lucy Marcus, “Taming News Corp’s Toxic Culture,” has been corrected and revised to take account of the 2013 division of News Corporation into News Corp and 21st Century Fox, the owner of Fox News. 

We apologizes for any inconvenience.


LONDON – “When someone tells you who they are,” counsels the novelist Maya Angelou, “believe them the first time.” The same advice applies to companies. Yet, though Rupert Murdoch’s companies have been telling us about themselves for years, many, from board members to regulators, have been effectively covering their ears.

Consider Fox News, a 21st Century Fox subsidiary. Despite the racist and sexist messages that have been a staple of Fox News’s reporting and commentary since the network was launched in 1996, it took more than 20 lawsuits alleging racial and sexual discrimination to bring real recognition to the problem. The unsurprising truth is that the company has long prioritized profit over ethics, treasuring the men who bring in the money, however badly they behave – or however flagrantly they violate the rights or dignity of their less lucrative colleagues.

During his 20-year tenure, Roger Ailes, the former CEO of Fox News, fostered an environment rife with bullying, harassment, and misconduct. And, apparently, he led by example: before he died earlier this month, ten women publicly accused him of sexual harassment, while at least 20 more privately accused him of some kind of workplace harassment. Those accusations got him forced out of Fox News last year.

One person who eagerly followed Ailes’s example is Bill O’Reilly. During O’Reilly’s 21 years at Fox News, the network’s biggest star and its parent company paid five women a total of $13 million to drop litigation or remain publicly silent about their sexual-harassment allegations against him. Two of those settlements came after O’Reilly’s own departure.

The corporate culture that enabled Ailes and O’Reilly to behave as they did was apparent even during their exit. Both were forced out only after they became liabilities. In O’Reilly’s case, Fox News acted only after sponsors, worried about their own reputations, pulled their advertisements from his show, The O’Reilly Factor. And the massive exit packages they received – $40 million for Ailes and up to $25 million for O’Reilly – far exceeded the settlements quietly paid to their victims, who were forced out of the company long before their harassers were.

The problem has long pervaded News Corp and 21st Century Fox, both formally spun off from the original News Corporation in 2013, after the News of the World scandal in 2011, when employees of the British tabloid were accused of engaging in phone hacking, police bribery, and exercising improper influence. A long-serving editor of the British Sun newspaper, for example, was recently dismissed for a column making a racist comparison between a soccer player and a gorilla.

News Corp’s board of directors, which at the time of the hacking scandal included venture capitalist Thomas Perkins (who likened the so-called war on the top 1% of income earners to the Nazis’ persecution of the Jews), was a textbook example of poor corporate governance. After the hacking scandal erupted, the board was uncritically supportive of Murdoch. Though Murdoch stepped down as News Corp’s CEO in 2013, he remains Executive Chairman.

Though News Corp and 21st Century Fox split into separate entities, not much has really changed since then. While board members have come and gone at News Corp (they now include José María Aznar, a former prime minister of Spain, and Kelly Ayotte, a recently defeated US senator), the lax attitude to oversight and accountability remains as entrenched as ever across Murdoch-controlled companies.

The board of 21st Century Fox, which is co-chaired by Murdoch and his son Lachlan Murdoch, and whose CEO is his other son, James Murdoch, apparently fails to grasp that corporate governance is not just about protecting the company’s bottom line. It is about detecting and addressing problems affecting all of those who interact with the organization including, for example, the family of Seth Rich, the murder victim around whom Fox News host Sean Hannity has spun a bizarre – and thoroughly refuted – conspiracy theory.

Given the Murdoch companies’ far-reaching influence, the failures of their boards are all the more consequential. Their senior executives have long enjoyed extraordinary access to the UK government, for example. In one 18-month period – from April 2015 to September 2016 – leaders of Murdoch-owned companies, including Murdoch himself, had some 20 official meetings with senior government representatives, including the prime minister and the chancellor of the exchequer. That is more than any other UK media organization, and it doesn’t include informal gatherings, dinner parties, and events surrounding high-level meetings.

Likewise, in the United States, Murdoch apparently speaks with President Donald Trump himself on a regular basis. When UK politician Michael Gove and German journalist Kai Diekmann conducted the first post-election interview by a foreign newspaper with then-President-Elect Trump, Murdoch was in the room, though that detail went unreported for some time.

Trump’s daughter, Ivanka, who works closely with her father in the White House, is also close to the Murdochs. Until the election, she served as a trustee of the trust fund established for Murdoch’s youngest children, administering nearly $300 million in shares in 21st Century Fox and News Corp (both spinoffs of the original News Corporation) on their behalf.

Murdoch’s companies have shown us who and what they really are. They are organizations that wield massive power and influence, which they have no qualms about using. They have hacked people’s phones with reckless abandon. The have stuck by employees who behave in unethical ways, while punishing their victims. Most important, even after a major scandal, and even after a company split, they have reverted to business as usual as soon as public attention has waned.

It is time for us to believe what News Corp and 21st Century Fox are saying. More to the point, it is time for those in a position to rein them in to believe what Murdoch’s companies are saying – beginning with the independent British media regulator Ofcom, which is now deciding whether 21st Century Fox, and the Murdoch family that runs it, is fit to proceed with its acquisition of Sky.

News Corp and 21st Century Fox should serve as a cautionary tale for regulators, independent board members, and investors alike. When dealing with major companies and the sometimes-formidable figures who run them, vigilant and rigorous oversight is vital. For companies like those controlled by the Murdochs, it seems clear that root-and-branch change will not happen otherwise.


Lucy P. Marcus is CEO of Marcus Venture Consulting.

Copyright: Project Syndicate, 2017.
www.project-syndicate.org



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