Murdoch shareholders should vote with their feet

The News Corporation AGM in Los Angeles went off with barely a hitch on Friday. Rupert was apparently his normal combative self. There was the usual words of contrition in relation to phone hacking and everything was voted through on the nod.

Rupert reigns supreme. The most compliant board of directors in corporate history remains in place. The façade of proper governance continues.

All this despite various institutional shareholders sabre rattling in advance and attempting to vote down the re-election of various directors. Christian Brothers Investment Services (CBIS) for example, tabled a resolution to separate the roles of chairman and chief executive, positions currently held by Rupert, and instead replace them with an independent chairman. It was rejected.

In fact, some of the world's largest investors voted against his re-election, and that of his sons, to the News Corp board. They also did not approve of the $33m (£21m) he was paid as chairman and chief executive this year.

None of this matters one jot. Murdoch owns 12 per cent of the company but controls about 40 per cent the votes because of News Corp's two classes of shares which ensure that the Murdoch family can vote down anything it doesn’t like. Pity the poor institutional shareholder.

Well no not really, in fact it is difficult to have any real sympathy for the institutions on this one because they are trying to have it both ways. They want to have their cake and eat it (I’ve never understood that phrase, I mean what else are you supposed to do with cake?). The institutions want influence, but they also want the money ie. dividend and capital growth.

The problem is they all knew what News Corp was like when they signed up and they knew that influence and proper corporate governance were not on offer. It’s all a bit late to start bleating now!

Of course if they really feel strongly about this they could vote with their feet and sell their shares en masse, but that would mean they wouldn’t get the money - oh damn!

Phone Hacking: The waves lap around the Prime Minister’s ankles

Sir Paul Stephenson’s extraordinary resignation statement last night has brought the earthquake that is phone hacking to the doors of 10 Downing Street.

The Commissioner of the Metropolitan Police’s long and mostly self-justificatory statement contained, approximately half way through, a knifing in the back of the Prime Minister. Referring to his hiring of former News of the World journalist Neil Wallis, who was last week arrested in relation to phone hacking, Sir Paul made the following comments:

“Once Mr Wallis's name did become associated with Operation Weeting [into phone hacking], I did not want to compromise the Prime Minister in any way by revealing or discussing a potential suspect who clearly had a close relationship with Mr Coulson."

Sir Paul is in effect saying: “I couldn’t tell you about Wallis because you are close mates with Coulson who would have gone running back to News International to tell them all about our investigation.”

In his statement last night Sir Paul went on to say: "Unlike Mr Coulson, Mr Wallis had not resigned from the News of the World or, to the best of my knowledge been in any way associated with the original phone hacking investigation."

In other words: “I’ve got a good excuse for hiring an ex-News of the World staffer because he hadn’t been forced to resign from his previous job over phone hacking. What’s yours for hiring Coulson after he was forced to resign the editorship of the NOTW?”

There are two key issues now for the Prime Minister. Firstly, to use another Watergate analogy, is there a ‘Smoking Gun’ which points to the fact that he was asked to appoint Coulson by News International or worse forced to appoint him.

The other key issue is how the Tory press will react. Nearly two weeks ago Peter Oborne in the paper turned on the Prime Minster questioning his judgement over appointing Coulson. One veteran reader of the Daily Telegraph said to me it was “the most scathing indictment of a Conservative Prime Minister in the Telegraph since the paper turned on Anthony Eden over the Suez Crisis”.

Many Tory supporters are worried. Last night Tory blogger Iain Dale questioned whether the Prime Minister, indeed the Government, could survive this.

If the Prime Minister is not careful the waves currently lapping around his ankles will be up to his neck.

We live in extraordinary times.

A Good Day for Democracy

Yesterday was (another) bad day for Rupert Murdoch and News International but it was a good one for democracy.

Speaker John Bercow (who is rapidly becoming a serious contender for my Man of the Year) has played a blinder in the last few days. In agreeing to an emergency debate on phone-hacking he has placed the House of Commons at the centre of the phone-hacking crisis, which is exactly where it should be.

The previous speaker (Gorbals Mick) would never have dared get on the wrong side of the previous Labour Government in agreeing to a debate, but Bercow has proved he is his own man (one suspects Cameron and the Whips Office are privately furious with him).

I was fortunate enough to be in the car on the way back from a client meeting and able to listen to a packed House during one of its finest hours for many a year. Tom Watson (who for me had the line of the day “News International had entered the criminal underworld”), John Whittingdale, Bob Stewart, Alan Johnson, Nicholas Soames, Yvette Cooper, Simon Hughes and Menzies Campbell all spoke well, eloquently and without shrillness. For the Government, Dominic Grieve, the Attorney General, made a series of telling points.

For me the big loser was Cameron (it was a good day as well for Ed Miliband at PMQs which even the Daily Telegraph conceded!). Yes the Prime Minister agreed to a Public Inquiry (perhaps even two) but I think he is still behind the curve on this one (and Peter Oborne explains why in today's Telegraph). My concern when he announced an Inquiry was the potential for it to be very narrow in its terms of reference and without teeth. Lo and behold this morning the Independent reports that the PM and Clegg are at loggerheads over whether a judge should take charge of one or both - Clegg wants the judiciary involved, the PM doesn’t.

Frankly, any Inquiry needs teeth and that means a Judge in charge of it who is able to sanction those who refuse to attend (a tried and tested News International tactic) and then cross-examine under oath with all the consequences that entails.

This whole saga now looks as if it could be the high watermark for Rupert Murdoch’s influence on British public life, just as MPs expenses proved a catalyst for the House of Commons. The crucial issue now is how the Government will wriggle out of its commitment to let News International buy BskyB (and it’s going to have to however much it protests!).

Keep watching!

Full disclosure is the only route now for Murdoch

Rupert Murdoch must have thought he was going to have a good summer. The phone-hacking scandal was dying down, Sienna Miller had been paid off and the Culture Secretary had kindly waved through his takeover of BskyB.

And then we find out that the News of the World (NOTW) had been hacking into Milly Dowler’s phone! There are multiple reasons why this is a horrendous story for News International.

Firstly, from a journalistic ethics point of view, it is hard to scrape any lower than this. Regardless of the potential effect on the family of hacking and, crucially deleting, messages it is highly likely that, at best, the NOTW’s actions diverted police resources and, at worst, de-railed an entire investigation at a crucial time.

Secondly, these disclosures widen the dates of the phone hacking back to 2002. We now have a four-year window when we know, categorically, that phone-hacking was taking place, namely 2002 to 2006 not the two-year window (2004-2006) that News International has claimed all along.

Thirdly, Rebekah Brooks, for the first time, can be said to have been in a position, namely editor where, even if she didn’t know, then she should have known what was going on. Previously, under the two-year 2004 to 2006 window she could claim to have been out of the loop.

Finally, this story now has all the potential to gain a foothold in the public consciousness. Previously, exposure of the NOTW’s antics has been almost exclusively the territory of The Guardian and, latterly, The Telegraph, but with the Prime Minister wading in the whole media corps will stoke a strong sense of revulsion on the part of the public.

What does Rupert Murdoch do now? My own view, and it’s long overdue, is that only full disclosure of all the facts, regardless of how painful it will be, will stem the tide now for News International. That means a full cleansing of the augean stables, sackings, full compliance with the police investigation, attendance and an end to stonewalling at Parliamentary Select Committee enquiries and full co-operation with what is looking increasingly like a full Public Inquiry.

PR statements and front page apologies are not going to cut it anymore. What’s more Rupert is probably going to have to cut Brooks free at some point. This will be painful as she is his direct line into Downing Street, but even Nixon eventually sacked his Chief of Staff HR Haldeman.

The Watergate analogy is not cheap. What started out as a “third rate burglary” in the words of the 37th President, eventually brought him down. Murdoch is probably insulated from that fate but he will be keen to ensure that his family are bomb-proof on this one which probably explains why James Murdoch has recently been moved to New York.

Rebekah though is still in London!

Phone Hacking: The Telegraph opens a second front

More woe for News International this morning with reports that a whole host of new (and very prominent) VIPs have allegedly been hacked, most notably Tony Blair and Kate Middleton.

Old news? It looks it at first sight but there are a number of key points to quickly make.

Firstly, if the reports are true we have a new private investigator in question, a certain Mr Jonathan Rees. The News International defence that this was all the work of a rogue reporter (Clive Goodman) aided by a lone investigator (Glenn Mulcaire) has already proved risible, but this is further embarrassment.

More importantly, the news that Kate Middleton’s bank account has been hacked in 2005 demolishes the News International defence that all hacking was undertaken between 2002 and 2004.

Perhaps most importantly, the Telegraph’s running of the story so prominently is a clear opening of a second front in the hacking scandal. Up until now The Guardian, and to a lesser extent the BBC, has made the running with this story with other media organisations tending to shun it. The cynics would suggest that those in glasshouses were wary of throwing stones!

However, the Telegraph in its role as protector of all things Royal and Establishment is clearly going into bat on this one. That’s more bad news for News International because as this story gets more a public airing the more the pressure builds on senior management and the louder the calls for a full Public Inquiry.

What did Rebekah know and when did she know it?

The tangled web that was the Watergate scandal, which brought down Richard Nixon, had lost most people in its twists and turns by the time the Senate started investigating in 1973, but like many complex issues it was boiled down to a single ominous question by Senator Howard Baker, “what did the President know and when did he know it?”

It would appear that the News of the World (NOTW) phone hacking scandal is now reaching a similar point when there is only one crucial question left to answer – namely what did the most senior people in News International know and when did they know it?

The collapse of the rogue reporter defence, the arrests of two senior reporters and last weekend’s mea culpa on a page 3 suggest that senior people in News International know a lot more than they have been willing to admit so far and probably far earlier. How long will its latest line in the sand, namely that only 7 or 8 people were hacked and that £20 million has been set aside in a compensation fund, remain uncrossed? My guess is not very long.

Nixon was ultimately brought down by the Smoking Gun Tape (famously illustrated by Washington Post cartoonist Herblock) on which he was heard to instruct his Chief of Staff, HR Haldeman, to tell the CIA to block the FBI investigation into the Watergate break-in. This was a clear obstruction of justice.

Bizarrely, it might be the actor Hugh Grant who has uncovered the smoking gun in this story. In a New Statesman article Grant has admitted turning the tables on a former NOTW employee by secretly taping him talking about the hacking and letting slip that Rebekah Brooks, formerly editor of the NOTW and now News International’s senior executive in the UK, knew all about it. The extraordinary transcript of the conversation can be read HERE.

The question now is whether the House of Commons Committee investigating the hacking will be able to get Brooks to appear in front of them to ask the same ominous question that Senator Baker posed nearly four decades ago.

Nixon hated the press and would have loved the way Grant has turned the tables on News International. Somewhere, he and the late HR Haldeman are smiling.