Devoted to Managers and those that seek to improve their management skills

A small shareholder in the News Corp. (NWS-A) business has succeeded in getting his personal agenda in the next shareholders meeting.

He has a petition in place to recommend that shareholders vote down the existing two-tier voting structure that makes up News Corp. News Corp. went to the SEC to have the proposal dropped, but the SEC rejected their request. Consequently, it will now be part of the agenda presented at the company's annual general meeting in New York on October 19.

The Financial Times quoted the Australian Financial Review saying:

"No matter how irritating people may find Mayne, he raises a valid corporate governance point in respect to News Corp’s two-tier voting structure. Mayne has petitioned for a motion to be put to News shareholders recommending the company abandon its existing capital structure, which conveys preferential voting power to Murdoch, and create a company with just one class of share and one vote per share."

The problem with the comment above is it attempt to make this look like it's something unique to Rupert Murdoch, which is untrue - to be kind about it.

For example, Murdoch himself had to face this when he went through the process of negotiating to buy Dow Jones (DJ), which had a similar structure where the Bancroft family controlled the voting shares, although owning less general shares.

Other good companies that have the same structure in place are Google (GOOG) and Berkshire Hathaway (BRK-A). So this personal smear on Murdoch that he's getting some type of preferential treatment unknown to anybody else is false. It's been a part of business practice in the United States for a long time.

When it comes down to it in this case, it's a difference between making decisions for the long-term or the short-term. The value of having voting power is retaining a long-term outlook for the company while making decisions that may over the short-term cause the share price in the company to stall.

The weakness of the system is you could end up with a Dow Jones' situation where absentee owners control the voting, and take no interest in the company, while just letting it go its own way.

Most companies doing this do it so they can make decisions that make sense for long-term success. If shareholders in News Corp. were to vote the two-tier system out of the company, it would force the company to make short-term decisions that could hurt it more than help it over the long haul.

What this goofy nut is trying to do this is making a personal attack upon Murdoch, and he doesn't seem to care how it impacts other shareholders. If you hold shares in News Corp., I'd be careful about attempting to end this system. The company is having pieces put in place at this time that could give it explosive growth in the future. To vote the existing system down may give this nut some personal gratification, but it would hurt shareholders who have a long-term outlook.

New Corp. is in a strong position for future growth with its international holdings and not being overly exposed to advertising. While I don't own any shares in News Corp., if I did, I would definitely vote against taking away the current stucture. It is working well for the company, and as I said, the pieces are being put into place where it will over the long haul make some tremendous profits for shareholders. Why vote that away from themselves?

Note: The Financial Times which reported this is a direct competitor of Murdochs and News Corp.