Investors to Challenge James Murdoch's Other Directorships Following Today's News Corp AGM

WASHINGTON, Oct. 21, 2011 /PRNewswire/ -- Today, as News Corp. (NASDAQ: NWSA) shareholders challenge James Murdoch's position at the media conglomerate, the CtW Investment Group called on the boards of Sotheby's (NYSE: BID) and GlaxoSmithKline plc (NYSE: GSK) to part ways with the younger Murdoch. The CtW charges that his service as a corporate director of any company is untenable in the wake of the phone-hacking scandal. The UK proxy advisory firm PIRC has already called for James Murdoch to step down as chairman of British Sky Broadcasting Group plc (PINK: BSYBY).

October 21, 2011

Mr. Michael Sovern, Chairman of the Board & Chairman of the Nominating and Corporate Governance Committee
Sotheby's
1334 New York Avenue
New York, NY 10021

Dear Mr. Sovern:

In light of the investor outcry surrounding this year's News Corporation shareholder meeting, the CtW Investment Group believes James Murdoch's continued service as a corporate director of Sotheby's – indeed, of any company – has become untenable. He has emerged as a focal point of shareholder and public discontent in the wake of the phone-hacking scandal, and with serious doubts hanging over both his competency as an executive and credibility as a director, we call on the board not to nominate Mr. Murdoch for re-election.

The CtW Investment Group works with pension and benefit funds sponsored by unions affiliated with Change to Win, which collectively hold over $200 billion in assets. As representatives of institutional investors with broad market positions, we believe it would be a grave mistake if the serious concerns being raised over Mr. Murdoch's judgment, oversight and conduct at News Corp. go unheeded by the other boards on which he serves.

News Corp. and BSkyB investors lose confidence in James Murdoch

On an almost unprecedented scale, major investors and proxy advisory service firms are publicly objecting to Mr. Murdoch's continued service as a director of News Corp. in the wake of the hacking scandal.

Institutions opposing James Murdoch's re-election to News Corp. board

Most striking, perhaps, is that whilst these funds have responded to the crisis at News Corp. with different voting strategies, there is at least one common thread: James Murdoch has to go.

Of course, the dual class voting structure all but ensures Mr. Murdoch will continue to serve - the Murdochs own 12% of the company, but control 40% of the voting shares, with purported close ally Prince Al-Waleed bin Talalholding another 7% of the voting shares; however, unless the Sotheby's board glosses over the clearly divergent interests of the Murdoch family and public shareholders at News Corp., it must heed the concerns expressed by major investors.

Moreover, it is critical to recognize that the objections to Mr. Murdoch appear to stem from profound concerns over his judgment and credibility, not the result of a formulaic "check the box" approach to governance. The OTPP, in its recommendation against Mr. Murdoch, says it has "concerns of the lack of oversight [he] provided as chair of News International … during the ongoing phone hacking scandal," while the LAPFF believes his continued presence is "causing significant reputational damage." Glass Lewis says his "poor oversight" does not make him a suitable director and that he "bears some responsibility," and PIRC points out that it remains "unclear why he did not initiate in-depth inquiries at an earlier stage and why former colleagues now directly and publicly contradict his stated position."

Mr. Murdoch also faces pressure over his tenure as chairman of the 40% News Corp. owned British Broadcasting Group (BSkyB). Bowing to public pressure in the UK, the company dropped its bid for BSkyB, a move that cost the company and shareholders $63 million in breakup fees. PIRC is calling for Mr. Murdoch to step down as chairman, and the Financial Times (October 11, 2011) reports that other leading shareholders, including Franklin Templeton Investments, are also supportive of a change in leadership.

By Sotheby's own standards, shareholders deserve better

According to Sotheby's 2011 proxy statement, among the key attributes the Nominating and Governance Committee seeks in evaluating board candidates are "high ethical standards, integrity and business judgment." In light of recent developments, it would be incredible if the committee still finds fit to unequivocally apply this standard to Mr. Murdoch. As both chairman of News International, the UK subsidiary that included the now shuttered News of the World, and a director of News Corp., Mr. Murdoch played a pivotal role in the mishandling of the hacking affair and its escalation into a full blown corporate crisis. Even if nothing else comes to light, the scandal, at a minimum, throws into doubt Mr. Murdoch's business judgment and ethical conduct.

According to an August 9th Bloomberg report, at least three opportunities were missed by Mr. Murdoch to question whether wrong doing had been confined to a rogue reporter or, as it now seems likely, other employees. Lord Myners, an authority on UK corporate governance and the former chairman of Marks & Spencer plc., told the British House of Lords in mid-July there were sufficient doubts about James Murdoch's business judgment that he should resign as chairman of BSkyB.  Sir Christopher Bland, former chairman of the BBC and BT Group, plc., echoed these concerns in a Financial Times op-ed (July 27, 2011), writing that "James Murdoch's 'willful blindness' showed at best a lack of curiosity, and at worst a failure to ask questions, for fear of hearing unacceptable answers."  

However, it is his testimony in mid-July before a British Parliamentary Committee investigating the matter, subsequent written submissions and a recent second-round of testimonies by former News Corp. executives which has sent his credibility into free fall.  Rather than clearing the air, his testimony has sparked accusations of a cover-up.  Alleged inconsistencies in his answers to questions from Members of Parliament have been widely reported that challenge his account of what he knew, when and what he did about it. As a result, he is now to reappear before the committee to answer fresh questions about whether he knew that phone-hacking was widespread at the company.

At the same time, it is not clear that Mr. Murdoch brings unique qualities and expertise to the board that could not be found in equal or greater measure elsewhere.  He has arguably no experience providing critical, independent oversight, whilst his business experiences stem entirely from positions within News Corp. (or affiliated entities), in essence the family business, and at where, as we have now seen, he has shown critical lapses in judgment. Even before the current crisis at News Corp., independent advisor Governance Metrics International had consistently given the company an F-rating, "only because there is no lower grade." The firm recently placed New Corp. on its list of 10 riskiest companies.  

Sotheby's loyalty is to shareholders, not James Murdoch

The uncertainty surrounding News Corp. and Mr. Murdoch is unlikely to be resolved anytime soon, and Sotheby's shareholders deserve and demand to have a director who is fully committed and able to focus on the company. Shareholders cannot continue to afford Mr. Murdoch with the benefit of the doubt. In the event that he is included on the company's 2012 proxy ballot, we will appropriately consider our options for next steps.

We look forward to your prompt response.

Sincerely

Richard Clayton
Director of Research

October 21, 2011

Sir Christopher Gent, Chairman of the Board & Chairman of the Nominations Committee
GlaxoSmithKline plc
980 Great West Road
Brentford
Middlesex TW8 9GS

Dear Mr. Gent:

In light of the investor outcry surrounding this year's News Corporation shareholder meeting, the CtW Investment Group believes James Murdoch's continued service as a corporate director of GlaxoSmithKline plc – indeed, of any company – has become untenable. He has emerged as a focal point of shareholder and public discontent in the wake of the phone-hacking scandal, and with serious doubts hanging over both his competency as an executive and credibility as a director, we call on the board not to nominate Mr. Murdoch for re-election.

The CtW Investment Group works with pension and benefit funds sponsored by unions affiliated with Change to Win, which collectively hold over $200 billion in assets. As representatives of institutional investors with broad market positions, we believe it would be a grave mistake if the serious concerns being raised over Mr. Murdoch's judgment, oversight and conduct at News Corp. go unheeded by the other boards on which he serves.

News Corp. and BSkyB investors lose confidence in James Murdoch

On an almost unprecedented scale, major investors and proxy advisory service firms are publicly objecting to Mr. Murdoch's continued service as a director of News Corp. in the wake of the hacking scandal.

Institutions opposing James Murdoch's re-election to News Corp. board

Most striking, perhaps, is that whilst these funds have responded to the crisis at News Corp. with different voting strategies, there is at least one common thread: James Murdoch has to go.

Of course, the dual class voting structure all but ensures Mr. Murdoch will continue to serve - the Murdochs own 12% of the company, but control 40% of the voting shares, with purported close ally Prince Al-Waleed bin Talalholding another 7% of the voting shares; however, unless the GlaxoSmithKline board glosses over the clearly divergent interests of the Murdoch family and public shareholders at News Corp., it must heed the concerns expressed by major investors.

Moreover, it is critical to recognize that the objections to Mr. Murdoch appear to stem from profound concerns over his judgment and credibility, not the result of a formulaic "check the box" approach to governance. The OTPP, in its recommendation against Mr. Murdoch, says it has "concerns of the lack of oversight [he] provided as chair of News International … during the ongoing phone hacking scandal," while the LAPFF believes his continued presence is "causing significant reputational damage." Glass Lewis says his "poor oversight" does not make him a suitable director and that he "bears some responsibility," and PIRC points out that it remains "unclear why he did not initiate in-depth inquiries at an earlier stage and why former colleagues now directly and publicly contradict his stated position."

Mr. Murdoch also faces pressure over his tenure as chairman of the 40% News Corp. owned British Broadcasting Group (BSkyB). Bowing to public pressure in the UK, the company dropped its bid for BSkyB, a move that cost the company and shareholders $63 million in breakup fees. PIRC is calling for Mr. Murdoch to step down as chairman, and the Financial Times (October 11, 2011) reports that other leading shareholders, including Franklin Templeton Investments, are also supportive of a change in leadership.

GlaxoSmithKline shareholders deserve better

Judgment, oversight, accountability and credibility are all essential qualities for a director.  Yet the scandal has thrown each of these traits into question for Mr. Murdoch. As both chairman of News International, the UK subsidiary that included the now shuttered News of the World, and a director of News Corp., Mr. Murdoch played a pivotal role in the mishandling of the hacking affair and its escalation into a full blown corporate crisis. Even if nothing else comes to light, the scandal, at a minimum, throws into doubt Mr. Murdoch's business judgment and ethical conduct.

According to an August 9th Bloomberg report, at least three opportunities were missed by Mr. Murdoch to question whether wrong doing had been confined to a rogue reporter or, as it now seems likely, other employees. Lord Myners, an authority on UK corporate governance and the former chairman of Marks & Spencer plc., told the British House of Lords in mid-July there were sufficient doubts about James Murdoch's business judgment that he should resign as chairman of BSkyB.  Sir Christopher Bland, former chairman of the BBC and BT Group, plc., echoed these concerns in a Financial Times op-ed (July 27, 2011), writing that "James Murdoch's 'willful blindness' showed at best a lack of curiosity, and at worst a failure to ask questions, for fear of hearing unacceptable answers."  

However, it is his testimony in mid-July before a British Parliamentary Committee investigating the matter, subsequent written submissions and a recent second-round of testimonies by former News Corp. executives which has sent his credibility into free fall.  Rather than clearing the air, his testimony has sparked accusations of a cover-up.  Alleged inconsistencies in his answers to questions from Members of Parliament have been widely reported that challenge his account of what he knew, when and what he did about it. As a result, he is now to reappear before the committee to answer fresh questions about whether he knew that phone-hacking was widespread at the company.

At the same time, it is not clear that Mr. Murdoch brings unique qualities and expertise to the board that could not be found in equal or greater measure elsewhere.  He has arguably no experience providing critical, independent oversight, whilst his business experiences stem entirely from positions within News Corp. (or affiliated entities), in essence the family business, and at where, as we have now seen, he has shown critical lapses in judgment. Even before the current crisis at News Corp., independent advisor Governance Metrics International had consistently given the company an F-rating, "only because there is no lower grade." The firm recently placed New Corp. on its list of 10 riskiest companies.  

GlaxoSmithKline's loyalty is to shareholders, not James Murdoch

The uncertainty surrounding News Corp. and Mr. Murdoch is unlikely to be resolved anytime soon, and GlaxoSmithKline shareholders deserve and demand to have a director who is fully committed and able to focus on the company. Shareholders cannot continue to afford Mr. Murdoch with the benefit of the doubt. In the event that he is included on the company's 2012 proxy ballot, we will appropriately consider our options for next steps.

We look forward to your prompt response.

Sincerely

Richard Clayton
Director of Research

SOURCE CtW Investment Group