Proxy Advisory firm Glass Lewis & Co. has told shareholders of News Corporation that they should vote against six directors, including Chairman and CEO Rupert Murdoch's sons James and Lachlan, for re-election to the company board.
Seven of the fifteen directors are either affiliated with the company or are insiders, said a statement by the firm which Bloomberg quoted. This raises serious concerns about the objectivity and independence of the board and its ability to perform its proper oversight role.
The board of directors of News Corp. actually has 16 directors and one director emeritus, according to a listing on their website.
Along with Murdoch and his two sons, the other members of the board who are affiliated with the company are President and Chief Operating Officer Chase Carey, Chief Financial Officer David DeVoe, Executive Vice President Joel Klein and Senior Advisor to the Chairman Arthur Siskind. Glass Lewis is calling on the shareholders to reconsider the nominations of the Murdoch sons, Siskind and independent directors Natalie Bancroft and Andrew Knight.
News Corp. will host their annual meeting on Oct. 21.
The company is embroiled in a phone-hacking scandal which has led to the closing of Britain's News of the World newspaper and the firing of the former editor, Rebekah Brooks, and the then-CEO of News International, Leslie Hinton.
It won't be easy for shareholders to make the changes recommended by Glass Lewis. Murdoch and his family own just 12 percent of the shares of News Corp. However, the family owns Class B shares of the company, which gives them nearly 40 percent of the voting rights.
This is not the first time the company has received criticism for their corporate governance. They received some criticism for their perceived hands-off approach when the phone-hacking allegations first arouse. Concerns over executive compensation have also plagued the company. Murdoch was paid $33.3 in total compensation, including a $12.5 million bonus despite the News of the World scandal. His son James was given $17.9 million, however he turned down his $6 million bonus in light of the recent scandal.
Furthermore, Murdoch receives $8.1 million in salary each year, which has drawn flak from some corporate governance experts because the pay is not tied to the performance of the company.
Shares of News Corp. are up 3.80 percent to $16.92 by late morning.