Rupert Murdoch declared unfit to run an international company

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British MPs from the House of Commons Culture, Media and Sport Committee handed down a damning judgment on phone hacking at News Corporation’s UK arm, News International — and about its shonky management practices, especially from its chairman, Rupert Murdoch. Here, Independent Australia republishes the section of the report that includes the finding that “…Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.”

[Download the full report in PDF.]

News Corporation's bad management

In November 2011, James Murdoch asserted that News International had responded so aggressively to the Committee’s 2010 Report because senior company executives had themselves been misled: “I received the same assertions around the quality of those investigations and the lack of evidence that this Committee received, and that’s something that is a matter of regret”. On 19 July 2011, a similar view had been expressed by Rupert Murdoch, who told us that
“I feel that people I trusted I am not saying who, and I don’t know what level have let me down. I think that they behaved disgracefully and betrayed the company and me”. 

Jonathan Chapman, formerly Director of Legal Affairs, told us that, in terms of knowledge held by Rupert and James Murdoch and Rebekah Brooks about payments made to Clive Goodman:
“None of them had any first-hand knowledge of that. Mr Murdoch junior and senior were out of the country, and had not taken on executive obligations then—in Mr James Murdoch’s case—and Rebekah Brooks was still editor then. In order for them to be able to comment in any way on what happened in 2007, they would be reliant on briefings from others, and I believe those briefings were incorrect.”

Jonathan Chapman’s account appears consistent with the corporate culture that was portrayed to us throughout our investigation. Rupert Murdoch explained his claimed lack of direct involvement in the News Group Newspaper titles as follows:

“…the News of the World is less than 1% of our company. I employ 53,000 people around the world”.

In November 2011, James Murdoch said that
“…this is a company of over 50,000 employees globally, and appropriately so senior management in the company, myself included, rely on executives at various levels in the business to behave in a certain way”.

When asked who he held responsible for phone-hacking, Rupert Murdoch said
“…the people that I trusted to run it [the company], and then maybe the people they trusted. I worked with Mr Hinton for 52 years and I would trust him with my life”.

Delegation relies on trust and on the integrity of those to whom authority is delegated.

Of News International, James Murdoch told us that:
“The way that the company has always operated is to rely on executives directly responsible for a unit of the business – a paper, etc – to go and do the things that they needed to do, under the assumption that they would be appropriate and lawful, and that they would be questioned from time to time, and come to senior management with issues.”

The same principle was, we were told, in operation at the company when it came to expenditure. On 19 July 2011, James Murdoch told us that
“…as long as they stay within those guidelines, the belief is that they should be empowered to make those judgments, to spend those moneys and achieve the ends that they can”.

Individual papers were described as functioning in the same way. Rebekah Brooks, for example, told us that

“I think the newsroom of any newspaper is based on trust. [...] You rely on the people who work for you to behave in a proper manner, and you rely on the clarity of information that you are given at the time”.

The evidence we have taken on the corporate culture of News International suggests that Rupert and James Murdoch not only delegated authority to those beneath them but also actively kept out of their business affairs. In July 2011, Rupert Murdoch told us, for example, that
“…sometimes, I would ring the editor of the News of the World on a Saturday night and say, ‘Have you got any news tonight?’ But it was just to keep in touch. [...] I’m not really in touch, I have got to tell you that”.

He claimed that his habit of being out of touch extended even to being unaware of payments as significant as that made to Gordon Taylor. We asked him whether the Editor of the News of the World would have told him about a payoff of £1 million. He answered emphatically “no” and then “he would expect other people to tell me that, if anyone was to”.

We were curious as to whether this amounted to senior executives being kept in the dark. Rupert Murdoch told us that
“…nobody has kept me in the dark. I may have been lax in not asking more, but it was such a tiny part of our business”.

James Murdoch told us that
“…there is a difference between being kept in the dark, and a company that is a large company, the management of which is delegated to managers of different companies within the group, and so on and so forth”.

The Gordon Taylor settlement was sizeable (approximately £700,000), and the claims made by Gordon Taylor had potentially very serious reputational consequences for the company. However keen senior executives may have been to delegate, it seems extraordinary that they would not have sought greater involvement in the decisions that were made given how much was at stake for the company. Yet we have been told that this is precisely what happened. Rupert Murdoch was apparently completely unaware of the Gordon Taylor settlement. James Murdoch, we have been told, authorised the settlement on the basis of a possible rushed conversation in the corridor or over the phone; a single meeting that lasted between 15 and 30 minutes; and an e-mail exchange that he took no longer than three minutes to peruse.

We have struggled to understand such a lack of openness with senior management and have considered whether it can be explained by a deliberate policy of “don’t ask, don’t tell” designed to shield senior executives from events taking place beneath them.

This hypothesis is given weight by Neville Thurlbeck’s evidence to the Committee, in which he describes being frustrated by trying to bring evidence about phone-hacking to the attention of Rebekah Brooks, by then Editor of the News of the World, and allegedly being repeatedly denied access to her by the Managing Editor, Bill Akass.

A note made by solicitor Julian Pike of Farrer & Co of a conversation that he had with Colin Myler on 27 May 2008 illustrates just how reluctant senior employees at the company may have been to approach James Murdoch. In the note, Colin Myler is reported as saying “James wld say get rid of them—cut out the cancer”.

The use of the conditional tense is noteworthy because it shows that the issue in hand – the possible culpability of journalists at the News of the World – may not have been explicitly brought to James Murdoch’s attention before the meeting on 10 June 2008, perhaps in order to avoid the consequences that might ensue if it had been.

In September 2011, we also heard from Jonathan Chapman that on the papers at News International
 “…when someone messes up badly and commits a crime, I think there was also a feeling that, yes, they have done a terrible wrong, but their family should not suffer”.

In other words, that the cancer should not always be cut out.

We considered whether employees at News International went out of their way to try to please the Murdoch family. On 19 July 2011, Rupert Murdoch told us that
“…I am sure there may be people who try to please me. That could be human nature, and it’s up to me to see through that”.

Both Rupert and James Murdoch referred several times to their high expectations of Colin Myler, who was appointed as Editor of the News of the World after Andy Coulson’s resignation with, as Rupert Murdoch put it, a remit “to find out what the hell was going on”.

James Murdoch described Colin Myler as
“…an outside person who had a responsibility and remit to both clean up and investigate the issue, and move the company and the newspaper forward in a way that made sure that these things could not happen again”.

Similarly, in September 2009, Les Hinton had told the Committee that
“…Colin had come in from New York, a very experienced editor with a clear remit to do two things: make sure that any previous misconduct was identified and acted upon and that the prospect of any future misconduct would be ruled out”.

Clearly, Colin Myler did, partially at least, ‘find out what the hell was going on’ and it has been a matter of dispute between him and Tom Crone on the one hand and James Murdoch on the other as to whether a culture of wrongdoing at the News of the World was explicitly brought to the attention of executives outside the confines of the newspaper. It seems to us on balance, therefore, that Les Hinton’s subsequent description of Colin Myler’s role in his evidence to the Committee in October 2011 was more accurate when he said that “he would just settle down the company and get people back on track”.

Within the corporate culture of News International, it seems clear to us that there were no incentives to convey unwelcome news, if problems could be contained — as the company clearly thought they largely had been, indeed, through the confidential settlements of the claims brought by Gordon Taylor, Jo Armstrong, John Hewison and Max Clifford.

The portrayal, furthermore, that we have been given to believe, of Rupert and James Murdoch being at one remove from events at the News of the World, as it was such a small part of the global News Corporation empire, is at odds with other evidence we have received, and which has been subsequently given to the Leveson inquiry.

Rupert Murdoch is certainly not, as part of his evidence would have us believe, a ‘hands-off proprietor’. We have Rebekah Brooks’ testimony for that:
Q549. Philip Davies: How many times would you speak to Rupert Murdoch when you were chief executive of News International?

Rebekah Brooks: I would speak to Mr Murdoch and James Murdoch much more regularly since I have become chief executive than I did when I was editor.

Q550. Philip Davies: Once a day? Twice a day?

Rebekah Brooks: James Murdoch and I have offices next to each other, although he has his travel schedule because of his wide responsibilities, and I would talk to Rupert Murdoch quite regularly.

Q551. Philip Davies: Once a day, twice a day — can you give me any other idea?

Rebekah Brooks: On average, every other day, but pretty regularly.

James Murdoch, too, has testified to the Leveson inquiry about his father’s role which in February 2012 with respect to launching a replacement for the News of the World appears to have extended to bypassing his son entirely, despite his position as Chairman and Chief Executive Officer, International, of News Corporation:
“The decision to launch a Sunday edition of The Sun was made by my father, in conjunction with the management of News International. There had previously been discussions about a Sunday paper, but the timing of the launch, the pricing of the paper and the reinstatement of the journalists were all decisions made by my father and the management of News International.”

Rupert Murdoch’s close involvement with his newspapers is entirely understandable: he built his empire from a single publication in Australia and print and ink, it can be said, are in his blood. James Murdoch, clearly, has a different background. Until he took responsibility for all of News Corporation’s operations in Europe and Asia, which included News International’s print publications, his career had focused on broadcasting and digital media.

Nonetheless, though James Murdoch’s main interests and priorities may have lain elsewhere, before authorising the Gordon Taylor settlement, he was not content to rely solely on advice from Colin Myler and Tom Crone – two experienced newspaper hands – but wanted to wait for independent counsel’s opinion. As we have explored earlier, why then he did not ask to read that opinion is one of the many astonishing things about this whole affair.

As for corporate culture, James Murdoch’s characterisation of the epiphany moment in December, 2010 – when they allegedly realised that the ‘one rogue reporter’ defence could not be true and leapt into action – is also at odds with the company’s behaviour afterwards. Despite contacting the police – and suspending and sacking a senior member of staff – the organisation continued to maintain that no more of its journalists had been involved with Glenn Mulcaire in its defence to Sienna Miller’s claim several weeks later in February, 2011.

Far from having an epiphany at the end of 2010, the truth, we believe, is that by spring 2011, because of the civil actions, the company finally realised that its containment approach had failed, and that a ‘one rogue reporter’ – or even ‘two rogue journalists’ – stance no longer had any shred of credibility. Since then, News Corporation’s strategy has been to lay the blame on certain individuals, particularly Colin Myler, Tom Crone and Jonathan Chapman, and lawyers, whilst striving to protect more senior figures, notably James Murdoch.

Colin Myler, Tom Crone and Jonathan Chapman should certainly have acted on information they had about phone-hacking and other wrongdoing, but they cannot be allowed to carry the whole of the blame, as News Corporation has clearly intended. Even if there were a ‘don’t ask, don’t tell’ culture at News International, the whole affair demonstrates huge failings of corporate governance at the company and its parent, News Corporation.

The history of the News of the World at hearings of the Committee is a long one, characterised by “collective amnesia” and a reluctance fully and fairly to provide the Committee with the information it sought. News International has repeatedly stonewalled, obfuscated and misled and only come clean, reluctantly, when no other course of action was sensible and when its wider commercial interests were threatened. In Rupert Murdoch's own words to the Leveson inquiry, News Corporation in the UK mounted a cover-up.

Rupert Murdoch unfit to run an international company

In any company, the corporate culture comes from the top. In the case of the News of the World this is ultimately the American parent company of News International, News Corporation and its chairman and chief executive, Rupert Murdoch.

Rupert Murdoch has repeatedly claimed that News Corporation has a zero tolerance approach towards wrongdoing. He stated this, indeed, long before he gave evidence to the committee, when he gave the inaugural Thatcher Lecture in London on 21 October 2010: “we will not tolerate wrongdoing” he told his audience. He also made similar statements at the annual general meeting of News Corporation in Los Angeles in October 2011 when, in relation to phone-hacking, he said there was “no excuse for such unethical behaviour” at the company and that staff had to be “beacons for good, professional and ethical behaviour”.

On 8 April 2011, News International finally issued a statement admitting that phone-hacking had indeed occurred in a number of cases and was not restricted to the News of the World’s former royal reporter, Clive Goodman. It offered certain civil litigants an unreserved apology and a compensation scheme. At this point, the ‘single rogue reporter’ defence was clearly dead. That defence had become very questionable long before, but now that News International had finally acknowledged that hacking had been widespread, it was clearly no longer tenable.

In his testimony to us and also the Leveson inquiry, Rupert Murdoch has demonstrated excellent powers of recall and grasp of detail, when it has suited him. Had he been entirely open with shareholders on 21 October 2010—and with this Committee on 19 July 2011—he would have learned for the first time on some date between 21 October 2010 and 8 April 2011 that he had been misled by senior employees of his company.

Such a revelation, had it happened, would have been a shock. He was the chairman and chief executive officer of a major international company. He had repeatedly given clear and categorical assurances to the general public, and to his shareholders, that phone-hacking and other wrongdoing were not widespread and would not be tolerated at News International. These assurances had now turned out to be false.

This is not a situation a chief executive would or could tolerate, still less simply ignore. Action would have been taken. Yet, when asked by the Committee if he “knew for sure in January [2011] that the ‘one rogue reporter’ line was false”, he replied: “I forget the date.”

This is barely credible. Had he really learned for the first time at some point in the six months following his Thatcher Lecture that he had been deceived, and so that he in turn had deceived the public and his shareholders, that moment would have been lodged forever in his memory. It would have been an unforgettable piece of information.

On the other hand, had he suspected all along that phone-hacking and other wrongdoing was endemic at the News of the World – that the means justified the ends in beating the competition and getting the story – and that elaborate, expensive steps were being taken to conceal it, it is entirely understandable that the precise moment between 21 October 2010 and 8 April 2011, when he recognised the game was up, might have slipped his memory. And all the more so, had he already realised the truth long before those dates.

In such circumstances, even if he took no part in discussions about what to reveal and when, there would probably not have been a clear moment of revelation. There would have been a gradual erosion of the ‘one rogue reporter’ fiction to the point where a collective decision to abandon it would have been taken. In those circumstances, it would be entirely understandable that he should forget the date, if indeed there was a single date on which the decision was taken, rather than an unfolding contingency plan involving gradual admissions.

The notion that – given all that had gone on, right back to evidence given over payments to the police to our predecessor Committee in 2003 – a hands-on proprietor like Rupert Murdoch had no inkling that wrongdoing and questionable practice was not widespread at the News of the World is simply not credible.

Given his evidently fearsome reputation, the reluctance of News International employees to be open and honest internally and in their evidence to the Committee is readily understandable. In assessing their evidence, the culture emanating from the top must be taken into account, and is likely to have had a profound effect on their approach in 2007 and 2009 in evidence given to the Committee.

A further example of this culture and Rupert Murdoch and his management’s failure to focus on serious wrongdoing within the organisation was his response to the Committee’s questions about attempts by Neville Thurlbeck, then chief reporter of the News of the World, to blackmail two of the women involved in the newspaper’s controversial exposure of Max Mosley’s private life.

His reply that this was the first he had heard of this claim and that no one in the UK company had brought the allegation to his attention – if this was indeed the case – indicates a seriously wrong state of affairs in his company. Furthermore, it appears that having had the matter brought to his attention during questioning by our committee, he had still not read the Eady judgement by the time he gave evidence to the Leveson inquiry on 26th April 2012.

When asked if he agreed with the judge in that case that this “discloses a remarkable state of affairs at News International”, Rupert Murdoch replied “no”.

He appeared to see nothing unusual in News International failing to investigate or take action when a senior employee was cited by a High Court judge as resorting to blackmail in the course of his employment. This wilful turning of a blind eye would also explain Rupert Murdoch’s failure to respond (or to have another executive respond) to a letter sent to him in New York by Max Mosley on 10 March 2011, inviting him to order an investigation at News International into the blackmail allegation.

Another example of Rupert Murdoch’s toleration of alleged wrongdoing is his reinstatement, on 17 February 2012, of journalists who had been arrested. This is in contrast to most organisations this Committee can think of, which would have suspended such employees until the police had confirmed that no charges were being brought.

Rupert Murdoch told this Committee that his alleged lack of oversight of News International and the News of the World was due to it being “less than 1% of our company”.

This self-portrayal, however, as a hands-off proprietor is entirely at odds with numerous other accounts, including those of previous editors and from Rebekah Brooks, who told us she spoke to Rupert Murdoch regularly and ‘on average, every other day’. It was, indeed, we consider, a misleading account of his involvement and influence with his newspapers.

On the basis of the facts and evidence before the Committee, we conclude that, if at all relevant times Rupert Murdoch did not take steps to become fully informed about phone-hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications. This culture, we consider, permeated from the top throughout the organisation and speaks volumes about the lack of effective corporate governance at News Corporation and News International. We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.
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