News Corp’s headache – what should Murdoch do with a $12bn cash pile?

August 8, 2011 12:29 pmComments OffViews:

Powered by Guardian.co.ukThis article titled "News Corp's headache – what should Murdoch do with a $12bn cash pile?" was written by Roy Greenslade, for guardian.co.uk on Monday 8th August 2011 07.20 UTC

News Corp's board will meet in Los Angeles tomorrow for the first time since the phone hacking scandal turned toxic in early July.

It may prove uncomfortable for the company's chairman and chief executive, Rupert Murdoch.

According to a Wall Street Journal article, the company hopes to "use" the board meeting and the presentation of its year-end results the following day "to steer attention away from the scandal."

Citing "people familiar with the matter", the paper – owned by News Corp – says the company's overall numbers are expected to look good.

But directors must decide what to do with News Corp's bulging cash pile, which stood at nearly $12bn (£7.3bn) in March. Most of it had been earmarked to buy the 60.9% of BSkyB it doesn't own – a deal that is now dead.

One possibility is raising the company's dividend. Another is a shares buyback over and above the $5bn programme previously announced.

After all, the company's stock price is low. Its shares closed on Friday at $14.67, down 19% from 5 July, the first day of trading after the Milly Dowler hacking revelations.

The board meeting will be a chance for News Corp's nine independent directors to discuss the progress of a company committee formed to help investigate the hacking allegations.

The independence of that committee has come under attack from corporate governance critics because it reports through a News Corp executive, Joel Klein, to independent director Viet Dinh.

The board is also facing criticism that it is too beholden to Murdoch, whose family has 40% voting control of the company even though it owns a much smaller economic stake.

Some shareholders also question the role two of Murdoch's children play at the company and whether it is appropriate for him to hold both the chairman and chief executive titles.

One institutional investor with a small stake, Christian Brothers Investment Services, wants to strip Murdoch of his chairmanship and appoint an independent chairman at the company's annual meeting in October.

Members of the Interfaith Centre on Corporate Responsibility – with about 1.1m non-voting class A shares and 201,000 voting class B shares – sent a letter on Friday to Rod Eddington, News Corp's senior independent director, expressing concern about Murdoch's double role.

Source: Wall Street Journal

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