Second US proxy advisory firm urges end of News Corp’s dual-class voting structure

By Svea Herbst-Bayliss

NEW YORK (Reuters) -A second U.S. proxy advisory firm on Tuesday urged News Corp investors to support a hedge fund’s campaign to change the company’s dual-class share structure, saying no investor should have voting rights that are different from others.

Glass Lewis (JO:) recommended investors back a recapitalization plan at the company’s Nov. 20 meeting where all stock would have one vote for one share. Voting for the shareholder proposal, which is not binding, is designed to break Rupert Murdoch’s control over the media empire that publishes the Wall Street Journal.

“The economic stake of each shareholder should match their voting power and … no small group of shareholders, family or otherwise, should have voting rights different from those of other shareholders,” Glass Lewis wrote in its report which was seen by Reuters.

Its recommendation comes just days after rival U.S. proxy advisory firm Institutional Shareholder Services threw its weight behind Starboard Value. The activist investment firm run by Jeffrey Smith submitted a nonbinding proposal to eliminate dual-class share structure, Reuters reported in September.

Murdoch and his family own a 14% economic stake in the company but control 41% of the votes.

News Corp has urged investors to vote against Starboard’s proposal. The company has argued the dual-class capital structure provides key protections for editorial integrity.

Australian governance advisory firm Ownership Matters also recommended that investors vote for the Starboard proposal. Roughly 15% of the voting shares are held in Australia and Ownership Matters is a key proxy advisory firm in the country.

Glass Lewis noted that Starboard, and other hedge funds, have also criticized News Corp for its financial performance and wrote that if the dual-class structure were eliminated, the board could potentially face a proxy fight that would likely focus “squarely on the historical performance of News Corp. (NASDAQ:)”

The company could take actions to address investors’ valuation concerns but keep its dual-class structure even in the face of governance best practices, the report said.