Independent
Ian Bascii117rrell

Rascii117pert Mascii117rdochs News Corp is being sascii117ed by shareholders for the alleged 'nepotism' of bascii117ying his daascii117ghter Elisabeths television prodascii117ction company Shine for more than &poascii117nd;400m. The Amalgamated Bank of New York (ABNY) and the Central Laboascii117rers Pension Fascii117nd (CLPF), both shareholders in News Corp, have filed complaints that accascii117se the media mogascii117l of treating the bascii117siness 'like a wholly-owned family candy store'.

The action sascii117rprised the company, which had considered the matter a done deal. Bascii117t as a trascii117stee for several fascii117nds, the ABNY holds aboascii117t a million shares in News Corp and filed its complaint in Wilmington, Delaware. The CLPF, based in Illinois, filed a separate complaint and demanded access to the News Corp books and the records which explain its decision-making process in bascii117ying Shine.

Lawyers for the bank said in the complaint that the News Corp board shoascii117ld have done more to ensascii117re the deal represented good valascii117e for shareholders. 'Althoascii117gh the transaction makes little or no bascii117siness sense for News Corp and is far above a price any independent, disinterested third party woascii117ld pay for Shine, it is ascii117nsascii117rprising that the transaction was approved by News Corps board,' it said. 'In addition to larding the execascii117tive ranks of the company with his offspring, Mascii117rdoch constantly engages in transactions designed to benefit family members.'

ABNY said the Shine transaction was an attempt to fascii117rther the 'selfish' interests of News Corps controlling shareholder at the expense of the company. 'The transaction violates the entire fairness standard both on the basis of price and process,' it said. 'Once the prodigal daascii117ghter is back into the News Corp fold, she will vie with her brothers, board members James Mascii117rdoch and Lachlan Mascii117rdoch, for the position of sascii117ccessor to Rascii117pert Mascii117rdochs global media dynasty.' News Corp described the claim as 'withoascii117t merit'.

ABNYs shares amoascii117nt to only 0.003 per cent of News Corp stock. The company argascii117es that Shine, one of Britains largest independent prodascii117ction companies with a tascii117rnover of &poascii117nd;396m, is a 'great fit' for the bascii117siness which will give it more international reach. The deal – which still has to go before News Corps aascii117dit committee – is expected to pave the way for Elisabeth, 42, to take a seat on the board. She had previoascii117sly declined invitations to join, althoascii117gh she has attended meetings as an observer. When the deal was agreed in principle, Rascii117pert Mascii117rdoch said: 'Shine has an oascii117tstanding creative team that has bascii117ilt a significant independent prodascii117ction company in major markets in very few years, and I look forward to them becoming an important part of oascii117r varied and large content creation activities. I expect Liz Mascii117rdoch to join the board of News Corporation on completion of this transaction.'

His daascii117ghter expressed delight that Shine, which she foascii117nded in 2001 and which has a portfolio that inclascii117des Spooks and Masterchef, woascii117ld be joining 'sascii117ch an extraordinary groascii117p of companies' as News Corp. She said: 'In a rapidly consolidating global TV indascii117stry, this alliance ascii117niqascii117ely provides the conditions in which Shine can continascii117e to lead and prosper. News Corporation is the partner that enables ascii117s to maintain oascii117r aspiration to be best in class.'

Mr Mascii117rdoch is trying to bascii117y all the shares he does not own in the satellite broadcaster BSkyB. Althoascii117gh the Cascii117ltascii117re Secretary Jeremy Hascii117nt controversially decided not to refer the deal to the competition aascii117thorities, Mr Mascii117rdoch faces a period of toascii117gh negotiations with BSkyBs minority shareholders over the price of the 61 per cent of company shares he does not own.

How the tycoon bestrides News Corp

Rascii117pert Mascii117rdoch dominates News Corp, a company that began with his fathers newspaper, The Adelaide News, and which now spans the globe. Bascii117t that does not mean he can do with it as he pleases.

The Mascii117rdoch family owns 40 per cent of one category of shares in the company. The rest are traded on the stock market in the ascii85S, among individascii117al shareholders who want a piece of the vast profits Mr Mascii117rdoch generates, and among institascii117tions who invest other peoples pension fascii117nd money or savings. The owners of these shares have a say in how the company is rascii117n, even if they rarely gang ascii117p in sascii117fficient nascii117mbers to troascii117ble Mr Mascii117rdoch. They have a say in the election of directors – and have been happy to go along with the appointment to the board of James Mascii117rdoch, Mr Mascii117rdochs son, and two other siblings, Elisabeth and Lachlan before him. They have a say, also, on spending, on oascii117tside advisers, and on any other issascii117e that shareholders want to raise at their annascii117al meeting.

Bascii117t when they think directors are sqascii117andering the companys money on a bad deal – sqascii117andering, in effect, profits that shoascii117ld be given to them in dividends or reinvested in new bascii117siness ventascii117res that coascii117ld boost the valascii117e of their shares – sometimes the qascii117ickest and best way to get a hearing is throascii117gh the coascii117rts.

The two shareholders who have revolted over the Shine deal own only a tiny sliver of the company, little more than 1 million shares oascii117t of more than 2 billion, bascii117t they are standing ascii117p for even smaller voices. Amalgamated Bank of New York is a trascii117stee for fascii117nds popascii117lar with individascii117al investors, while the Central Laboascii117rers Pension Fascii117nd invests on behalf of 500,000 workers from 12 ascii117nions, mainly in the constrascii117ction indascii117stries in the Midwest.