Email to News Corp analysts

Dear Analyst,

My name is Stephen Mayne and I'm the former News Corporation journalist turned shareholder activist who has put up the shareholder resolution for this year's News Corp AGM proposing an end to the company's dual class share structure.

I hope you've had an opportunity to read the brief supporting statement. The board's response as set out in the proxy statement is pretty lame.

Importantly, the proxy advisory house Institutional Shareholder Services has this week sent out a report to more than 500 institutional shareholders around the world recommending a vote in favour of my resolution in the following terms:

ISS Analysis and Vote Recommendation

ISS advocates a one-share, one-vote policy. We do not approve of companies having different classes of common stock with disparate voting rights. This effectively gives one class of shareholders disproportionate voting power in the company in relation to its equity position. This can serve to entrench management if the board and executives own a large voting percentage based on their ownership of supervoting stock. In this case, the company has two classes of common stock: Class A common stock and Class B common stock.

Class A is a non-voting stock. Only Class B stockholders are entitled to vote at the annual meeting. Each share of Class B common stock entitles its holder to one vote. As of August 17, 2007, all officers and directors as a group beneficially owned 31.20 percent of the company's Class B common stock.

As a non-binding proposal, we support the request that the company take steps to develop a recapitalization plan whereby the company would have only one class of outstanding stock, with one vote per share. In general, we believe that simplified capital structures where voting interests are proportional to economic interests are preferable to dual class structures where management has disproportionate control of voting stock.

Vote FOR Item 4.

The ISS report was covered in some of today's Australian newspapers, including this story in The Sydney Morning Herald.

We now have the prospect of a serious protest vote at the 19 October AGM which then gets to the issue of on-going pressure on News Corp to reform its capital structure and the implications this would have on its share price.

I'm travelling from Melbourne to New York for the meeting and am planning to run a long-term campaign on this issue, which is where you come into the equation.

I would love to see some research on what the dual class structure means for the share price and whether diluting Murdoch control by having Rupert's family reduced to 15% of a one class company would trigger a re-rating of the stock.

What do you think would happen to the share price if News went to a one-class capital structure?

On the day my resolution became public in Australia, the discount applied to the non-voting shares contracted from $A1.87 to $A1.58 and today it remains at $1.64.

The opposition of the News board members is solely based upon this weak proposition: Somehow Rupert Murdoch and his family members will either not remain a part of News or, alternatively be sacked by News unless they retain these special share rights. It is incredible to think that Rupert Murdoch cannot stand proudly on his remarkable business record and the enormous value of his present News holdings.

Apart from sound financial reasons, having a democratic voting structure is good governance at a time when the Dow Jones acquisition means News Corp's own standards will come under increasing scrutiny.

The shareholder resolution has already attracted significant media coverage, which is summarised here.

In what is an innovation in shareholder activism, I'm also producing a daily videoblog, which includes 5 episodes on this News Corp campaign, including today's attempt at some humour.

Jokes aside, this campaign is serious and I would love to open a dialogue with you about the company.

Please feel free to call or email and provide any confidential feedback or information that would be relevant for this campaign.

Yours Sincerely,

Stephen Mayne

Copyright © 2022 The Mayne Report. All rights reserved

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