2005 NewsCorp transcript

Stephen Mayne: Yes. Good morning, gentlemen. My name is Stephen Mayne, I'm a shareholder. I've got the stake up to about $US10,000 this year. I'm also proxy for my wife and I've got some open proxies for a couple of other Australian shareholders. I think Rupert and I are probably the only 2 people in the room who have been to the last six AGMs of News Corp. Just by way of background for the Americans, I worked for Rupert for 7 years as a journalist from Australia and have been going to these annual meetings for the last 6 years as a shareholder.

I ran for the Board in 2002 and tried to nominate this year, but was rejected on the grounds the nomination wasn't timely. Having spent all this money coming over here from Australia, I'm looking forward to a lovely shareholder showbag this year, Chairman, to justify the trip. And I have to say I think we've gone backwards in terms of process. I mean why are we having all resolutions discussed at once? In Australia over the last few years we've made some progress. You do the Chairman's address at the start, we have the reaction to that, and then we went through the resolutions one by one. Come to America and all of a sudden we don't get your address until the end and it's one in, all in, we have to ask you about everything at once.

Chairman and CEO Rupert Murdoch: I can assure you that after my address you'll be free to ask any further questions.

Stephen Mayne: Okay, well I've got a couple of questions for the directors that are up for reelection so I'm hoping that you'll indulge me in allowing them to answer them. And also, when it comes to general questions, I was hoping that the Chairman of Board Committee
would be available to answer any relevant questions.

Rupert Murdoch: Yes, they certainly will be.

Stephen Mayne: Okay. In relation to Chase Carey's election, when James Murdoch was appointed CEO of BSkyB, he decided that it would be in accord with good governance practices that he resign from the News Corp board. Now, I understand, Chairman, you were opposed to that and he insisted that happened. So my question to Chase Carey is, doesn't he feel that he has a conflict of interest in remaining on the News Corp board, while being the CEO of Hughes? And why didn't he take the same approach that James Murdoch took with BSkyB?

Director Chase Carey: No, I don't think it's a conflict. And, in fact, based in principle and the sort of a core premise on News Corp, because my background is in News Corp before DirecTV, when we invested in DirecTV was to capture synergies and opportunities for News Corp and DirecTV to work together. And I think these roles, particularly given the breadth of the US assets of News Corp and Fox and DirecTV's US base, I think the role gives me an ability to make sure we try and capture the opportunities for those 2 businesses to work together and really capture the opportunities inherent in that.

Stephen Mayne: Okay. This is a second question for you Chase. How do you handle the related party transactions? You've done some large programming deals between News Corp and DirecTV. Are you negotiating with yourself?

Chase Carey: I'm not allowed to, no. No. I mean first, I'm on the Direct side of that and in Direct there's a very clear process set up for related party transactions that have the independent directors on the Audit Committee approving those transactions. So there's been a very clear process set up to deal with that.

Stephen Mayne: Okay. A couple of questions for Andrew Knight. Andrew, you're a chairman of the Remuneration Committee. You're on the – in the annual report or the proxy statement you're down there as owning $US7 million worth of shares. I guess my concern with you being in charge of the Remuneration Committee is that I understand you have made more than $100 million out of – or you've made a large amount of money out of some very generous and attractively priced equity issues that you received when you were an executive with News Corp.

So we have a situation with someone who's supposedly an independent but is actually an affiliated director hailing from management. You benefited enormously from the generosity of the Chairman and then he sits on the Committee dishing out $9 to $10 million cash bonuses to that same Chairman. Now, from my way of thinking, that's a pretty severe conflict of interest. Can you spell out exactly what the equity situation was, what the history is there so we can have the full context as to your position as you dish out bonuses to your Board colleagues?

Chairman of Compensation Committee Andrew Knight: Gosh, Mr Mayne, I wish that were true. I wish I had made that much money. I was an executive of the company between 1991 and 1994. As an executive, I had some options, which I exercised. I didn't make anything financially like that amount of money and I wish I had. Those shares are in trust, which a large chunk of them are in charitable trusts, which I am not a beneficiary of. I'm an eligible beneficiary of the other one, but, as you know, the dividend of News Corp is very low, so I would think that I have benefited in terms of income in terms of maybe tens or hundreds of thousands over those years. I ceased to be an executive in 1994 after three and a half years with the company.

Stephen Mayne: Okay. Question for Peter Chernin. One of the problems with the poison pill is that it caused the share price to tank by about 10% since the pill was extended. Now, Peter, you're most exposed, apart from the Chairman, in terms of options, you've got 9 million options in News Corp. Doesn't it concern you, as someone who's got largely out of the money options, that the Board has implemented a policy which had the effect of depressing the share price by 10%? And you've got fiduciary duties to try and maximise the value of the company and you've got a large options play running you still, why would you support such a policy which has put your options even further out of the money?

President and COO Peter Chernin: Well, I think first of all the amount of options I have is a pretty good indication that my interests are clearly aligned with the company and my interests are in the best interests of the company. I believe that the poison pill was in the best interests of the company and my fiduciary interests and my options is over the long term, I'm not interested in cashing in tomorrow. I'm interested in seeing the company maximising its growth, which I believe it has the potential to do over the longest period of time. The other thing I might point out is I believe that our stock was traded fairly similarly to other media stocks during that same period of time.

Rupert Murdoch: I'd just add to that, I think it's purely coincidental. All media stocks are out of favor at the moment and we're all down. Although in our case we've had by far the fastest growth of any other media company of all our peers, shall we say.

Stephen Mayne: Okay. Question for Rod Eddington. Rod, given your reputation as being a well-regarded CEO of British Airways, a director of Rio Tinto, I'm particularly disappointed that someone such as yourself has supported this poison pill. The poison pill, it's all very well for Rupert to go with the poison pill; he wants to entrench his power in News Corp, that's his position. But the real disappointment here is the genuinely independent directors and those who are meant to be representing us, the small shareholders. And I think personally Rod Eddington is probably one of the most disappointing performers here.

So I'd like to ask Rod, as an independent director or someone who claims to be an independent director, how is that you could regard the poison pill as an acceptable policy? I mean all the time we see News Corp making takeover raids on other companies. We're making a bid for Realestate.com.au at the moment. What would we think if suddenly Real-estate's Board came out and said, "You can't buy any more shares or we'll be massively diluted"? We'd be outraged. We've been launching takeover bids for years. Never before have we had to seek the permission of a Board to do that like we apparently required John Malone to do. So, Rod Eddington, why is it, do you think, that we can possibly have a policy of this poison pill which is in any way defendable?

Chairman of Audit Committee Roderick Eddington: The issue of the poison pill was something that was discussed at the Board at some length and it was the view of all the directors, certainly independent directors, that it was the right thing for our company to do at this point in our journey. It was something that was considered carefully and discussed thoroughly and we believe it was the right thing to do for the company at this point in its journey.

Stephen Mayne: Do you appreciate that your reputation has suffered given the undertakings that were given to a group of institutions and proxy advisors at the time of the re-incorporation to the US?

Rupert Murdoch: Before you make statements like that, you should wait to hear the vote.

Roderick Eddington: I think the issue there is, again, it was discussed thoroughly. We're clear about what was and wasn't said. As I understand it, this is a matter of legal process anyway at this point in our journey and I think to say any more at this point in time would be inappropriate.

Stephen Mayne: Okay. In terms of...

Rupert Murdoch: I'd just like to say something here. You're from Australia. There are very different rules in Australia where you can't do a creeping control. And the poison pill is simply to prevent people from taking over a company without paying a proper premium.

Stephen Mayne: But you're not even giving Malone a chance to pay any premium. You're saying that he could –

Rupert Murdoch: Yes, he can walk in any day, offer us $100 a share and we'll consider it at the Board.

Stephen Mayne: But he can't make a $40 a share takeover bid right now. And as a shareholder, I'd –

Rupert Murdoch: Sure he can.

Stephen Mayne: ...love to receive.

Rupert Murdoch: Sure he can.

Stephen Mayne: No, he can't.

Rupert Murdoch: Yes, he can.

Stephen Mayne: He can't come on to the market and start buying –

Rupert Murdoch: No, he can't. He just can't come on the market and buy it at $15. If he wants to come at $40, come and talk to us.

Stephen Mayne: (inaudible) has to get permission to buy shares is absolutely ridiculous. I just have a couple of questions for directors. Mr. Eddington is also the –

Rupert Murdoch: The whole point is protection of the small shareholders not being tricked into giving up control of the company at a low point

Stephen Mayne: Well, I –

Rupert Murdoch: ...and so that everybody should get the same premium.

Stephen Mayne: I haven't enjoyed the 10% haircut that your so-called protection –

Rupert Murdoch: Which had nothing to do with the poison pill. No one likes the present market in media stocks, particularly myself. All media stocks, regardless of results, have been completely out of fashion for the last 12 months.

Stephen Mayne: I guess my point is that if you want to get the share price up, remove the poison pill.

Rupert Murdoch: Well, (inaudible) don't have them and see where their shares are.

Stephen Mayne: Okay. Another question for Rod Eddington. Rod, you're chairman of the Audit Committee. The results that were announced for the 2004-05 financial year have a capital gain of $US264 million based on the fact that the BSkyB share price had fallen. Now, it's a little bit complicated, but there's $US1 billion in convertible equity in BSkyB, which we have to pay out in 2016 and, perversely, if the BSkyB share price falls, we have to pay out a different amount of shares and that gets booked through the accounts as a profit.

Now, I guess my issue here is with disclosure, where it had the all-singing, all-dancing, which was the best profit ever announcement from the Board, but if you read the annual report, this is not actually spelled out, that $US246 million of our profit increase came from the fact that the BSkyB share price had fallen. Now, as chairman of the Audit Committee, I just want to ask you why wasn't that spelled out properly in the profit results and in the annual report and it wasn't until we got a 10-K announcement a little while back that the full scale of that increase was revealed?

Roderick Eddington: My understanding and recollection is that there was full disclosure on that issue. It was certainly in the 10-K, as you say. And I think it was there for everyone to see. That is my recollection.

Rupert Murdoch: I think Mr DeVoe might like to speak to just how this works.

CFO David DeVoe: It's not only in the 10-K; it's in the annual report.

Stephen Mayne: What's the figure?

David DeVoe: The figure is in the annual report. I'm looking at page 106 of the annual report, if you'd like to look that up. And in that report it shows that there was a gain on the change in – fair value of the Boks is $246 million. And I might also say that in our press release announcing our results it was also disclosed. So if you look at our profit results, the increase to earnings per share of 28% year over year, that is a true increase in our EPS.

Stephen Mayne: All right. A question...

David DeVoe: Would you like a copy of the page?

Stephen Mayne: Sure. A question for Mr. Knight. The bonuses, the cash bonuses have been paid out by your Remuneration Committee, in part based on – or mainly based on an EPS formula. Despite the fact that the share price has gone backwards over the last year, we've obviously had a massive increase in cash bonuses, $US55 million to the top 4 executives, unprecedented in the company's history. Was the gain on the BSkyB convertible equity included in the EPS figures as you decided those record bonuses?

Andrew Knight: Well, Mr Mayne, you were present at the AGM last year, and you will remember that what I said then about how we were going to remunerate the top officers of the company. It was rather warmly welcomed and I'll now repeat it for those who weren't there last year. The Compensation Committee retained Deloitte in Chicago as independent advisors and we tried to set an arms length arithmetic formula for bonuses for the senior officers with the company rather than making it discretionary, rather than having a group of them sitting there coming to judgment. And we benchmark it with Deloitte's help against our peers and our peers are very obvious ones, Disney, Time Warner, Viacom. And it became very apparent during that process that certainly one of our senior officers was significantly under-compensated.

But, as I say, we didn't make a judgment about that; we just applied the formula to those senior officers. We've had a stellar year and that was reflected in the bonuses that have been paid, which still doesn't take them out of the quartile or out of the peer group. There were no share options; we got rid of those because investment community opinion were very much veering in that direction. We decided to make it (inaudible) with some restricted stock units in the case of Mr Chernin. And the results are what you see. Now, if the earnings were to go down, which – as we're looking for it to go up as far as I can see this year, but if the earnings were to go to down, that would be reflected in the bonuses.

Stephen Mayne: My concern is –

Rupert Murdoch: I sympathise with that point of view. And, Mr Mayne perhaps you would keep the rest of your questions till later...and let other people.

Stephen Mayne: ...this is the problem –

Rupert Murdoch: We ought to just answer this question first.

Stephen Mayne: This is the problem we're having at all –

Rupert Murdoch: Let us just –

Stephen Mayne: ...all resolutions as one.

Unidentified Company Representative: Let me just –

Rupert Murdoch: No, there's plenty of time.

Unidentified Company Representative: Let me answer your question. The gain on Boks (inaudible) is excluded from management compensation -.

Unidentified Company Representative: I was just about to say that. It's on true earnings. In other words, excluding exceptionals of any kind. And we are very rigorous about that. And I think actually you could have noticed that yourself.

Stephen Mayne: I guess my problem is –

Rupert Murdoch: Now, I think you've had all your questions answered.

Stephen Mayne: I have –

Rupert Murdoch: Now, I'm not getting into a debate with you. I'd like you to sit down –

Stephen Mayne: I have one more –

Rupert Murdoch: ...and take your turn.

Stephen Mayne: I have one more for Mr. Chernin. I want to decide whether I'm voting for Mr Chernin or against him, and I have one more question for him.

Rupert Murdoch: It doesn't really matter how you vote, but go ahead.

Stephen Mayne: Well, I know that. But this is democracy. And my question for Andrew Knight is in deciding whether to vote for him in his role as Chairman of the Remuneration Committee. Now, my problem with what Mr Knight is saying is that he's announced record bonuses. We've gone to a formula of EPS, earnings per share, whereas the shareholder return, our shareholders have actually gone backwards. So we have a situation where we've taken a haircut, we're losing money, and you're paying out bigger cash bonuses. And that's the reason for my question, is how he can justify that in his position as chairman of the Remuneration Committee.

And my last question on these resolutions is for Mr. Chernin, and I want to ask him about his contract. Lachlan Murdoch was quoted in the New York magazine saying that Chernin's contract was quite an unbelievable contract. And yes, he got his $US19 million cash bonus in a year when the share price went backward. What I want to ask him, though, is why does he feel the need to have a cash $US40 million payout negotiated if he was terminated. I mean that just seems extraordinary, $US40 million in cash.

And can he explain the thinking behind the company being mandated to buy a 6 year deal where we've got to buy 2 films a year at a minimum and a certain amount of his TV productions at the most favorable terms of TV and film purchase deals that our company's ever done. What's going on here? What's the point of this TV and film deal over 6 years? If we want to fire him, surely we just want to fire him, we're not really locked into taking his product for another 6 years at unfavourable terms for us. So can you tell us, maybe it's on to you (inaudible) if you negotiate it or maybe it's one for the chairman of the Remuneration Committee? But it does indeed sound, as Lachlan described it, kind of like an unbelievable contract and I think we need a little bit of explanation as to what is.

Rupert Murdoch: Those terms have been there for many years and this was just a continuation of that. What was changed was that there would be a firm basis on the bonus on the lines that Mr Knight explained to you. Otherwise, there was no change in salary or conditions, as I remember.

Andrew Knight: Mr Chairman, do you want me to answer the question on stock?

Rupert Murdoch: Yes.

Andrew Knight: Mr Mayne, you've shown your fidelity to the company, you're a long-term holder. And I don't think you've taken a haircut at all unless you sold. If anybody here was to try and base bonuses on whether the stocks go up and down, they'd be basing bonuses on often bookmaking systems. You don't know whether the stocks are going up and down, we don't know. We've decided and I have to say a I feel totally confident that we were right and we were advised by Deloitte in this direction that earnings per share is the only true measure of achievement. That will be reflected in the stock price over time if we have confidence, which we clearly do, in the company.

Stephen Mayne: Chairman, (inaudible) Evelyn and I have formed a very happy coalition of the willing here. Just a couple more supplementary questions and obviously I would love to see some other shareholders get up. I'll just ask a couple and then give someone else a chance.

Rupert Murdoch: It'd be a nice change.

Stephen Mayne: I should say by way of background, Rupert had one question over 7 years (inaudible) in the 1990s and he did enjoy that. But America, the place of the famed culture of shareholder pressure, it's good to see a few more people get up. On the vote, though, Chairman, did John Malone vote in favor of all resolutions?

Rupert Murdoch: Yes.

Stephen Mayne: So, what in effect has happened here is that John Malone has given the directors a pay rise, has he? Because that resolution would have been lying bull (ph). The resolution –

Rupert Murdoch: Well, that could go for a lot of shareholders perhaps.

Stephen Mayne: Yes, but I think – the way you were reading those figures before, you were trying to make the point that it seemed to be very strong and all that sort of stuff. Fact of the matter is that the biggest ever no vote against a News Corp. director in the past was
(inaudible) in 2002 when there was 71 million voted against, and that's adjusted for the one-for-two consolidation as part of the move to America. So the fact that we're now at around 120, 130 million, or almost $2 billion worth of stock, he's actually the largest ever processed vote against any News Corp. director in its 52-year history – by double.

So today we've seen double the biggest ever processed against these Board directors. Without the Murdoch and Malone voting block of 48% of the stock, it would have been lineball in terms of the director pay rise and it was about 65/45 order, 60/40 order for the individual directors. So make no mistake about it –

Rupert Murdoch: I think I'd say that the AE Harris Trust did abstain from the vote on the shareholder – on the directors.

Stephen Mayne: Yes, that's why that was 60-odd%. What I'm saying is that Malone voted on that one, so we have this lovely irony here of Malone objecting to the poison pill, but then choosing to vote his (inaudible) voting stock in favor of giving the shareholders effectively a US $100,000 bonus for all their hard work on approving the move to America, which enabled the poison pill to happen in the first place.

So I think we should have for the record here today, that this has been a substantial process vote against the directors for breaking their word, for choosing a poison pill, which has been against the interests of the shareholders because it's driven down the price. And I'd just like to ask you firstly, directly, Chairman, why are you so scared of John Malone? What is it about him – and I was looking at the Forbes rich list yesterday. He's only at, what, 1.9 billion; you're at US $6.7 billion. He's a tiddler compared to you. Why are you so worried about him getting on the Board? He's a great thinker. Work with him, let him buy more stock, drive the share price up, get him on the Board, and we'd all be happy. I mean why is it you're so paranoid about John Malone?

Rupert Murdoch: I'm not going to make any comments. I have a good relationship with him, and I intend to keep it that way.

Stephen Mayne: Okay, and –

Rupert Murdoch: And actually, your arithmetic is wrong; if you'd taken away his 180 million votes, it still would have been a majority. A narrow one, but a majority.

Stephen Mayne: Yes, close is right. And actually supplementary on that, what was the size of the undirected open proxies that were given by default to the Board on average across the resolutions? Was it about 10 million?

Unidentified Company Representative: We don't have that.

Rupert Murdoch: No idea.

Stephen Mayne: Those figures have to be disclosed by law (inaudible).

Unidentified Company Representative: They will be disclosed. We're still –

Stephen Mayne: Okay, because I suspect that that resolution would have failed but for Malone and the open undirected proxies. So I think it's important not to try and put some spin here on the size of the process that has occurred. Chairman, a specific question and then I'll sit down and give someone else a chance. The proxy statement refers to the fact that you don't have a beneficial interest in the Murdoch Trust, that you disclaim any beneficial interest in the Murdoch Trust.

Now, given the departure of Lachlan from the Board and given what John Malone has done of late, I think this is a fair question to ask. You might argue it's a private matter. But in terms of what happens to that 30% voting stake in News Corp., which today has exerted control over a number of resolutions, do you personally have absolute and unfettered control over that voting stock in all circumstances? So if you were to resign from the Board, do you still have absolutely 100% voting stock?

Because the public record is that you've got 4 votes and that your children, your 4 adult children have 4 votes, so that seems to be 4/4, but the perception is that you have control. Can you just clarify that you have unfettered control even though the proxy statement says that you disclaim any beneficial interest in those voting shares?

Rupert Murdoch: I'm not prepared to say anything other than what's in the public record, which is a very full description of what the situation is.

Stephen Mayne: Just a brief supplementary. Are you in the position to unilaterally decide to sell those shares were John Malone to make a bid or do you have to go to your children to approve that?

Rupert Murdoch: You'd have to go to all the (inaudible).

Stephen Mayne: Right, so you don't have unfettered control in terms of selling the stock?

Rupert Murdoch: I'm not prepared to go into that or what the conditions are or what the rules are.

Stephen Mayne: If anyone else would like to ask a question?

Rupert Murdoch: Thank you. Well, if that's all –

Stephen Mayne: I've got – if no one else wants to ask, I've got another couple. Mike Mangham is an analyst at Deutsche Bank and has been following News Corp. for 15 years until his resignation a few months ago. Last week online in Australia he published an extraordinary account of life as a News Corp. analyst in which he alleged that when he first downgraded the stock from a buy to a hold in 1995, he was "abused, insulted and sworn at by News Corp. executives".

When he plucked up the courage to downgrade the stock in 1998, your representatives told his boss and called him unprofessional and threatened the relationship and any ongoing fees from News to Deutsche Bank, although I don't understand that there are many of those over the years. When he put a sell on the stock at the peak of the dot-com boom in 2000, which was a smart move given the stock's fall from $56 to $0.22, your executives again called his boss and asked for him to be removed. He put a sell recommendation on the stock early this year and he said he's been retrenched, although I understand that that's been tendered and that he was offered a position in New York as the media analyst.

Now, Mike Mangham in this piece claims that you put Murdoch control and media domination ahead of shareholder return in terms of priority and the poison pill would certainly be an example of that. And "no other company I know has ever had so many buy recommendations yet produced such appalling returns". And he quotes the fact that there's been no shareholder return since 1998 and earnings per share has been static since 1987, 18 years. He also alleges that you've generated about US 250 million in fees for investment banks over the last 10 years – a year and that you –

Rupert Murdoch: A year.

Stephen Mayne: A year, and he's talking about the after market and all sorts of things. And he's claiming that you effectively used those fees to influence the analysts to have a slew of buy recommendations on your stock and he makes the point that he's never seen so
many buys when there's been such share bad performance. So my question to you is are his allegations correct and in light of the Spitzer reforms in the U.S., can you commit to not allowing such a situation to occur again? And can you state on the public record that any analysts recommendation towards News Corp. stock won't influence any investment banking relationships and won't influence things like whether they get a run on the conference calls?

He alleges that he always gets left off the back of the conference calls, because he hasn't got a buy recommendation on the stock. And he never gets invited to cozy lunches and breakfasts because only those that have a buy recommendation in the stock. So these are very serous allegations and I think you need to deal with them and you need to also state a public policy for News Corp. to –

Rupert Murdoch: I'd like to handle that and say they are very serious allegations and they are total fiction. I've investigated them, there was never any – either any abuse of him nor, indeed, was there ever any pressure to Deutsche Bank. So, as you say, we do, I think, practically no business with them. Oh, perhaps a little bit from time to time. And so the whole story is a fiction and the poor guy's out of a job I guess. That has nothing to do with me. He was never a significant figure. When you're in public life, you've got to put up with these sort of inventions. But there was absolutely not a word of truth in that.

Stephen Mayne: Ed, you should have bought the stock on January the 19th, 1990. I think that was the low point, wasn't it?

Rupert Murdoch: About $2.

Stephen Mayne: Now, if you adjusted for everything, it's about US $1 back then. And you could have got out at 56 at the peak of the dot-com boom. So, the point is there's been no earnings per share growth since '87, so you're alleging from '52 to '87, and then
you've done nothing, if we're going to be honest about the shareholder return. Now, Chairman, you took over this company in October 1962. I'd like to ask you, when was the last time you were elected?

Rupert Murdoch: In Australia, chairmen are not elected. I will now – in much tighter regulations, I will be standing for election next year, whenever –

Stephen Mayne: Have you ever been elected?

Rupert Murdoch: Not recently, I don't think so. I forget. But in Australia –

Stephen Mayne: Yes. Chairmen are not exempt. (inaudible) every other prominent executive chairman in Australia –

Rupert Murdoch: I'd be very happy to submit my name next year, and you can make another 5 speeches, all right?

Stephen Mayne: But you haven't – you're elected for 2007. It's not next year. So not only have you not been elected in 30 or 40 years, but then you tagged yourself on at the lightest (ph) possible time. Was that done by ballot or, did you just say to your chairman of your
Nomination Committee, Mr. Viet Dinh, who probably wasn't alive when you were last elected, did he – did we have a ballot for that or did you just tell him ?

Rupert Murdoch: I have no idea.

Stephen Mayne: What do you mean you have no idea?

Rupert Murdoch: Certainly never spoke to –

Stephen Mayne: You have every idea –

Rupert Murdoch: ...Mr. Dinh about it.

Stephen Mayne: I want to ask Viet Dinh a question. He's the chairman of the Nomination Committee. Now, we've seen some statements in the press the last couple of weeks claiming that News Corp. has a majority of independent directors. Now, I haven't heard something quite as funny as that in a long time. Five of those so-called independents are former executives of the company, Rod Eddington, Andrew Knight, Ken Cowley, and you've got Stanley Shuman, at least he knows that he's not independent.

So we've only got 3 genuine independents on this Board. We don't have a majority of independent directors. How can Ken Cowley be an independent director when he and Rupert started the Australian together – newspaper in 1964, before you were born, Viet Dinh? Ken Cowley and Rupert have been in business together for 43 years and this Board has the temerity to tell us that he's only been on the Board since 1997 and that he's an independent director. I mean whose leg are you pulling here?

Rupert Murdoch: We're following all the regulations, which describe these people exactly as what they are, which is independent.

Unidentified Company Representative: And in addition –

Chairman of Nominating and Corporate Governance Committee Viet Dinh: Let me add to that –

Unidentified Company Representative: In addition, ISS has also determined that we have a majority of independents (inaudible - microphone inaccessible)

Viet Dinh: And also (inaudible - microphone inaccessible)

Stephen Mayne: Okay, now you're in charge of finding new independent directors, Viet Dinh. How's that process going? What sort of directors are you looking for? Is the Chairman going to have any influence on who it is or are you a genuinely independent chairman of
the Nomination Committee.

Viet Dinh: We have an independent – a committee of nomination (ph) and corporate governments that is composed entirely of independent directors. We follow established procedures, including input from Board members and other interested persons. And we'll leave it at that.

Stephen Mayne: Is it fair to say that support of the poison pill not going to a vote of shareholders is a prerequisite for any new independent directors that your committee chooses?

Viet Dinh: No, it is not a prerequisite. Each and every single one of us has a fiduciary duty to act in the interests of all shareholders and we are in agreement with that responsibility and we'll carry out that responsibility according to facts and circumstances of the case.

Stephen Mayne: But you obviously admit that it's going to be difficult to find genuinely independent shareholders because –

Rupert Murdoch: Why is it obvious? He never said that.

Stephen Mayne: Well, he's saying that –

Rupert Murdoch: What do you know about it? You don't even live here.

Stephen Mayne: I don't know –

Evelyn Davis - Highlights and Lowlights, Editor - Shareholder: You have had enough (inaudible - microphone inaccessible)

Stephen Mayne: Now we're getting along well, Evelyn.

Evelyn Davis: (inaudible - microphone inaccessible)

Stephen Mayne: I've come a long way, Evelyn.

Evelyn Davis: You make it bad for the rest of us.

Stephen Mayne: I have one last question and then I'll sit down. Evelyn, I've come a long way –

Evelyn Davis: inaudible - microphone inaccessible

Stephen Mayne: I've flown a long way, 20 hours on the plane.

Evelyn Davis: (inaudible - microphone inaccessible) Why don't you wear a tie and shirt, and a jacket?

Stephen Mayne: I didn't want to have any luggage. I didn't have any stored luggage, so I travel light.

Evelyn Davis: (inaudible - microphone inaccessible)

Stephen Mayne: All right, I promise I'll wear a suit next time, Evelyn.

Evelyn Davis: (inaudible - microphone inaccessible)

Rupert Murdoch: Time is moving. Mr. Mayne –

Stephen Mayne: My last question –

Rupert Murdoch: ...one question only.

Stephen Mayne: One last question, Chairman. I think I'd like you to explain, Stan, what happened with your son Lachlan and his resignation, his (inaudible) resignation a couple of months ago. We've seen that extraordinary sort of 8,000-word feature in New York magazine by Steve Fishman, which was clearly Lachlan's side of the story. Although not directly quoted, obviously it was clear what happened there. And he made a series of claims that –

Rupert Murdoch: Excuse me; I'll take no more of this. Lachlan made a personal decision to resign from an executive role in the company, at least for a number of years, while he does his own thing and he's very welcome to it and we wish him well. And that's all we have to say. Thank you.

Stephen Mayne: Thank you.

Go here for a full chronological list of edited AGM transcripts available from the past decade of shareholder activism.

Copyright © 2022 The Mayne Report. All rights reserved

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