PROPOSAL NO. 4
STOCKHOLDER PROPOSAL CONCERNING THE ELIMINATION OF THE COMPANY'S DUAL CLASS CAPITAL STRUCTURE
Mr. Stephen Mayne, PO Box 925, Templestowe, Australia, 3106, who has advised us that he is the owner of 150 shares of Class B Common Stock, has given notice that he intends to present for action at the Annual Meeting the resolution set forth below. In accordance with the applicable proxy regulations, the proposal and supporting statements, for which the Company accepts no responsibility, are set forth below.
That the News Corporation board of directors submit a proposal to holders of class A and B shares within the next 12 months which, if approved, would create a company with just one class of share.
When News Corporation first announced its reincorporation proposal on 6 April, 2004, it justified the move, in part, on the following grounds:
“The reincorporation is expected to benefit all shareholders by increasing the scope and depth of the shareholder base, improving trading liquidity, enhancing access to the capital markets and making the Company's shares eligible for inclusion in a variety of US-based indices.”
Unfortunately, the move initially caused considerable share price weakness as News Corporation was ejected from the Australian indices, triggering large sales by Australian funds.
Whilst both classes of share were including in the Australian indices, unfortunately Standard & Poors only allows one class of share from each company to be included in the S&P500 index on the New York Stock Exchange.
Given this has to be the most populous share on issue, News Corp's B Class voting shares are not included in the S&P500 index. Therefore, many index funds are compelled to buy non-voting A Class shares and holders of the B Class voting shares suffer a lower than necessary share price.
Having a single class of share would add almost 1 billion News Corp shares into the S&P500 index, lifting the total to more than 3 billion shares.
Creating a single class of share, possibly giving A class shareholder full voting rights, would also serve the purpose of diluting Murdoch family control from approximately 39% of the voting stock to less than 15% of the total stock. This would likely trigger a re-rating of the stock as investors build in a potential takeover premium.
The Grant Samuel report accompanying the Liberty Media Exchange proposal noted the “adverse” consequences of not having Liberty as a counter balancing force to the Murdoch interests on the News Corporation share register. Creating a single class of share would dilute Murdoch family control and allow the independent shareholders to appoint a majority of directors and determine key future issues such as a succession management.
As News Corporation discovered when it first approached Dow Jones & Company, a two tier voting system can appear highly undemocratic and discourage attractive takeover bids. News Corp's suite of strategic assets would be highly attractive to private equity bidders, yet the two-tier voting structure discourages their interest.
News Corp is a company which passionately promoted the idea of spreading democracy to places like Iraq, so it seems inappropriate that our own system of democracy is severely gerrymandered with almost 70% of the shares on issue not having voting rights. The exact form of any restructure proposal should be developed by the board and delivered to stockholders in time for a vote at the 2008 annual meeting, if not earlier.
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