The deadline passed last night for submissions to UK media regulator OfCom, which is examining whether Rupert Murdoch’s 21st Century Fox should be allowed to bid $19 billion for 100% control of the UK-listed media giant Sky.

After being contacted by the activist group Avaaz, I lodged a 2500-word submission focusing on the various governance breaches inside the Murdoch empire over the years and requesting that these two very specific conditions be placed on the takeover:

  1. 21st Century Fox and News Corp should be required to have a clear super-majority of independent directors and an independent non-executive chair.
  2. 21st Century Fox and News Corp should be required to move to a conventional UK-style capital structure where all shares on issue have equal voting rights.

If the Brits are going to allow an unprecedented amount of media power to be vested in the hands of one foreign citizen with a dubious record, then they should at least insist on some governance reform as part of the deal.

At the moment, excessive power is concentrated in the hands of the Murdoch family courtesy of a reverential hand-picked board at both News Corp and 21st Century Fox and a voting gerrymander, which delivers the Murdochs about 40% of the votes when they only own circa 14% of the total shares on issue.

Public investors actually own more than US$50 billion worth of stock in companies controlled by the Murdoch family, but have virtually no say in their governance, which has been shoddy for many years.

Here are some examples of governance issues arising at News Corp AGMs, which have been supplied to OfCom:

Australian Annual General Meetings 1990-2004: Executive chairman Rupert Murdoch failed to put himself up for election, using the voting exemption which is available in Australia for CEOs, even though this is  rarely taken by other Executive Chairs who face the normal three-yearly election cycle.

1993: Rupert Murdoch announces undemocratic super-voting proposal at AGM when family still owned 32% of a conventionally capitalised News Corp, but the push was defeated in Australia after a two-month debate. 

1994: Dual-class voting structure launched shortly after the AGM with a one-for-two bonus issue of non-voting preferred stock.

2002: I ran for the News Corp board at the AGM in Adelaide but faced the worst platform censorship. So much for free speech!  

2003: News Corp shareholders voted down a proposal to issue options to directors because the Murdoch family was unable to vote their controlling stake. Faced with this unprecedented exercise of shareholder power, the Murdochs responded by immediately commencing plans to redomicile the company to Delaware where shareholders have fewer rights.

2004-06: Rival entrepreneur John Malone swooped on an 18% stake in the voting stock and News Corp board responded by instituting an undemocratic poison pill, which would be illegal in Australia and the UK. This scandal was finally resolved in 2006 after News Corp was sued by shareholders for breaking an undertaking to the Federal Court.    

2007: I proposed a shareholder resolution to end News Corp’s dual-class voting structure, which was supported by 60% of independent shareholders, or voting stock worth about $5 billion, at the time. Despite this record protest, the board sticks by Rupert’s undemocratic gerrymander. 

2008: Rupert refuses to call for any AGM questions in New York and breaks promise to have a shareholder information meeting in Adelaide each year.

2010: Remuneration report voting has been operating in Australia since 2004 but News Corp directors opposed a shareholder resolution calling for a “say on pay” in 2010. However, a clear majority of independent shareholders ignored the board’s advice and supported the proposal.

2011: Record protests against News Corp directors after phone-hacking scandal with 80% of neutral shareholders opposing re-election of James and Lachlan Murdoch.

2014: Shareholder resolution proposing end to News Corp gerrymander only narrowly defeated but board refuses to change.

2015: Without Rupert’s voting support, 10 of the 12 directors would have been voted off the News Corp board, as shareholders react angrily to the latest poison pill technique designed to entrench Murdoch family control. 

2016: The three Murdoch men on the News Corp and 21st Century Fox boards extracted an unprecedented A$110 million in salaries for 2015-16, sparking a record remuneration report protest vote of 63.7% from the independent Fox shareholders, but no concessions from the board. The Murdoch men have taken US$606 million in salary and bonuses over the past 18 years. And if News Corp and 21st Century Fox are truly operating separately, why were both 2016 AGMs held on the same day in the same theatre at Fox Studios in Los Angeles? With three Murdoch men common to both boards and a common controlling shareholder, they are still quite tightly connected, even if they have different sets of minority shareholders and assets.

On the board front, 21st Century Fox is on the record aspiring to have a super-majority of independent directors, but are a long way from achieving this. Based on the Australian Shareholders’ Association guideline that independence is lost after 10 years of service, this is how they line up:

Non-independent directors 21st Century Fox

Rupert Murdoch: 86-year-old executive chairman and CEO since January 1953.

Lachlan Murdoch: executive co-chairman and eldest son of Rupert.

James Murdoch: CEO and second son of Rupert.

Chase Carey: currently vice-chairman and a former chief operating officer who spent more than 20 years as a senior Murdoch executive.

David Devoe: long-time finance director of News Corp.

Sir Rod Eddington: claimed to be the “lead independent director” but fails to qualify as a former executive who ran Ansett and having served on the board for 18 years.

Viet Dinh: no longer independent after becoming godfather to Lachlan Murdoch’s son and having served for 13 years.

Jeffrey Ubben: controls 7% of the voting stock through his activist fund Value-Act, so not independent.

Genuinely independent 21st Century Fox directors

Delphine Arnaut: joined Fox board in June 2013.

Tidjame Thiam: Fox director since November 2014.

Robert Silberman: Fox director since June 2013.

James Breyer: News Corp and then Fox director since 2011.

Jacques Nasser: A director of Fox since June 2013 although independence could be challenged by his earlier 10-year stint on the BSkyB board.

With just five out of 13 independents at 21st Century Fox, OfCom should insist on substantial board changes as a pre-condition before the bid can proceed.