News Corporation Scandal

Analysis of the corporate governance of News Corporation

Executive summary

The 2011 News Corporation phone-hacking and bribery scandal, as recent scandals in other business sectors such as the Enron, Tyco and the Parmalat controversies, might be directly linked to the failure of the company’s corporate governance practices and structures. Evidence supports that the division of the corporation in two entities in 2013 partially restored the brand image and the stock value of the media conglomerate. However, some underlying corporate issues, i.e. independence of board members, nepotism allegations, dual class shares structures and corporate responsibility, still need to be addressed to avoid possible future frictions and conflicts.

News Corporation scandal

In summer 2011, a series of phone hacking and bribery scandals surrounding the mass media company News Corporation were exposed to the British public eye. The journalists and managers of the newspaper News of the World were accused of exploitation of private and sensible information, bribery of policemen and corrupt involvement of politicians in such practices.

The immediate consequences of the scandal were the closure of the newspaper, the formal apologies by Chairman and CEO Rupert Murdoch and the failure of the takeover of BSkyB by News Corporation. After a substantial drop, News Corporation shares have held steady (Daily Mail, 2012).

In the following months, allegations about the violations of ethical standards by the News Corporation subsidiaries have raised vivid concern over the practices of the News Corporation subsidiaries in the United States and Australia.

Corporate Governance of News Corporation during the scandal

Corporate governance in media companies is not merely important as a business issue clarifying the company’s reporting and improving relationships with investors but because of its effects the content of media and the ability of media firms to carry out their social...