PROPOSAL NO. 4
STOCKHOLDER PROPOSAL
ELIMINATE THE COMPANYS DUAL CLASS CAPITAL STRUCTURE
The Nathan Cummings Foundation (Nathan Cummings), 475 Tenth Avenue, 14th Floor, New York, NY 10018, which is the beneficial owner of 960 shares of Class B Common Stock as of the date of submission, has given notice that it intends to present for action at the Annual Meeting the resolution set forth below. Legal & General Assurance (Pensions Management) Limited, the beneficial owner of 3,798 shares of Class B Common Stock as of the date of submission, on behalf of its client Hermes Equity Ownership Services, joins Nathan Cummings as a co-filer of this proposal. In accordance with applicable proxy rules, the proposal and supporting statements, for which the Company accepts no responsibility, is set forth below:
RESOLVED, that stockholders of News Corporation (News Corp. or the Company) request that the Board of Directors take the necessary steps (excluding those steps that must be taken by the Company's stockholders) to adopt a recapitalization plan that would eliminate News Corp.s dual-class capital structure and provide that each outstanding share of common stock has one vote.
Supporting Statement
News Corp. had 583,193,671 shares of common stock outstanding as of April 30, 2015, according to the Company's Form 10-Q filed on May 6, 2015. Holders of the 383,563,431 outstanding shares of Class A common stock, nearly 66% of the Companys equity base, have no voting rights. Holders of Class B common stock, of which 199,630,240 shares were outstanding, have one vote per share.
According to a May 2015 SEC filing, News Corp. executive chairman K. Rupert Murdoch may be deemed to beneficially own 39.4% of the Class B shares and less than 1% of Class A shares. Thus, despite owning only about 14% of outstanding shares, Mr. Murdoch controls nearly 40% of the voting power, allowing him outsized influence on the outcome of shareholder votes.
Dual-class structures can distort incentives and increase agency costs by misaligning economic
incentives and voting power. High-profile scandals at companies like Hollinger and Adelphia illustrate the dangers of dual-class structures in facilitating the extraction of private benefits for management. Governance expert Charles Elson has stated that dual-class structures create a culture with no accountability. (Geoff Colvin, The Trembling at News Corp. Has Only Begun, CNNMoney, July 19, 2011)
Dual-class structures are associated with poorer company performance. A 2008 study by Harvards Paul Gompers and two co-authors found that dual-class structures with disparate voting rights were correlated with lower firm value . (Paul Gompers et al., Extreme Governance (working paper 2008) (available at http : //papers.ssm.com/sol3/ papers.cfm?abstract id= 56251 l))
In a preliminary proxy statement filed in 2013, News Corp. identified certain negative consequences associated with the existing dual-class capital structure, including the possibility that significant voting stockholders could pursue their own interests to the detriment of other stockholders. Indeed, we believe that the Murdoch family's effective control over News Corp. has resulted in decisions that are not in public stockholders' best interests.
A derivative suit filed after the phone hacking scandal and settled in 2013 for $139,000,000 alleged that the Board failed in its oversight duties on a number of fronts. Among other things, the plaintiffs alleged that, "The Board has a long track record of pursuing transactions that clearly help the controlling family, while providing questionable benefits or objective injury to the public shareholders." While the suit targeted News Corporation prior to its split into two distinct, publicly traded companies, a majority of the current News Corp. directors served during some or all of the period covered by the suit.
Accordingly, we believe that eliminating the dual-class structure, and installing a one-share/one-vote arrangement, would benefit News Corporation and its public stockholders.