Rupert Must Resign

21/07/2011 23:14 BST | Updated 20/09/2011 10:12 BST


Rupert Murdoch hoisted his own petard and should resign from News Corporation immediately based on his own logic.

At this week's Parliamentary hearings into newspaper misdeeds, he was asked whether he should resign. He answered that "I feel that people I trusted, I'm not saying who, I don't know what level, have let me down. I feel they behaved disgracefully, betrayed the company and me and it's for them to pay. I think that frankly, I'm the best person to clean this up."

Using that logic, Rupert Murdoch should "pay" by leaving. He was trusted by his company's investors and customers (readers) and he let them down. His oversight and judgment was flawed, his managers at many levels were mediocre, or, worse yet, some went rogue. Therefore, to quote Rupert himself, it's for him to pay too.

Go, Rupert, Go

His management has financially damaged shareholders. The company shut down its profitable News of the World, leaving a L45 million profit hole, and requiring massive write downs in severance and future litigation costs as well as damages to 5,000 victims whose phones were allegedly hacked.

News Corp.'s stock price has taken a drubbing, due to Murdoch's inept crisis management, losing billions in value. Other brands have been greatly damaged such as the Sun and Times, both implicated in phone hacking and other allegations of journalistic malpractice.

Investigations and political inquiries into operations have spread from Britain to the US and Australia and are swamping the company.

The most negative financial impact is that this admitted mismanagement at News Corp. has cost the company a strategic advantage. The possibility that News Corp. will be allowed to rebid to buy the rest of BskyB will be next to impossible. Indeed, many British politicians are calling for a forced divestiture of the 39 percent News Corporation already owns of the lucrative satellite channel. Others are demanding that the newspapers be spun off and sold in a market where they will fetch next to nothing.

Pink slip

Given this set of disastrous outcomes, Rupert Murdoch cannot possibly be "the best person to clean this up". If he did not have a dual-class share setup, with himself holding control, he would have been forced to resign.

The current crisis also reveals his poor judgment. He picked executives to run his global empire who were inappropriately promoted out of trashy tabloid journalism ranks. These people, and Murdoch, never imposed strict quality controls on their "products", the news, and worse yet could not have been reading any of these salacious stories.

It would have been impossible for anyone to have read these "scoops" without knowing that, if true, they could only have been obtained by unethical, immoral or illegal means. It is against the law to intercept voice mail, phone calls or to bug premises and obtain information from financial institutions or medical personnel without the permission of the client or patient. It is illegal to obtain privileged police information. Any journalist, and most readers, knows this.

A lingering odor in the C-Suite

The biggest damages will be caused by the questions that will hang over this enterprise as long as Rupert Murdoch remains at the helm: Has the newsroom cancer in Britain metastasized throughout all of News Corp.'s media brands? Does the Murdoch bias, and tabloid DNA, trump valid, fair news coverage? Can readers and viewers trust these outlets in future whether it's The Times, The Wall Street Journal, Fox TV or the Australian?

At the end of the day, this is a business story about a guy who let his shareholders and customers down by running a fiefdom that made some immoral and possibly illegal products, but who cannot be unseated, or even encouraged to retire, because he chooses to operate his public corporation as though it was a family business.

The News Corp. scandal is less about journalism and more about a business model that has become too big to succeed.

The Financial Post