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Murdoch Faces Angry News Corp. Shareholders (RECAP)

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RUPERT MURDOCH
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Rupert Murdoch faced a series of angry shareholders — many of whom had pledged to vote him out of his own company — at News Corp.'s annual meeting on Friday.

The meeting was held in Los Angeles, on the lot of the 20th Century Fox studios. It was the shareholders' first chance to question Murdoch since the phone hacking scandal erupted in July, and they made the most of the rare opportunity.

Bolstered by a formal proposal from one investor to eject Murdoch from his role as chairman of the News Corp. board, shareholder after shareholder vented their frustration with his handling of the company, and criticized News Corp.'s corporate governance and stock structure. All of them called for a new, more independent structure, and many said that the hacking scandal had fatally damaged Murdoch's credibility.

The central issue at hand —whether Murdoch, his son James and his closest allies on the company board would be voted out of their posts — was never a very suspenseful one. News Corp.'s stock structure means that Murdoch alone controls 40 percent of the vote, ensuring that he would maintain his status as CEO and chairman. Indeed, News Corp. announced later on Friday that all nominees to the board had been elected, though the company declined to release the tallies until next week. But, with huge pension funds like Calpers vowing to vote against him, it seems likely that a substantial protest vote will be recorded.

The meeting was hardly the first storm Murdoch has weathered thanks to the hacking scandal, which has been relentless in its forward motion. Beyond his infamous appearance before the British Parliament, he has also addressed the scandal during a company earnings call with Wall Street in August. However, Friday's meeting brought him face to face with shareholders representing pension funds from such diverse interests as labor unions, church groups and an Australian man with whom Murdoch had a series of increasingly contentious debates.

In addition, one of Murdoch's fiercest critics in the UK, Labour MP Tom Watson, showed up at the meeting, having bought stock in News Corp. expressly to question the company chief. Watson made a numbers of serious allegations against News Corp., charging employees with having hacked into peoples' computers and falsely impersonating a former Prime Minister.

Throughout it all, Murdoch struggled to keep his cool, repeatedly interrupting his interrogators and defending his conduct. Though he issued another abject apology for the hacking scandal, he also pointedly said that News Corp. had faced "unfair criticism." He especially lost his temper with the Australian, a former employee named Stephen Mayne, calling him a "liar" at one point.

Below, see a recap of what happened at the meeting.

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Tom Watson — the MP who is a big thorn in Murdoch's side — will be at the meeting. He bought shares in News Corp. just to be able to trash Murdoch to his face.

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So far, the music is rather New Age-y and plaintive on the audio feed we're listening to.

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It's started.

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"I'm Rupert Murdoch," he says. "It's my pleasure to welcome all of you."

He thanks the shareholders for a "remarkable journey...that is still in its early stages," and says he wants to reaffirm the "seriousness" of the hacking scandal, while also wanting to put it in context.

Then, he talks about how great News Corp.'s shares are doing.

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@ GregMitch : #OWS protest coming this morning at Fox Studios in L.A. -- News Corp shareholders meeting http://t.co/nCXyGVGN

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"We cannot just be a profitable company," Murdoch says. "We must be a principled company...that is why we must admit to and confront our mistake, and establish rigorous and vigorous procedures to put things right."

He says there is "no excuse" for hacking, and that the company "could not be taking this more seriously."

Murdoch also praises the directors of News Corp., especially Joel Klein (former NY schools chief) and Viet Dinh (former Bush official). He praises Klein for hiring good lawyers for the company, and Dinh for being a good watchdog. "I am grateful that they are the ones leading News Corp. in the effort to put things right," he says.

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Murdoch now going on about all of the company properties that are doing great—yet another reminder that his British newspaper division is a microscopic part of News Corp.

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Murdoch introduces them! 'Mr. James Murdoch' comes in the middle of the list, but he's the one everyone cares about (besides Rupert himself, of course.)

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Rupert lists all the nominees for a one-year term (the list includes himself and his sons Lachlan and James.) This is the point that many shareholders have taken issue with: they want the Murdochs off the board. With Murdoch controlling 40% of the shares all by himself, it's not likely. The thing to see will be how many protest votes are lobbied against Murdoch — and what shareholders want to say to him in person.

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Viet Dinh now speaking. He says that (surprise!) Murdoch is the best choice to remain as News Corp. chair and CEO. (Having never heard a News Corp. shareholder's meeting before, we assume this happens every year.) He also says that the board is unanimous in its recommendation to vote "against the floor proposal."

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Julie Tanner, from Christian Brothers Investment Services, criticizes "the pervasive and value-destroying scandal at the company," and requests that the chairman of the board be independent (i.e., not Murdoch), along with more "truly independent" directors and a "truly independent" investigation into phone hacking.

Murdoch says he will take the proposal seriously.

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An Australian shareholder then gets up. "We've had dreadful shareholder returns over the last 20 years," he says. "We've had poor governance, we've had gerrymander...it's time to get on the governance high road. It's time to actually embrace good governance. The returns haven't been there...you've treated us like mushrooms for a long time...I think you should really just get with the program." He also criticizes Murdoch's choices on Dow Jones, MySpace and hacking.

Whew! Murdoch says thanks, and respectfully disagrees.

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Why, it is! And his testimony is a doozy.

He says police are looking into allegations against News Corp., including: conspiring to pervert the course of justice and executives committing perjury. He also says that UK police "are now investigating at least three others" on the grounds of impersonating a prime minister, "targeting the former Queen," and illegally obtaining information from former Army intelligence officers. He says that the next shoe to drop is computer hacking, and that there is a "Mulcaire II" waiting in the wings (a reference to Glenn Mulcaire, of course.)

Murdoch essentially dismisses the allegations, saying that News Corp. is on top of them and that "we will make things right."

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Two representatives — one from the Church Of England and one from the SEIU union — also get up in favor of the proposal. Murdoch snaps at the church man, saying, "Your investments haven't been that good." Meow!

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Calpers— the country's largest pension fund— also says it's voting in favor of the proposal. This just keeps going!

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@ edmundlee : News Corp PR is desperately trying to stop the questions, gesturing to staff

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The Australian who hammered Murdoch earlier asks a procedural question, and says that he hasn't decided how to vote yet. Murdoch snaps at him. "I'd hate to call you a liar but I don't believe you," he says. "I know how you're going to vote."

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Murdoch asked if he has a "ballpark figure" for how much it's going to cost to pay off the "thousands" of potential phone hacking lawsuits. Murdoch says he doesn't no, and dismisses the idea that there are "thousands" of victims. The police would apparently disagree with this!

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Watson's back up again. He asks once more if Murdoch is aware of the allegations he made previously. Murdoch says he is not. "I promise you we will absolutely stop at nothing to put this right," he says, asking Watson to come forward with any new evidence. Watson says he's doing that now.

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The Australian, Stephen Mayne, gets up again. "This is your third time, Stephen!" Murdoch says. Mayne says News Corp. security are pushing him to stop the questioning, and says it's "embarrassing" and "undemocratic."

Murdoch says News Corp. can stand any embarrassment like that, and notes that Tom Watson was even on Fox News earlier in the day. "It's called 'fair and balanced,'" he says.

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Viet Dinh now answering questions about the broader corporate culture at News Corp. He says that, by and large, the company is "great," but that the "humiliating" situation in Britain is very serious.

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As a director makes a lengthy, lengthy statement about Murdoch's compensation, let's just take note of the fact that Murdoch seems all over the shop here: from contrite to contrary, with a definite pattern of increased irritation as person after person criticizes his leadership.

Also, the director just said that Murdoch's bonus went up because the company had "a very good year." Ok then! Murdoch admits he doesn't understand everything that was just said.

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Murdoch gets a loving testimonial from a longtime employee, who thanks him for all the money he's made him.

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After a weird animal-rights interlude, more supportive shareholders praise Murdoch. "We are kicking ass," one says.

Then Stephen Mayne gets up! He says he used to "self-censor" a bit when he worked for Murdoch. "You've made up for it," Murdoch says. Someone get these two a vaudeville act!

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"Anyone else?" Rupert Murdoch says. He apparently sees Stephen Mayne get up again, and sighs.

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A teacher asks Murdoch about his education ventures. He says she should have read his speech on the subject. She says she was teaching when he gave it. He says she should read the Wall Street Journal.

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He says the results of the vote will be listed later today. We'll see what happens...

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The media conglomerate has been rocked by evidence that its now-shuttered British tabloid, News of the World, hired a private investigator who tapped into the cellphone voicemail of a 13-year-old who disappeared in 2002 and was later found murdered.

Murdoch and his son James, who is in line to succeed him, were grilled by Watson and other lawmakers in a parliamentary committee hearing in late July. The elder Murdoch said he was ashamed at what happened but declined to take personal blame. He said he was the best person "to clean this up."

Watson told reporters Thursday that he will show that News Corp. used techniques that go "beyond phone hacking" into other technological means that could leave the company open to civil lawsuits and further damage to its reputation. News Corp. officials declined to comment.

Murdoch controls News Corp. through his family trust's 40 percent stake of voting shares. A key backer is Saudi Prince Alwaleed bin Talal, who controls 7 percent. The voting stock represents less than a third of the company's total $44.4 billion market value.

That dual-class share system has come under renewed fire. Critics say the company's board is dysfunctional and management has poor oversight of the company.

Proxy advisory firm Institutional Shareholder Services has recommended voting out all existing board members, including Murdoch and his sons James and Lachlan. Two other firms, Glass Lewis and Egan-Jones, recommend voting against the sons, among others.

Jay Eisenhofer, co-lead attorney in a shareholder lawsuit against News Corp. on charges of mishandling the affair, said on a conference call with Watson on Thursday if even 20 percent of votes are cast against the reelection of Murdoch and his two sons, it would be a victory.

That's because that approach half the 53 percent of votes unaffiliated with the family, he said.

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