Apparently, dynastic succession is still a viable concept in corporate America. Mr. Murdoch’s heir apparent, Lachlan, defended Fox and the Dominion settlement when speaking to investors on May 9. “The settlement in no way alters Fox’s commitment to the highest journalistic standards across our company or our passion for unabashedly reporting the news of the day,” he said. Comments such as these do not exactly inspire confidence that Fox News has any plans to try harder to stick to the facts in its reporting. “They’re doubling down,” Ms. Minow said. And that is downright scary, especially given the size of Fox’s audience and its influence.
The drama we’re watching play out at the Fox Corporation is an extreme example of how companies with a controlling shareholder can suffer — the stock is down almost 18 percent in the past five years — but it isn’t the only one. To a lesser degree, I see problems occurring at companies such as Comcast (controlled by the Roberts family) and Paramount Global (controlled by Shari Redstone), among others. When dual classes of stock are involved, a family’s voting power often far outstrips its economic ownership, leading to financially foolish, and even bizarre, behavior.
There’s a reason that a century ago the idea of professional management was introduced into American corporations. A professional manager creates a sense of distance between shareholders and management, which is held accountable to a board of directors, chosen to represent the shareholders. Professional managers are paid to look at problems objectively, accounting for what will theoretically be best for all stakeholders, including shareholders, creditors, vendors and employees. It may not be a perfect system, but the pas de deux between a professional manager and a board of directors has proved to be a durable way to create lasting wealth.
Contrast Mr. Murdoch with, say, Jamie Dimon, the chairman and chief executive of JPMorgan Chase, the nation’s largest bank. Or with Joaquin Duato, the chairman and C.E.O. of Johnson & Johnson, the health care behemoth, where there are no longer any Johnsons among the top brass. JPMorgan Chase is now run professionally, dispassionately and well by Mr. Dimon. He is powerful, yes, but he’s not all powerful. The JPMorgan Chase board of directors can fire him at any time, for any reason. The same goes for Mr. Duato. Does anyone at Fox or News Corp hold Mr. Murdoch accountable in the same way? Can anyone?
One way to rein in Mr. Murdoch may lie with Smartmatic. If it emerges victorious in its lawsuit, it could insist, as part of any settlement, on governance changes at Fox or even demand that the C.E.O. succession process include candidates outside the Murdoch family. Smartmatic, or even the recently filed shareholder lawsuit against Fox, could end up pressuring Fox, and indirectly News Corp, to scrap their dual-class stock structures.