Tuesday, 19 July 2011

Rupert Murdoch, News Corporation head testifies to British MP's

An interesting facet of Murdoch's testimony was his insistence that the News of the World is a very small part of News Corporation's interests: less than 1%. Given this, he would not have expected to be directly involved in the issues MP's were grilling him about. Actually the word 'grilling' is a little misplaced - it reminds me of Denis Healey's riposte, that it is "like being savaged by a dead sheep". The one line of questioning that was interesting regarded who, in management, asked what and when about the dossier of emails sent to lawyers - which constituted the central beam of News International's investigation to see whether the hacking went wider than the Royal Correspondent convicted in 2007. But more of that later.

Actually, it does not seem unreasonable that the chairman of the ultimate holding company should not have been hands on. The person at the top of a very big business cannot deal with the minutiae of every subsidiary - it has to be delegated - that is proper corporate governance. What is a little more surprising is to be unaware of the detail once the potential damage to the overall business becomes apparent. Surely, then good corporate governance demands that not just the chairman but also the main board should be aware of the detail. The local management should normally be left in charge, unless it appears they are taking bad decisions or cannot cope, but there should be written as well as verbal reports to the main board. And I would have thought that once this member of staff had been convicted then there existed the risk that the scandal could spread: that there could be contagion to other parts of the business.

What seems to me curious corporate governance is that an investigation was instituted - the main focus of which was communications by email from selected journalists at News of the World - and nobody from senior management seemed able to tell MPs who had chosen which journalists' emails should be looked at, how they were selected or what was the brief to the lawyers who reviewed them; not the regional head (James Murdoch), nor the chief executive of News International (Rebekah Brooks) nor the editor of the News of the World (Colin Myler). And nobody other than the external lawyers seems to have read them until the past few weeks.

Latterly those emails have been reviewed, as part of a renewed internal investigation and the results thought serious enough for the dossier to be handed to police.

Even a small part of a sprawling business empire can cause serious problems that are disproportionate to its profit earning share. When that risk becomes apparent then good corporate governance demands that the main board asks for and is given more than mere reassurance but is given the detail upon which to base an assessment of whether the risks are being managed appropriately. According to Rupert Murdoch that has not happened and he is still personally unaware of some of the detail. Even James Murdoch and Rebekah Brooks seem to have a wide range of unawareness of detail.

No comments:

Post a Comment