Given the scope and complexity of the scandal which surfaced last year concerning News Corp. and Rupert Murdoch, just one more in the long list of scandals that have been unearthed over the past decade, the world as a whole, already on a global campaign for better business General hashtag linkage to COVID-19 Pandemic practices, has sat up and taken notice with a new vigor.There are however, a great many things that might be learned from this case regarding matters of corporate governance and compliance.
1. Blending Roles
Much like Murdoch, many companies currently have individuals acting both in the role of CEO and Chairman. However, this practice needs to stop. Combining these two roles in one person grants that individual far more power than any single individual should possess within an organization. What’s more, this individual is now in complete control of the flow of communication to the board, and through this control may be preventing the board from fulfilling its responsibilities to the investors; an issue at the very heart of corporate governance practices.
2. Director Independence
While all companies need directors who are willing to remain independent and who are unafraid to ask questions, speak up, and challenge certain issues, this need is all the more important for those companies who are controlled and remain heavily influenced by a founding family.Where such controlling figures are concerned, it often becomes typical for board members to hold back and refrain from speaking their minds lest they are fired for their dissent. This needs to stop if these companies are to have any chance of maintaining proper governance practices.
3. Structuring and Reporting
While News Corp. had established an external committee, called the Management and Standards Committee (MSC), whose job it was to function independent of the company itself to monitor and advice the board on matters of governance, ethics, and compliance, this committee only reported to a single board member, severely limiting its effectiveness and that of the information it provided. In order for such an arrangement to truly work, the MSC should have been required to report to the board as a whole, or to a committee of board members at the very least.
Another important subject that may come to be addressed is the matter of succession.While having a successor/mentor program in place is certainly a valuable tool, once an individual’s integrity has been called into question due to acts of an illicit nature, it may then behoove the company to keep a close eye on those employees who were groomed as the perpetrator’s successor. What will be interesting to see in the case of News Corp. is how the successors of those doomed for the chopping block will come to be treated, and whether or not any trust will be instilled in these individuals.