The sadness of Rupert Murdoch

Family businesses

Aug 4th 2005
From The Economist print edition

As another child quits the family firm, is the Murdoch business dynasty ending?

THE patriarch's plan to transfer the management of News Corporation to his children is going very badly. On July 29th, Rupert Murdoch's eldest son, Lachlan, suddenly resigned from his executive roles at the company. As if bidding farewell to his father, he said in a statement: “I would like especially to thank my father for all he has taught me in business and in life.” Mr Murdoch said he was “particularly saddened” by his son's decision.

Lachlan, aged 33, will stay on News Corp's board, and advise the company. He had personal reasons to leave: he and his wife prefer Sydney to New York, and will move back. But there were troubles in the firm, too. Being deputy chief operating officer sounded important, but he was said to be frustrated that he had little say in the running of the businesses he oversaw—the group's American TV stations, its publishing business, Harper Collins, and its Australian arm. He was closely involved in day-to-day operations only as publisher of the New York Post. Most power rested with his father and Peter Chernin, the president and chief operating officer.

Executives at News Corp also say that Lachlan was not as obsessively interested in running the businesses as his father would have liked. According to one person close to the company, some senior people complained to the boss that his son was not particularly co-operative. He did not get on well with Mr Chernin. Mr Murdoch senior is said to have made cutting remarks about Lachlan's performance in front of other executives.

Lachlan's responsibilities are now expected to pass to Mr Chernin, and Mr Murdoch will return to being publisher of the New York Post. More businesses may come under the oversight of Roger Ailes, chief executive of Fox News.

Lachlan is not the only one of Mr Murdoch's children to leave in a hurry. In 2000, Elisabeth Murdoch, the second of his four adult children, suddenly quit BSkyB, a publicly-listed British satellite-television firm controlled by her father, to his surprise and dismay. Ms Murdoch was then regarded as a potential successor.

Now the only one of the children left at News Corp is James Murdoch, who recently moved from its Asian TV business to become chief executive of BSkyB. So far he is impressing investors, some of whom were sceptical at first. “As long as he is surrounded by the right people, James Murdoch has the potential to be a world-class media CEO,” says Murdo Murchison, a fund manager at Franklin Templeton. At BSkyB, James is at arm's length from News Corp, and he answers not only to his father but also to other shareholders. But it is not certain that he wants to manage his father's large and hard-to-handle collection of media assets. “These are not easy, pleasurable baubles to take on,” says a banker close to the family.

The uncertainty of succession at News Corp, some people believe, is part of the reason why John Malone, boss of Liberty Media, decided to buy more voting shares in the company last year. By doing so he may have been trying to protect his large non-voting investment in the company by gaining more say over who takes over from Mr Murdoch, who is 74.

The current plan is for Mr Chernin to succeed until one of the children is ready. But Mr Chernin is likely to leave the firm in the next few years. The picture is further complicated by the fact that Mr Murdoch has two young daughters from his third marriage, to Wendi Deng (another potential successor?). He reportedly wants to change the family's financial arrangements to give his youngest two children an equal share of his assets, which are held in trusts. Tension within the family is said to have been another factor in Lachlan's departure. In a further statement last weekend, Mr Murdoch said that he looks forward to the day when his son wants to return to the firm.

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