Tycoon Rupert Murdoch's plan to move his News Corp media empire headquarters to the US state of Delaware hit a major snag yesterday as an alliance of pension funds branded it unacceptable.
News Corp is seeking shareholder approval to move its legal domicile to the US, arguing that more than 75 percent of its revenues are now generated there.
Accusing News Corp of trying to "look and smell" like a US company, The Australian Council of Superannuation Investors (ACSI) said if the proposals were not revised it would recommend next week its members oppose the move.
A string of high-profile corporate collapses in the US did not augur well for the change, it said.
"We will be making a recommendation early next week," executive officer Phillip Spathis said.
"We are drafting the advice. It would be reasonable to assume that -- at least on corporate governance grounds given the outstanding concerns that we do have -- if nothing else changes, we will be recommending against," he said.
ACSI members control A$85 billion (US$60.7 billion) in funds and it has been backed by Corporate Governance International and international pension funds in the Global Institutional Governance Network.
It said after three months of dialogue it had gone public because News Corp appeared unwilling to listen to its complaints over the move, which it said would give the board increased powers at the expense of shareholders.
"The reason we have gone public is because that dialogue has come to an end. At the end of the day they want to smell and look like a US company," Spathis said.
Among a long list of complaints, the group cited what it termed negligible protection for minority shareholders in the event of a takeover and the potential for the board to create a further class of shares in the US without shareholder approval, saying this was "of considerable concern."
"We are surprised that News Corporation is asking investors to endorse a proposal that will effectively diminish governance standards, given that we have just come out of a cycle of collapses and failures attributed to poor corporate governance," ACSI president Michael O'Sullivan said in a statement.
"Instead we are left with the unsavory odor of further entrenchment of the board and management's hegemony in News Corporation."
O'Sullivan said News Corp's response on corporate governance fell short of key "checks and balances" currently applicable under the Corporations Act in Australia, where the company is currently based and where it controls many key media assets.
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