DEFA14A: Fox Board Rejects ISS Proxy Recommendations

Fox Corporation's Board of Directors strongly disagrees with Institutional Shareholder Services' recommendations regarding compensation committee members and governance issues, reaffirming its voting advice.

Summary

• Fox Corporation's Board of Directors strongly disagrees with Institutional Shareholder Services (ISS) recommendations for the 2025 Annual Meeting of Stockholders.
• ISS recommended against four members of the Compensation Committee due to a pledge of 37,002,060 Class B common shares by LGC Holdco.
• LGC Holdco, owned by trusts associated with certain Murdoch family members, holds 36.2% of the Company's Class B common stock.
• The pledged shares were used as collateral for a loan, the proceeds of which financed the acquisition of additional Class A and Class B common stock from departing beneficiaries, following the resolution of Murdoch Family Trust legal proceedings.
• The Board argues the pledge does not present significant risk, stating it was not a CEO pledge, was used to increase ownership, and LGC Holdco has the financial capacity to repay the loan.
• ISS also recommended against Mr. Paul Ryan and Mr. L.K. Murdoch due to the Company's dual-class structure and supported a stockholder proposal for a simple majority vote.
• The Board defends the dual-class structure as providing editorial integrity and protecting long-term value, and supermajority provisions as protecting minority investors.
• The Board reaffirms its recommendation to vote FOR all seven director nominees (Proposal 1) and AGAINST Proposal 6 (stockholder proposal for simple majority vote).

Sentiment

Score: 6

Explanation: The sentiment is moderately positive from the company's perspective, as it strongly defends its position and governance, aiming to reassure shareholders. However, the need to issue a supplemental proxy statement to counter ISS recommendations indicates underlying negative pressure and disagreement from a key proxy advisor, which could be perceived negatively by some investors.

Positives

• The share pledge by LGC Holdco was used to acquire additional company shares, increasing alignment of Mr. L.K. Murdoch and associated trusts with stockholders.
• LGC Holdco members reportedly have the financial capacity to repay the loan independently, minimizing risk of forced liquidation.
• The Company was not involved in the loan transaction, so it does not impact the Company's business or financial operations.
• Mr. L.K. Murdoch's personal share ownership significantly exceeds the Company's CEO stock ownership guidelines (6x annual base salary), demonstrating strong alignment.
• The dual-class structure, in place for over 20 years, is presented as providing important protections for editorial integrity and long-term asset value.
• Supermajority provisions are highlighted as protecting minority investors by requiring broad stockholder support for fundamental changes.

Negatives

• Institutional Shareholder Services (ISS) has issued negative recommendations against four members of the Compensation Committee, Mr. Paul Ryan, and Mr. L.K. Murdoch.
• The pledge of 37,002,060 Class B common shares by LGC Holdco, while explained, was a point of concern for ISS.
• The Company's dual-class structure and supermajority voting provisions are contentious issues, leading to ISS recommendations against key directors and in favor of a stockholder proposal.

Risks

• Potential for misinterpretation or misunderstanding of the LGC Holdco share pledge by proxy advisors and investors, leading to negative voting recommendations.
• Risk of negative investor sentiment or votes against directors due to the Company's dual-class share structure and supermajority voting provisions.
• While mitigated, the inherent risk associated with a significant share pledge (37,002,060 Class B shares) as collateral for a loan, even if LGC Holdco has repayment capacity.

Future Outlook

The Company anticipates continued stability in its ownership, leadership, vision, and management, reinforced by the recent share acquisition. LGC Holdco and Mr. L.K. Murdoch have no intention to pledge additional shares or employ hedging/monetization strategies, indicating a stable long-term commitment.

Management Comments

• The FOX Board of Directors (Board) strongly disagrees with ISSs recommendation against the four members of the Companys Compensation Committee as unwarranted and incorrect.
• The Board reaffirms its recommendation to vote FOR all seven of FOXs director nominees, including the members of the Compensation Committee.
• The Company welcomed this important development and the transactions related to it as strengthening the stability of its ownership, leadership, vision and management, all of which are in the best interests of the Companys stockholders.
• LGC Holdco and Mr. L.K. Murdoch have informed the Company that they have no intention to pledge additional shares, nor to employ hedging or monetization strategies.
• The Board believes such recommendation [against dual-class structure] is based on a one-size-fits-all checklist approach to corporate governance that fails to recognize the benefits of such structure...
• ISSs misguided recommendation to support a stockholder proposal to implement a simple majority vote fails to recognize... the limited provisions in our governing documents that require supermajority stockholder support in fact provide protection to our minority investors...

Industry Context

This filing highlights ongoing tensions between corporate boards and proxy advisory firms like ISS regarding corporate governance practices, particularly around executive compensation, share pledges, and dual-class share structures. Many companies with founder control or long-standing governance models face scrutiny from institutional investors and proxy advisors advocating for 'best practices' that may not align with a company's specific history or strategic objectives. The debate over dual-class structures is common in media and tech companies where founders seek to maintain control.

Comparison to Industry Standards

• The Board's defense of its dual-class structure is common among companies like Meta Platforms (Facebook), Alphabet (Google), and Berkshire Hathaway, which use similar structures to maintain founder control and long-term vision, often arguing it protects strategic direction from short-term market pressures.
• The scrutiny over share pledges, even for non-executive entities, aligns with broader corporate governance concerns raised by proxy advisors, who often recommend against directors at companies where significant insider pledges exist, citing potential for forced sales and stock price volatility.
• The debate over supermajority voting provisions versus simple majority is a recurring theme in corporate governance, with many institutional investors advocating for simple majority to enhance shareholder democracy, while companies often argue supermajority protects minority interests or prevents hostile takeovers.

Corporate Governance

Legal Proceedings

• Resolution of legal proceedings in Nevada related to the Murdoch Family Trust (MFT), which led to the acquisition of additional shares by LGC Holdco.

Related Party Transactions

• LGC Holdco, owned by trusts associated with Mr. L.K. Murdoch, Ms. Grace Murdoch, and Ms. Chloe Murdoch, acquired additional shares from departing beneficiaries following MFT legal proceedings. This transaction involved a collateralized loan where LGC Holdco pledged FOX shares.

Stakeholder Impact

• Shareholders: The filing directly impacts shareholders by providing the Board's perspective on voting recommendations, particularly concerning director elections and governance proposals. It aims to influence their voting decisions and reassure them about the stability of ownership and management.
• Management/Directors: The filing defends the Compensation Committee members, Mr. Paul Ryan, and Mr. L.K. Murdoch against ISS recommendations, affirming their roles and performance.
• Proxy Advisors (ISS): The filing directly challenges ISS's analysis and recommendations, highlighting a disagreement on governance best practices.

Next Steps

• Stockholders to vote on Proposal 1 (Election of Directors) and Proposal 6 (Stockholder Proposal for Simple Majority Vote) at the Annual Meeting.
• The Virtual Annual Meeting of Stockholders will be held on November 14, 2025.

Key Dates

Recommendation

The filing is a defensive response to negative recommendations from Institutional Shareholder Services (ISS) regarding corporate governance, director elections, and a significant share pledge. While the company provides strong arguments for its current structure and the nature of the share pledge, the existence of such a public disagreement with a major proxy advisor introduces a degree of uncertainty and scrutiny. There are no new financial results or operational updates to suggest a change in the company's fundamental value. Therefore, a 'hold' recommendation is appropriate as investors should monitor the outcome of the annual meeting and any further developments in governance, while the company's core business performance remains the primary driver for long-term investment decisions.

Keywords

Fox Corporation, SEC filing, Proxy Statement, ISS, Institutional Shareholder Services, Corporate Governance, Share Pledge, LGC Holdco, Murdoch Family Trust, Dual-Class Stock, Supermajority Vote, Compensation Committee, Director Election, Shareholder Meeting