DEFA14A: News Corp Rejects ISS Recommendations on Director Votes

News Corp's Board strongly disagrees with Institutional Shareholder Services' recommendations against certain director nominees, citing misunderstandings regarding a share pledge and the company's dual-class structure.

Summary

• News Corp's Board of Directors reaffirms its recommendation to vote FOR all six director nominees, including Compensation Committee members Mr. Masroor Siddiqui and Ms. Natalie Bancroft.
• The Board disputes ISS's recommendation against Compensation Committee members, stating it's based on a misunderstanding of the pledge of 30,404,378 Class B common shares by LGC Holdco, LLC.
• LGC Holdco, owned by trusts associated with Mr. L.K. Murdoch, Ms. Grace Murdoch, and Ms. Chloe Murdoch, holds 33.3% of the Company's Class B common stock.
• The pledge was part of financing for LGC Holdco to acquire additional Company shares following the resolution of Murdoch Family Trust (MFT) legal proceedings on September 8, 2025.
• News Corp argues the pledge does not present significant risk, as it was made by a separate legal entity (LGC Holdco), used to increase ownership, and LGC Holdco members have independent financial capacity to repay the loan.
• The portion of pledged shares applicable to trusts associated with Mr. L.K. Murdoch is approximately 10.1 million shares, valued at approximately $304 million, representing 2.0% of the Company's market value, which is significantly less than ISS's attributed amount.
• The Board also disagrees with ISS's recommendation against Mr. Jos Mara Aznar and Mr. L.K. Murdoch due to the Company's dual-class structure, asserting it provides editorial integrity and long-term value.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive from the company's perspective, as it strongly defends its position and directors, providing detailed counter-arguments to ISS's recommendations. It aims to reassure shareholders about governance and stability, despite addressing negative recommendations from a key proxy advisor.

Positives

• The share pledge by LGC Holdco was used to acquire additional Class A and Class B common stock, thereby increasing alignment with the Company's stockholders.
• LGC Holdco members have the financial capacity to repay the loan independently, minimizing risk of forced liquidation.
• The pledged shares are not linked to executive or director compensation and represent pre-existing ownership.
• The Company was not involved in the loan transaction, and the pledge does not impact its business or financial operations.
• Mr. L.K. Murdoch's personal share ownership far exceeds the Company's Director stock ownership guidelines (five times the annual cash retainer), demonstrating strong alignment.
• The dual-class structure, in place since the Company's IPO, is understood by investors and provides important protections for editorial integrity and long-term value.

Negatives

• Institutional Shareholder Services (ISS) recommended voting against two members of the Compensation Committee (Mr. Masroor Siddiqui and Ms. Natalie Bancroft) due to the LGC Holdco share pledge.
• ISS recommended voting against Mr. Jos Mara Aznar (Chair of Nominating and Corporate Governance Committee) and Mr. L.K. Murdoch (Board Chair) due to the Company's dual-class structure.
• ISS declined requests from the Company's management to engage prior to issuing its report and recommendations.

Risks

• Potential for misinterpretation or misunderstanding by proxy advisory firms (like ISS) regarding complex ownership structures and financing arrangements.
• Risk of negative stockholder sentiment or votes against director nominees if ISS recommendations are followed, potentially impacting corporate governance stability.
• While mitigated, any share pledge carries an inherent, albeit small, risk of forced liquidation if loan terms are not met, which could impact stock stability.

Future Outlook

The Company anticipates continued stability in its ownership, leadership, and vision, reinforced by the increased shareholding of LGC Holdco and Mr. L.K. Murdoch. LGC Holdco and Mr. L.K. Murdoch have no intention to pledge additional shares or employ hedging/monetization strategies.

Management Comments

• The Company's Board of Directors strongly disagrees with ISS's recommendation against the two members of the Company's Compensation Committee as unwarranted and incorrect.
• The Board reaffirms its recommendation to vote FOR all six of News Corp's director nominees.
• The Company welcomed the resolution of MFT legal proceedings as strengthening the stability of its ownership, leadership and vision.
• ISS's recommendation regarding the 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.

Industry Context

This announcement highlights ongoing tensions between corporate boards and proxy advisory firms like ISS regarding governance practices, particularly around executive/director share pledges and dual-class share structures. While dual-class structures are common in media companies (e.g., New York Times, Fox Corporation) to protect editorial independence or founder control, they often draw scrutiny from governance advocates who prefer 'one share, one vote' principles. Share pledges, even for increasing ownership, are often flagged by ISS as potential risks, reflecting a broader trend towards stricter governance standards.

Comparison to Industry Standards

• ISS's 'one-size-fits-all' approach to corporate governance, particularly concerning dual-class structures, is a common point of contention with companies that have historical or strategic reasons for such structures, similar to how other media conglomerates like Fox Corporation or The New York Times Company maintain them to protect founding family control or editorial independence.
• The scrutiny of share pledges by directors or significant shareholders is a standard practice by proxy advisors, aiming to identify potential risks of forced liquidation that could destabilize a company's stock, a concern that applies across various industries, not just media.
• News Corp's argument that the pledge was for increasing ownership, rather than hedging, aligns with a common defense used by companies to differentiate their situation from pledges made purely for personal liquidity or risk transfer, which are typically viewed more negatively by governance bodies.

Corporate Governance

Legal Proceedings

• Resolution of legal proceedings in Nevada related to the Murdoch Family Trust (MFT) on September 8, 2025, which led to the termination of all related litigation and LGC Holdco's acquisition of additional shares.

Related Party Transactions

• LGC Holdco, LLC, a legal entity owned by trusts associated with Mr. L.K. Murdoch, Ms. Grace Murdoch, and Ms. Chloe Murdoch, pledged 30,404,378 shares of Class B common stock in connection with a loan. The proceeds were used to acquire additional Company shares from departing beneficiaries of the Murdoch Family Trust.

Stakeholder Impact

• Shareholders: The filing directly addresses voting recommendations for the upcoming Annual Meeting, influencing how shareholders might vote on director elections and potentially impacting their perception of corporate governance and stability.
• Management/Board: The Board's defense aims to maintain the current leadership and governance structure, reinforcing confidence in their strategic direction and decision-making.

Next Steps

• Stockholders are asked to vote FOR each nominee listed in Proposal 1: Election of Directors at the Annual Meeting on November 19, 2025.
• Stockholders who have already voted do not need to vote again unless they wish to change or revoke their prior vote.

Key Dates

Keywords

News Corporation, SEC filing, Proxy Statement, ISS recommendations, Corporate Governance, Share pledge, LGC Holdco, Murdoch Family Trust, Dual-class structure, Director election, Compensation Committee, Stockholder meeting