This article is an instalment in a series, Project Harmony, on Rupert Murdoch’s secret plan threatening to blow up his family.
There has always been a fatal gap in the Rupert-to-Lachlan succession plan: it relied on Rupert’s three other eldest children being happy with Lachlan managing about US$5 billion of their inheritance without them having a say.
Good luck with that. “Come not between a dragon and its wrath,” cautions Lear when his own succession plans go awry. A better quote might be: “Come not between trust fund children and their payout.”
As a result of secretive court filings in Reno, Nevada, reported by The New York Times, we’ve seen how Rupert intends to pull it off: by changing the rules of the trust that holds the family’s controlling interest to give Lachlan voting control, empowering him to run the company without interference. All in the best interests of all his children, of course.
“Stop the steal!” squeal the three soon-to-be largely disenfranchised children, Prudence, James and Elisabeth, challenging their father’s application to change the terms of the trust.
“Pass the popcorn,” says the media-watching community.
This is more than a family spat. The Nevada court is being asked to answer a big question about modern media: is the pro-MAGA right-wing noise machine that Fox and News Corp have become the only viable business model?
Rupert — whose case is being prosecuted by former Donald Trump attorney-general Bill Barr — believes the answer is a resounding “yes”. As a result, he seems to be arguing that 52-year-old Lachlan is the only reliable hand in the next generation to keep the tiller pointed in the “right” direction.
The trouble with that argument is that the over-eager embrace of the pro-MAGA business model has already cost the company a cool US$787.5 million (A$1.2 billion) in last year’s deal to pay out Dominion Voting Systems after Fox amplified MAGA attacks on the company during Trump’s push to overturn the 2020 presidential election.
The US courts will soon hear a similar defamation case from another voting tech company, Smartmatic.
The filings in the Dominion case revealed internal emails and texts about just how the Fox sausage gets made — and the involvement of the Murdochs in the process.
The struggles at News Corp — with yet another round of its Australian journalists being hurried out the door — suggest that the MAGA strategy doesn’t work outside the narrow hot-house of US cable watchers.
The most vociferous of the company’s right-wing voices — Melbourne’s Herald Sun — has slid from its position as Australia’s most popular newspaper. Both in subscriptions and in internet impressions it’s even behind the family’s long-term bugbear, The Age. Dynasty founder Sir Keith would be rolling in his grave.
Rupert has held control of the family’s media interests through an undemocratic double-tiered system of weighted votes designed to maximum power and minimise tax.
There’s the Murdoch Family Trust, registered in Nevada. It’s the owner of the family’s shares in both Fox Corp and News Corp. Although there are seven beneficiaries of this trust — Rupert and his six children through three of his five wives — voting on the board is weighted: Rupert gets four, and the four older children get one vote each, giving the Rupert-Lachlan arrangement a controlling five votes. (The younger children, Grace and Chloe, from Rupert’s third marriage to Wendi Deng, are equal beneficiaries, but don’t get a vote, thanks to the divorce deal with his second wife, Anna).
The shares in the actual companies are also weighted, using a US securities provision not available in Australia. A minority of shares (Class B) get a vote. Most (Class A) don’t. The trust has a controlling majority of the voting shares — with the number creeping up to over 40% as a result of company share buybacks from other shareholders. The trust has agreed to cap its holding of votes at 44%.
The market value of the trust’s shareholding in the two companies is about US$6 billion — or about US$1 billion for each of the children.
America’s other big media dynasty, the Redstone family, is currently planning on selling its controlling voting shares in Paramount Global (owners of Australia’s Ten Network) at a 48% mark-up to pre-sale market price. It offers an attractive (and “beneficial”) road map for the Murdoch children who no longer work for the family companies.
On Rupert’s death, Lachlan would have a claim on just one-sixth of the trust’s beneficial interest and one in four of the votes on the family trust. By changing the votes on the trust, that lesser beneficial interest will be turned into continuing control. No wonder his siblings are calling foul.
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