Murdoch family’s control of media empire threatened by activist investor amid Succession-style drama

The Murdoch family’s grip over the media empire built by patriarch Rupert is under threat from an activist investor, amid a Succession-style battle among his children for control.

Starboard Value, a top 10 shareholder in News Corp, has said the Murdoch family’s power over the group should not be allowed to continue in perpetuity, adding that the current battle for control was becoming a costly distraction.

In a letter to fellow shareholders, the US investor claimed that News Corp – which owns The Times, The Wall Street Journal and HarperCollins among others – “suffers from worst-in-class corporate governance that has exacerbated the company’s valuation discount”.

While companies may “want their visionary founder to be insulated against short-term pressures for a limited period of time”, Starboard said the argument “vanishes as super-voting power and the associated protections transition to others”.

The agitation comes amid a Succession-style row over future control of News Corp amongst the younger generation of the Murdoch family.

In July, it emerged that Rupert Murdoch was trying to change the terms of his children’s family trust to ensure that sole control of his TV and newspaper businesses is handed to his eldest son, Lachlan, after his death.

Under the current set-up, all four of Mr Mudoch’s eldest children would share control after his passing. The 93-year-old’s attempt to change the arrangement would wrestle influence away from his other children – James, Elisabeth and Prudence – who he is said to view as being too liberal.

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It has triggered a legal dispute among the family over whether Mr Murdoch can change the terms of a family trust with a case at a district court in Reno, Nevada, expected to begin on Tuesday.

Starboard said the rift posed dangers for the company and “has allowed for complicated family dynamics to potentially impact the stability and strategic direction of News Corp”.

It added: “This uncertainty represents a risk to shareholders that is only amplified by the Murdoch family’s super-voting shares and the poor governance and oversight that stems from the dual-class share structure.”

The hedge fund is proposing a motion at News Corp’s annual shareholders’ meeting calling on the board to abolish the dual-class share structure which allows the Murdochs to exercise disproportionate control over the business.

The setup gives the family 41pc of the voting rights despite owning just 14pc of the shares.

Given the arrangement, Starboard will have to convince the vast majority of independent shareholders of its case in order for the motion to have any chance of success.

Starboard said in its letter to investors: “We believe majority support for this proposal will send a clear and direct message to the board to eliminate the dual-class share structure. If the board refuses to listen, we can then take further action.”

On Monday night, News Corp said: “The board believes that the company’s dual-class capital structure promotes stability and has facilitated the successful implementation of News Corp’s transformational strategy and long-term outperformance for all News Corp stockholders.”

Starboard Value is run by Jeff Smith. Once dubbed the “most feared man in corporate America” by Fortune magazine, he has in the past targeted companies including AOL, Yahoo and Office Depot, building shareholdings before agitating for change.

Starboard is the fourth-largest holder of voting (class B) shares in News Corp, owning 4.6pc of them. It also owns 3.7pc of non-voting (class A shares).