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Wednesday, July 20, 2011

Rupert Murdoch U.K Phone Hacking Scandal

Rupert Murdoch U.K Phone Hacking Scandal - Rupert Murdoch’s refusal to take responsibility for the Phone Hacking Scandal that has slashed $5.89 billion from the market value of News Corp. (NWSA) may undermine his credibility as chief executive officer.


Governance experts who heard Murdoch’s performance before the U.K. Parliament yesterday said that by blaming underlings and saying he wasn’t responsible he didn’t do enough as CEO to acknowledge his accountability.

“If he didn’t know what was going on, he’s doing a lousy job as CEO and the board should replace him,” said Jay Lorsch, a Harvard Business School professor. “The board should be asking, ‘Where were you?’ The buck stops with him.”

Chief executive officers who don’t hold themselves responsible for crises at their companies often have stepped aside under pressure. While Murdoch’s almost 40 percent voting control makes an involuntary ouster unlikely, the weight of the crisis may ultimately persuade him to give up the CEO post, said Sydney Finkelstein, a professor of management at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire.

“Based on the pattern we’ve seen in other major scandals, it’s likely we’ll see Murdoch resign,” said Finkelstein, author of “Why Smart Executives Fail.” “They all end up resigning.”

Rupert Murdoch, 80, withstood three hours of questioning yesterday with his son James. He denied any knowledge of phone-hacking and payments to police at the now-closed News of the World tabloid. Both Murdochs said they didn’t know about employees intercepting voicemails or paying police for stories.


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