The mismanagement and neglect by board members overseeing Fox News, revealed in a flood of texts, emails and sworn depositions, is likely to lead to shareholder lawsuits that could topple some Fox News insiders from their lucrative perches.
The latest trove has one top executive, whose contract was not renewed in retribution, calling the network’s jockeying over what to do about the former president’s lies an “existential” crisis for journalism.
The revelations reveal lots of culpability at the top, but will anyone be held accountable for ignoring what they knew to be true—that spreading lies had become the network’s business model?
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The bill is coming due, says Jeffrey Sonnenfeld with the Yale School of Management. He lays out a menu of steps, from shareholder lawsuits to a potential SEC investigation, and the possible loss of insurance protection for Fox board members for violating their duty of care and duty of loyalty (which are the two primary duties of a corporate director).
Care means doing the homework, paying attention. Loyalty means that the interests of the shareholders are paramount.
“The board, management, anchors admit that they were selling a seditious myth to harm our nation while undermining the integrity and value of their own enterprise,” Sonnenfeld told The Daily Beast in an email. “Even Rupert Murdoch was afraid of his own creation of the Foxenstein monster.”
Any of the non-Murdoch stockholders can bring a strong investors’ suit against the entire board, and the legal repercussions could extend to Fox News executives. Viet Dinh, Fox News’ general counsel, under oath admitted that executives in the chain of command are obligated “to prevent and correct known falsehoods.”
“What Paul Ryan said is an invitation to a shareholder lawsuit,” says Nell Minow, vice-chair of ValueEdge Advisors, and a longtime shareholder rights advocate. Former House Speaker Ryan, a member of the NewsCorp board, repeatedly voiced his concern internally about the direction Fox News had taken by pushing 2020 election lies, but told an interviewer that he did not think it was his responsibility to do more.
That’s not correct, says Minow, “When insiders (like Rupert Murdoch and his son, Lachlan) have such control, it’s more important for outside directors (like Ryan) to meet privately and push back.”
Rupert Murdoch
Mike Segar/ReutersThere are two separate eight-person boards, one for Fox News and the other for NewsCorp, the parent company. Murdoch tried to merge them, but got pushback from both entities. It really doesn’t matter. Everybody reports to Rupert Murdoch and his son, Lachlan, who head both boards.
On the Fox board is Kelly Ayotte—a former one-term Republican senator from New Hampshire— and Natalie Bancroft, an opera singer whose board position is a legacy from her family’s Dow Jones sale of The Wall Street Journal to Murdoch. “Not the kind of person who is going to stand up to him,” says Minow. There’s also a former prime minister of Spain, Jose Maria Aznar, on the board. (As PM, Aznar offered his country’s support for the Iraq War, a decision he defended more than a decade after the disastrous conflict began.)
Directors get about $275,000 in compensation, plus bonuses and stock options for their service, as outlined in NewsCorp’s report published before last year’s annual shareholder meeting.
The $1.6 billion lawsuit brought by Dominion Voting Systems has opened the door to holding Fox News liable for defamation, as the company accused the network of wrongly implicating its machines as part of a massive conspiracy to switch votes from Joe Biden to Donald Trump in 2020. Sworn testimony by Murdoch, and numerous texts and emails, show the network continued to broadcast false claims about Dominion—even after Dominion alerted them to the facts.
“That’s pretty textbook recklessness,” says Minow, and should clear the bar of “actual malice” that the law requires to sue the media for defamation. But that’s just the beginning. Lawsuits brought by the 61 percent of shareholders who are not Murdochs are likely. At last count, eight major law firms are bellying up to the bar, so to speak, to test what might be possible.
What everybody keeps forgetting, Minow says, is that when Murdoch brought his NewsCorp company from Australia, he promised he would create “one share, one vote.” If you had 100 shares, you had 100 votes. There would be no dual class, where anyone has more votes than shares.
“It took him less than a week to break the promise,” says Minow. When he got pushback, he said he would put it to a shareholder vote, which he never did. “From the beginning, this was a red flag. They set it up so there’s a great big moat around Rupert Murdoch and his family.”
The most likely way to achieve change is through shareholder lawsuits by large institutional shareholders, and to use their clout to seek governance changes. Minow suggests diluting Murdoch’s power by having his voting shares—and those of his family—taken over by an independent regent.
People pass by a promo of Fox News host Tucker Carlson on the News Corporation building.
Brendan McDermid/Reuters“If Murdoch and his family didn’t have this complete control, we wouldn’t be in this mess,” she says.
Five days after Jan. 6, NewsCorp board member Anne Dias contacted Murdoch to say, “Given how important Fox News has been as a megaphone for Donald Trump,” that it was “time to take a stand.” Shaken by the violence, she told Murdoch she felt Fox News and the nation faced “an existential moment.”
Advising his son how to respond, Murdoch said, “Just let her know we’re talking internally and in depth.” He told Lachlan that Fox News “is pivoting as quickly as possible.” But it’s tricky, the old man conceded. “We have to lead our audience, which is not as easy as it sounds.”
The evidence that Lachlan is personally involved makes him vulnerable, and anybody who looks at this evolving case wonders why Fox hasn’t settled. It would involve admission of wrongdoing, which Fox is loath to do, maintaining they were reporting the news that was out there, and that’s the role of a news network.
That basically is asking all eyes on this case to not believe what they’re seeing.
“It’s going to be one humiliation after another and they’re going to lose,” says Minow. If the Dominion lawsuit goes to trial, as many analysts expect, the verdict will serve as the starting gun for a lot more lawsuits to hold the directors responsible for not doing their job.
Every one of the directors when deposed will be asked the same questions: Did you express concerns? What did you do? And what would it take for you to do something?
If the answer is, “Nothing, not my job”—then the sin of omission is likely not exculpatory.
