Phone Hacking Scandal at News Corp
FNCE 696 Case Study
A Series of Phone Hacking Scandals reveal the flaws of management at News Corp
The News Corporation (News Corp) is one of the World’s largest multinational media conglomerates. Its holdings include book publishing, newspapers, TV broadcasting, music, radio and magazines. The recent phone hacking scandals that took place at one of News Corp’s subsidiaries not only led to FBI investigations, but also led to the closing of one of the World’s largest and longest running English Newspapers, News of the World. These scandals have also brought media attention on the flaws of the management style of Rupert Murdoch and the company’s corporate governance. Many claim that the duality of Chief Executive Officer (CEO) and the Chairman of the Board weakened News Corp’s ability to respond to crisis. The poor handling of the scandals by management has undoubtedly hurt the company’s reputational risk. At this moment, it is difficult to predict the ultimate outcome or cost of these scandals. However, it is certain that the company has a long way to rebuild its reputation as well as to set a better tone at the top.
The series of phone hacking scandals started when a private investigator, Glenn Mulcaire, uncovered evidence that suggested News of the World’s royal editor, Clive Goodman, had hacked the telephones of members of the British royal family in 2005. (Wikipedia, News of the World royal phone hacking scandal. http://en.wikipedia.org/wiki/News_of_the_World_royal_phone_hacking_scandal). In 2007, both Goodman and Mulcaire were sentenced to four and six months of imprisonment respectively. This scandal resulted in the resignation of Andy Coulson as the editor of the newspaper on the same day of the sentence. From 2009 -2011, the competitor of News of the World, The Guardian has made a series of investigations and allegations that the phone hacking scandals did not end with the imprisonment of Goodman and Mulcaire. In fact, it revealed that the
A Series of Phone Hacking Scandals reveal the flaws of management at News Corp
The News Corporation (News Corp) is one of the World’s largest multinational media conglomerates. Its holdings include book publishing, newspapers, TV broadcasting, music, radio and magazines. The recent phone hacking scandals that took place at one of News Corp’s subsidiaries not only led to FBI investigations, but also led to the closing of one of the World’s largest and longest running English Newspapers, News of the World. These scandals have also brought media attention on the flaws of the management style of Rupert Murdoch and the company’s corporate governance. Many claim that the duality of Chief Executive Officer (CEO) and the Chairman of the Board weakened News Corp’s ability to respond to crisis. The poor handling of the scandals by management has undoubtedly hurt the company’s reputational risk. At this moment, it is difficult to predict the ultimate outcome or cost of these scandals. However, it is certain that the company has a long way to rebuild its reputation as well as to set a better tone at the top.
The series of phone hacking scandals started when a private investigator, Glenn Mulcaire, uncovered evidence that suggested News of the World’s royal editor, Clive Goodman, had hacked the telephones of members of the British royal family in 2005. (Wikipedia, News of the World royal phone hacking scandal. http://en.wikipedia.org/wiki/News_of_the_World_royal_phone_hacking_scandal). In 2007, both Goodman and Mulcaire were sentenced to four and six months of imprisonment respectively. This scandal resulted in the resignation of Andy Coulson as the editor of the newspaper on the same day of the sentence. From 2009 -2011, the competitor of News of the World, The Guardian has made a series of investigations and allegations that the phone hacking scandals did not end with the imprisonment of Goodman and Mulcaire. In fact, it revealed that the
References: Bussey, J. 2011. The Missteps in Managing News Corp.’s Hacking Crisis. http://online.wsj.com/article/SB10001424052702304567604576456222770513148.html, November 23, 2011 Chmielewski, D. 2011. News Corp. profits fall as hacking scandal continues to take toll. http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/11/news-corp-earnings-fall-as-phone-hacking-scandal-takes-its-toll.html, November 22, 2011 Preston, A. 2011. News Corp could go the way of Enron if the contagion isn’t contained. http://www.newstatesman.com/economy/2011/07/news-corp-murdoch-investors, November 23, 2011 Robertson, M. 2011. News Corp, phone hacking & media ethics: how should investors respond? http://www.eiris.org/blog/news-corp-phone-hacking-codes-of-ethics-how-should-investors-respond/ November 23, 2011 Sandle, P. 2011. Quick guide to the News Corp hacking scandal. http://www.reuters.com/article/2011/07/18/us-newscorp-quickguide-idUSTRE76H5SA20110718, November 22, 2011 Tarantino, A., & Cernauskas, D. 2011. Essentials of Risk Management in Finance. Hoboken, NJ: Wiley Turner, M. 2011. Documents Show ‘A Culture’ of Illegal Phone-Hacking At The New of the World