Outlook: The beginning of the end for Rupert Murdoch

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The Independent Online

It is easy enough to see what is happening to a company's share price in real time. What willdismay Rupert Murdoch is that as he gave his shamblingevidence to Parliament yesterday, the value of News Corp, his empire, rose rather than fell. That tells you all you need to know about where this scandal is now headed.

The share price rose because Mr Murdoch's inability to show he has a grasp on the operations of this company suggests he cannot continue to head it for much longer – just as, hours previously, News Corp shares in Australia jumped 4 per cent following stories that Mr Murdoch planned to step down. Investors in News Corp believe it is in their interests for a new chief executive officer, whose name is not Murdoch, should be appointed.

To put that another way, the "Murdoch discount" has never been wider. This is the gap between what News Corp is worth and what it would be worth without Rupert Murdoch. Analysis conducted by Bloomberg, based on estimates of the value of the constituent parts of the business made by banks, suggest News Corp would be valued 50 per cent higher without Mr Murdoch at the helm.

Other analysts are more conservative, putting the discount at more like a third, but no matter. Investors in News Corp know that similar organisations are valued more highly than the business in which they hold shares because of governance issues. They would be tens of billions of dollars better off if Mr Murdoch were to step down.

The current scandal is an extreme example of why people worry about Mr Murdoch's power and judgement, but there have been no shortage of others. There is a lawsuit outstanding, for example, over how much News Corp paid for Shine, the television production company run by his daughter, Elisabeth. Many investors question his attachment to newspapers, full stop, which seem to cause News Corp so many problems yet deliver such a small part of its profits.

Given the Murdoch family's stake in the voting shares, a decision from News Corp's founder to relinquish control would only be the start of the process of dragging this company into the 21st century. But what a start it would be: with Mr Murdoch out of the way, activist shareholders would surely find the company much more receptive to governance reforms.

This is now the inevitable consequence of the phone-hacking affair. Mr Murdoch said yesterday that the News of the World was a tiny part of his business – maybe so, but what happened there is now going to see him toppled. Not because the buck stops with him – though of course it should – but because the owners of News Corp now judge that they would be better off without him. And money, in the end, always talks.

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