News Corp insiders see chance to loosen ruling family's grip

(REUTERS)

News International, the British newspaper arm of News Corp's global media empire, finds itself almost without friends in the upper echelons of the business.

Who's up and who's down in a company in crisis: click here to download graphic (102kb)

The departure of Les Hinton, a former executive chairman at NI, has left the Wapping operation more isolated than ever. Rupert Murdoch, the company's founder, now 80 and under pressure to identify his successor, is virtually the sole cheerleader for the London-based papers, increasingly seen in New York as an embarrassment.

Mr Murdoch is struggling to retain his dominance within his organisation. Michael Wolff, his biographer, estimated that his control over the business was waning. "If 10 is being all the way in charge, Rupert is at four and a half at this point," he said.

Nothing has undermined Mr Murdoch's iron hold over News Corp more than his failure to foresee how the UK public relations catastrophe would infect the rest of his empire. It was the emergence of legal and political pressure in the US, and a sharp fall in the value of the company's shares, at the start of last week that forced him to accept substantial outside help in managing the crisis.

The strategy of repeated public apologies, previously anathema to Mr Murdoch, was orchestrated by the PR firm Edelman; in the US, News Corp has hired Brendan Sullivan, the attorney who defended Oliver North in the Iran-Contra affair.

News Corp's board, long criticised as sclerotic and in thrall to the Murdochs, has not so far flexed its muscles, although corporate governance campaigners in the US are circling, sensing an opportunity to push through calls for an end to family dominance. The board's newest member, Joel Klein – the tough-talking former head of the New York City public schools system – is emerging as a key figure, having been given control of the internal inquiry into the hacking claims and executives' handling of the scandal.

Chase Carey, the chief operating officer and the man who runs the day-to-day operations of News Corp, has also started taking an interest in News International's affairs. Rupert Murdoch's emotional attachment to the British newspapers and the fact that they contribute relatively little to the overall profitability of News Corp has meant that Mr Carey, who has little interest in print media, previously concentrated on its cable television and movies arms.

Investors have remained relatively sanguine about the crisis, and News Corp's share price rebounded at the end of last week, partly because of the perception that Mr Murdoch's love affair with newspapers will no longer be indulged by the rest of his management. It was because James Murdoch was publicly dismissive of News Corp's newspapers and had long argued that television would be more important to the company in the future that shareholders were unconcerned by the apparent nepotism of his rise to Rupert Murdoch's heir apparent.

Michael Corty, media sector analyst at Morningstar in Chicago, said investors were not likely to be moved if James Murdoch became a casualty of the scandal, since Mr Carey is a respected executive and also seen as being likely to push the focus of News Corp away from newspapers. "The important thing is that it is still business as usual elsewhere in the business," he said.

The pressure on News Corp was continuing to mount yesterday, with the scandal discussed at length on the influential Sunday morning political talk shows.

With the FBI already investigating whether News of the World reporters tried to hack the phones of 9/11 victims, Senator Dick Durbin became the latest Democrat to call for Congress to get involved. "What's going on in England is startling, breaking the law to report a story," he told NBC's Meet The Press. "We need to follow through with the FBI investigation and also with Congressional investigations."