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07.14.11

Can Murdoch Salvage His Legacy?

Former News International executive—and Rupert Murdoch protégé —Rebekah Brooks was arrested Sunday morning for her role in the phone-hacking scandal. The media mogul has been back from the brink before, having saved his company 20 years ago. But, as Joanne Lipman points out, he was a lot younger then.

With the News Corp. phone-hacking scandal growing seamier by the day, the most urgent question may well be: Does Rupert Murdoch have enough time to salvage his company’s—and his own—legacy? 

He’s done it before. Twenty years ago, he almost lost it all. Crushed by debt from a massive spending and acquisition binge, his News Corp. was on the financial brink. So with characteristic tenacity, Murdoch jumped into action, renegotiating with the company's banks, shoring up his money-losing British satellite-television operation, and selling off a slew of American magazines. And he came back with a vengeance: his arguably greatest triumphs, including the ascendance of Fox News, were still to come.

But that was 20 years ago. And as recent appearances and his awkward photo opportunity last weekend beside his embattled young chief executive make abundantly clear, Murdoch is now an eighty year old.  Yes, he is younger than some of his fellow media moguls—Conde Nast’s Si Newhouse is 83 and Viacom’s Sumner Redstone is 88.  But the spiraling scope of the scandal suggests Murdoch will need a very long runway to reclaim both the company’s reputation and his own legacy. 

Complicating matters, News Corp.’s board of directors, packed with close associates, “is a captured board, and they aren’t going to do the right thing, which is to ask the succession question. They really have to work that through,” says Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management. “Time is short to pull that off.”  

Murdoch has joked in the past that he will never retire, pointing to his third wife, Wendi Deng, 42, and their two young daughters.  His mother is still going strong at 102. At News Corp.’s annual meeting in 2003 he laughed that his retirement plans had been “put on hold forever,” and he would have to be “carried out.” Though he did stop short of Sumner Redstone’s declaration a few years ago: “I intend to live forever!” 

phone-hacking-underhill
British Prime Minister David Cameron, top right, has resisted calls for an investigation into the practices of Rupert Murdoch's News of the World, where reporters accessed the voicemail of missing British teenager Milly Dowler in 2002. Rebekah Brooks, lower right, was editor of News of the World at the time. (Clockwise from left: Getty Images, AP Photo (2))

But as the scandal deepens, time isn’t on his side. Disgust is high on both sides of the Atlantic over revelations that Murdoch’s now-shuttered News of the World tabloid hacked into the phones of royalty, celebrities and a 13-year-old murder victim. Last week, the Federal Bureau of Investigation launched an investigation into whether News Corp. tried to hack the phones of 9/11 victims in the U.S. as well. Back in the U.K., Murdoch, his son and potential successor James have been called to testify before Parliament. So has Rebekah Brooks, who stepped down as News International Chief. Dow Jones Chief Les Hinton also resigned last week.

Just two weeks ago, Murdoch was the most powerful media magnate in the world. Now he has fallen so far so fast that even disgraced media rival Conrad Black took shots at him, slamming him in the Financial Times as “a malicious myth-maker, an assassin of the dignity of others.”  Dubbing Murdoch a “great bad man,” Black added for good measure: “He has difficulty keeping friendships; rarely keeps his word for long; is an exploiter of the discomfort of others; and has betrayed every political leader who ever helped him…”  

One observer believes that if the scandal continues to play out, News Corp.’s board may need to name an interim CEO and kick Murdoch upstairs to chairman.

And this from a guy who served jail time for fraud, and is on his way back to prison for a second stint! 

Murdoch clearly still harbors hopes this storm will pass He has always been a long-view player, and for most of his career that’s served him well. He typically has spent years building up ambitious ventures like Fox Broadcasting, and he’s eyeing the long game now as well. On Wednesday News Corp. abandoned its $12 billion bid to buy the rest of British Sky Broadcasting --but those around Murdoch believe he simply hopes to wait until the furor dies down and then renew his bid. 

To be sure, other executives have fought their way back from scandal, like Martha Stewart, who skillfully orchestrated a comeback after her prison stint ended in 2005.  Many more have survived lesser professional disasters, like getting fired.  But Murdoch, having weathered his company’s near-death experience 20 years ago, knows better than any of them that rebounding from disaster takes time. And it simply isn’t clear he will have enough of it. 

Yale’s Sonnenfeld says disgraced executives who do recover successfully tend to follow the same basic game plan. In his book, “Firing Back,” which studied career comebacks, he identified five steps virtually all of them take, such as engaging publicly rather than stonewalling.  Murdoch, he says, is violating pretty much every rule. “Murdoch is running for cover, giving confusing statements…he’s aping what celebrities do all the time, which never works for them.” Sonnenfeld believes that ultimately, if the scandal continues to play out and particularly if advertising sales suffer, the board will need to name an interim CEO and kick Murdoch upstairs to chairman.   

In the meantime, he is just plain baffled by Murdoch’s behavior: “He has an oddly confused strategy for someone who is a media master.”