British MPs massacre the Murdochs

Rupert Murdoch has two straws to cling onto after he was savaged by British MPs overnight in a devastating report on the News of the World phone-hacking scandal.

The first is that Conservative members of the House of Commons Culture committee refused to back the majority verdict and brand him unfit to run an international company.

The second is that he and his son James have escaped being hauled before the bar of the House to apologise for misleading parliament, as seems likely to happen to three of his top ex-executives—Les Hinton, Tom Crone and Colin Myler.

But otherwise there is no comfort for him in an extraordinarily damning 117-page critique, which characterizes Rupert and James Murdoch and their top ex-executives at News International as a pack of liars, cheats and fools.

Most damaging of all is the verdict on the old man himself, backed by the five Labour MPs and one Liberal Democrat on the committee, who charge that Rupert either knew about phone hacking and hasn’t admitted it, or he tried his best not to find out:

“If at all relevant times, Rupert Murdoch did not take steps to become fully informed about phone-hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications. This culture, we consider, permeated from the top throughout the organisation and speaks volumes about the lack of effective corporate governance at News Corporation and News International. We conclude therefore that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company”.

The phrase “not a fit person” was chosen to match the test used by British media regulator Ofcom, which is investigating whether Murdoch and News should be allowed to continue controlling satellite TV group BSkyB. And the committee’s condemnation—even though it is not unanimous—will make it much harder for the Murdochs to hang onto their stake.

Defending this headline verdict to the media, Labour MP Tom Watson claimed bluntly: “Everybody in the world knows who is responsible for the wrongdoing at News Corporation. Rupert Murdoch. More than any individual alive he is to blame. Morally the deeds are his; he paid the piper and called the tune. It is his company, his culture, his people, his business, his failures, his crimes.”

The MPs’ judgment on the rest of the Murdoch team was only marginally better, and this was unanimous, with three ex-top executives judged to have “misled” the committee and participated in a “cover-up”, while Rupert’s son James was described, on the kindest view, as astonishingly incompetent.

Here’s what the committee had to say about each of the main players.

News International: “Exhibited wilful blindness, for which the companies’ directors – including Rupert Murdoch and James Murdoch – should ultimately be prepared to take responsibility.”

Les Hinton, (Rupert’s trusted deputy for 50 years, CEO of News International till December 2007). “Misled the committee … complicit in a cover up”.

James Murdoch, (CEO of News International from December 2007): Displayed an “astonishing” lack of curiosity and “wilful ignorance”, which “clearly raises questions about his competence”.

Tom Crone, (NotW top lawyer): “Deliberately avoided disclosing crucial information to the committee and, when asked to do so, answered questions falsely.”

Colin Myler, (NotW editor from January 2007): “Deliberately avoided disclosing crucial information to the committee and, when asked to do so, answered questions falsely.”

The MPs would almost certainly have slammed two other ex-NotW editors, Rebekah Brooks and Andy Coulson, who were more directly implicated in the actual hacking and were warned by police of the scale of it in September 2006. But since both may face criminal charges, the committee decided to make no comment.

So what does it all mean and what will be the likely impact?

The first thing you can say is the Murdochs will now find it harder to hang onto control of BSkyB and may decide to sell their 39% stake.

Second is that it may put the British newspapers into play and see Rupert drummed out of Britain. This is what Rupert’s biographer Michael Wolff is predicting. We’re not sure that’s right, but we’ll see.

Third is it will increase pressure from News Corporation’s independent shareholders for Rupert to step down as executive chairman and for James to step down from the board. More broadly, it will also increase pressure on the gerrymander that gives the Murdochs control of the group with nearly 40% of the votes, despite having only 12% of the shares.

And fourth and last is that investors clearly don’t give a damn. As all this ordure cascaded down yesterday, News Corp’s share price rose gently, unfazed by the prospect of losing BSkyB, and unconvinced (or unconcerned) that the scandal might loosen Rupert’s grip on the empire.

Meanwhile, News Corp has responded to the report, stating it contains commentary that is “unjustified and highly partisan”, and Rupert Murdoch has issued a statement to the company’s staff (read the item in Media).