Sale Talks Between News Corp., Dow Jones Hinge on Bancrofts' Buffer Demands

Today is a critical point in negotiations between Rupert Murdoch's News Corp. and Dow Jones over the potential sale of the latter company, as both sides haggle over a proposed editorial board whose aim is to keep Murdoch away from Dow Jones's prized jewel, the Wall Street Journal.

Late Friday afternoon, Dow Jones's board of directors delivered a long-awaited, four-page proposal to Murdoch's News Corp. headquarters in New York, according to sources who have seen the document and spoke on condition of anonymity because talks are ongoing.

The document originated from the Bancrofts, Dow Jones's controlling family, which has been wary of Murdoch's unsolicited $5 billion bid since it became public on May 1. The 35-member Bancroft family, whose predecessors built the Journal and have controlled the company for decades, fear that Murdoch would use the Journal to further his political and business interests, destroying its editorial independence.

News Corp. and Dow Jones negotiated over the proposal's language over the weekend and until late last night, the sources said. The key sticking point so far, according to those close to the situation: The composition of the proposed seven-member editorial board, which would act as a buffer between ownership and the newsroom.

In the Dow Jones proposal, the board would include two Bancrofts, two members selected by News Corp. and three independent directors nominated by the Bancrofts and approved by News Corp.

Such a board composition is unacceptable to News Corp., the sources said, because it would effectively give the Bancrofts more control over the Journal than they now have.

The Bancrofts have long held a hands-off attitude toward the Journal. A representative of the Bancrofts said last week that the family would probably draw up a proposed editorial board regardless of who bids on the Journal. A family spokesman declined to comment last night, as did a News Corp. spokesman.

Murdoch had proposed giving one seat on the Dow Jones board of directors -- under his ownership -- to a Bancroft family member. In the Dow Jones proposal, the Bancrofts had asked for two but backed off on that position over the weekend.

The Times of London -- which Murdoch bought in 1981 -- has such an editorial board. Its aim is to mediate differences between the newsroom and ownership, should they arise, with final authority. In theory, an owner could not fire an editor without going through the editorial board.

It remains unclear how much power an editorial board would have, with Murdoch or any owner.

In former Times editor Harold Evans's 1983 book, "Good Times, Bad Times," Evans quotes Murdoch as saying that his promises of editorial independence for the Times "aren't worth the paper they're written on," a statement News Corp. says Murdoch didn't make.

Current Times editor Robert Thomson said Murdoch has never ordered or killed news stories, although he enjoys talking to his journalists about their areas of coverage.

As of late last night, the Dow Jones board was seen to be backing off from its original hard-line stance, the sources said, bringing negotiations to a critical point today.

One day after Murdoch's bid became public, about 80 percent of the Bancroft family -- a group that holds enough Dow Jones voting shares to block any sale of the company -- turned down Murdoch's offer. In the weeks following though, as Murdoch wooed the family and proposed creation of an editorial board, his $60-per-share offer remained unmatched by serious rivals.

The family met with Murdoch on June 4. Days after the meeting, the Bancrofts said that if Murdoch agreed to an editorial board they found acceptable, they would give the Dow Jones board permission to begin negotiating sale details with Murdoch.

But the Bancrofts dragged their feet on delivering an outline of such a board in following weeks, spurring the Dow Jones board to take the lead in negotiations with Murdoch.