This piece is part of a leadership roundtable on Rupert Murdoch’s handling of the News Corp. scandal — with opinion pieces by Tuck School of Business Professor Paul A. Argenti, London Business School Dean Sir Andrew Likierman, and Harvard Kennedy School Professor Marty Linsky.
So just how good a corporate leader is Rupert Murdoch? The size of the empire he has created and the bold moves by which he built it are the stuff of legend. The shift from a small Australian print organization to a worldwide one, then from print to broadcast and cable TV, shows his ability to deliver strategy on a grand scale. What’s more, in a field that usually combines big egos with small profits, Murdoch has run a financially successful media enterprise over an extended period.
Yet it’s not all been a triumph. The stock price first reached its current level in the 1990s; and there have been some disasters since, such as the hundreds of millions of dollars lost on buying MySpace in 2005. Keeping underperforming but ego-boosting assets may not be the worst move, but it shows an Achilles heel.
Defenders of Murdoch’s record would argue that there are bound to be some mistakes in any commercial success story—what matters is that there are more good decisions than bad and that the organization flourishes overall. They are right. The record is of a vigorous organization that has taken risks and done well commercially.
Is that it then? A business school case study in successful leadership?
Not quite. Successful leadership is not just what has happened in the past. It’s the ability to position an organization to succeed in the future. Rupert Murdoch has certainly been successful. But those of us watching the gripping evidence session to the U.K. Parliament must surely have asked ourselves whether he still is.
His own position on the matter could not have been clearer, accompanied by table thumping just in case we didn’t get the message: He was not aware of wrongdoing at the News of the World; U.K. newspapers were a distant—and frankly, rather insignificant—province in the News International empire; a little local difficulty had been resolved a few years ago and everyone had assured him that this was an isolated incident; others (unnamed) had now let him down; he was the best person to sort it out.
Even if all true, a question still remains. How much does a good leader have to know about what’s going on? Clearly it’s not reasonable to expect the same scrutiny in a company with thousands of employees spread over several continents as in one where the boss knows everyone and everyone knows the boss. And yet that’s precisely why good leadership involves identifying the key risks facing the organization and implementing good controls to monitor them. Judging by Murdoch’s evidence to Parliament, News International’s reputational risk assessment was built on a massive miscalculation. For the chief executive to have to come and eat humble pie in front of the world could hardly be better evidence that there was something fundamentally wrong with the way risks were managed and controlled.
This need to manage risk is not confined to multinationals in general, or to News International in particular. It’s what all organizations have to do to survive. Of course risks (including reputational risk) cannot be eliminated, but they can be mitigated—most notably by picking good people who understand them and can take the necessary action, which sometimes includes consulting the boss. It’s an essential attribute of a leader like Murdoch, who runs a far-flung multinational organization, to be able to make the right judgement about how far to trust such hires. Having the right people makes everything possible. The wrong ones land you in all kinds of trouble.
It is this ability to pick the right people that has been called into question, not just by commentators but by no less an authority than Murdoch himself. The defence “I didn’t know what was going on” has to be met with the rejoinder “For something as important as this, why not?” So now, a key question for those watching Murdoch is whether he has the ability to pick the right people for the future.
Another open question is whether the company can manage its risk better. Limiting the damage by dramatically closing the News of the World and throwing out those responsible for past mistakes is not enough. Murdoch will have to demonstrate that risk-management lessons have been learned and that there are new, credible processes in place. Time for the non-executives to shine.
Good appointments, good controls and good risk management are three of the key elements of good corporate governance – often a weakness at organizations dominated by powerful founding families. Get corporate governance right now, and the last few weeks could look like another News Corp. storm successfully weathered. Get it wrong, and the shareholders will vote with their feet.
Andrew Likierman is dean of the London Business School, a non-executive director of Barclays and a former managing director of the U.K. Treasury.