Oh, the drama! The hacking scandal in the U.K. has all the elements of a first-class docudrama.Just look at the cast of characters: seedy private investigators, corruptible police officers, disreputable journalists, a sadder-but-wiser whistleblower, a redheaded bombshell who rose out of the secretarial pool to executive heights, formerly-obsequious-now-indignant politicians…and, at the centre of it all, a baron of a businessman who single-handedly created the largest media empire in history.
Rupert Murdoch’s story seems likely to become just the sort of saga that made his tabloids so successful.
It will probably be some time before the tale behind the scandal is fully told, but here’s what’s been reported so far. Murdoch’s company, News Corporation (NWS), owned four national newspapers in the U.K., among them News of the World, the world’s most widely-read Sunday tabloid. Five years ago, News of the World reporter, Clive Goodman, was accused of using private investigators to hack into the cell phones of Britain’s Royal Family looking for juicy tidbits to publish. Goodman was fired, and News of the World management reportedly assured Scotland Yard that the hacking was limited to a single, rogue reporter.
Now it appears that cell phone hacking may have been par for the course at News of the World. According to news reports, journalists from News of the World may have hacked into cell phones of celebrities, politicians, and families of the victims of the 2006 London subway bombings.
Perhaps most offensively, News of the World journalists stand accused of hacking the cell phone of slain 13-year-old Milly Dowler, then deleting her messages (presumably to prevent reporters from other papers from gaining access to them). The activity on the girl’s cell phone reportedly impeded police investigating her disappearance and gave her parents false hope that their daughter was still alive.
When the Milly Dowler story broke, the British public exploded in outrage. News Corporation quickly shut down News of the World, but by then politicians who’d lived in fear of Murdoch’s editorial might were lining up to excoriate him. It soon emerged that News of the World journalists had reportedly bribed British police for inside information and lenient treatment.
Scotland Yard and Prime Minister David Cameron had both hired former News Corporation employees to advise them. News Corporation executives admitted that the scope of the alleged hacking went far beyond what they alleged five years ago. Parliament began an inquiry that will likely lead to a major overhaul of British media law. News Corporation was forced to withdraw from its proposal to buy out British Sky Broadcasting, losing millions in break fees on what had once been considered a shoe-in deal.
In the U.S., the FBI began investigating allegations that News Corporation employees might have hacked into the cell phones of 9/11 victims’ families, and several prominent lawmakers have suggested that News Corporation may have violated the Foreign Corrupt Practices Act by bribing British officials.
At the centre of the scandal sits Rupert Murdoch, architect of the News Corporation empire. Described as a man who “meets power with power,” Murdoch initially bridled at the suggestion that News Corporation employees had gone too far, strolling like a conquering hero through crowds of reporters and describing himself as “annoyed” by allegedly inaccurate press reports.
Since the breaking of wave upon wave of new allegations, Murdoch’s bluster is more muted. He published a vague but unequivocal apology in every national British newspaper and, according to their family attorney, made a “full and humble apology” to Milly Dowler’s parents. A “humbled” Murdoch appeared before a Parliamentary inquiry on July 19, then denied responsibility for the alleged cell phone hacking at News of the World, saying that the blame lies “with the people [he] trusted to run it.”
Murdoch’s refusal to accept responsibility for his employees’ actions may be, to mix metaphors, the final straw that brings him crashing down. Admittedly, News of the World was only a tiny portion of News Corporation’s many media outlets. Among such titans as the Wall Street Journal, The New York Post, Daily Telegraph, Harper Collins Publishers, Dow Jones, FOX Broadcasting Company and its subsidiaries, and Twentieth Century Fox movie studios, one Sunday tabloid could readily get lost.
Unfortunately for Murdoch, however, it now appears that News of the World management may have deliberately misled Scotland Yard’s investigators when they claimed that the alleged hacking of the Royal Family’s cell phones in 2006 had been the unapproved act of a single rogue reporter. That hacking story made international news at the time; if Rupert Murdoch didn’t know about it, he must have failed to read his own publications. And if News Corporation’s management didn’t set and enforce strict ethics rules for its journalists in the wake of Scotland Yard’s 2006 investigation, it seems likely that someone at the top simply chose to look the other way.
At this point, it seems inevitable that Rupert Murdoch will be pushed from power by News Corporation shareholders. Analysts are already suggesting that a Murdoch-less News Corporation’s stock would be worth about 50% more than it is today. Bloomberg Businessweek concludes that, by failing to address the hacking scandal in a full and timely way, Murdoch and his management team have put News Corporation’s entire empire at risk. The company will undoubtedly recover, but will do so more quickly if Murdoch steps down.
So, what lessons can we take from Rupert Murdoch’s tumble from grace?
1. When crises occur (as they inevitably will), delay, obfuscation, and denial aren’t an effective strategy.
2. Individual employee misconduct must be addressed before it becomes epidemic.
3. Delegation is essential to successful management, but must be tempered with careful oversight.
4. Corporate culture is set at the top. Arrogance in management begets arrogance throughout a company, and employees who become intoxicated by it are more likely to indulge in ethical lapses because they’ll consider themselves unassailable.
5. Finally, as Rupert Murdoch is now learning, the bigger they are, the harder they fall.
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