This also appeared on the Real Business website
The current scandal which has enveloped News Corporation and it’s founder, Chairman and CEO, Rupert Murdoch is an extraordinary spectacle; I can’t help wondering how the other famous 80 year billionaire, Warren Buffett, would deal with this issue if he were in Rupert’s shoes?
Interestingly the two share a common background in newspapers: Buffett started his entrepreneurial endeavours as a young boy operating paper delivery routes and in later life he’s also known for his ownership of the Buffalo News and as a board director of The Washington Post.
Rupert Murdoch, dubbed the “billionaire tyrant” in an episode of Fox screened cartoon, The Simpsons, is of course infamous as a hands-on publisher who knows more about what’s going on than his editors; he is known to call his editors on a weekly basis and give them a grilling. That made it hard to believe what we saw at the committee inquiry today. On the one hand Rupert Murdoch, and even at times, his son James, appeared genuinely sorry, but also very genuinely unaware of the issues and the allegations facing News Corporation and its subsidiaries.
Even with the opportunity of the last couple of weeks to do their research and be well briefed, there were issues brought up of which the Murdochs seemed to have no knowledge of. They’re still paying some or all of the convicted criminal, Glenn Mulcaire’s legal bills, and Murdoch Snr had no knowledge at all of the “collective amnesia” of his News International staff, or of the actions of the News of the World’s chief reporter, Neville Thurlbeck in receiving transcripts of intercepted phone calls.
The media, and the MPs in today’s parliamentary select committee found it hard to believe that the Murdochs could be quite so trusting of their employees. One BBC reporter quaintly referred to delegation of power and responsibility at the company which employs 53,000 people, as “devolution”. It seems that could in fact be an accurate description. Should Rupert Murdoch be congratulated for being the trusting patriarch at the head of News Corporation, leaving talented and trusted employees to run each subsidiary as they see fit, or the person to blame for a culture of criminality and deliberately following a policy of willful blindness?
Warren Buffett is the founder and CEO of Berkshire Hathaway is famous as a hands-off manager, even though he runs a diversified conglomerate with annual revenues of $136Bn, an amount over 4 times that of News Corporation. In contrast to News Corp, Berkshire has a head office staff of just 16 people. He famously only does business with those that he “likes, trusts and admires”, and once he’s bought a company he leaves the management team in place to do as they see fit. So why does Buffett get away with such a light touch, when it appears to backfire so spectacularly for Mr Murdoch?
Looking back at the Salomon Brothers scandal of the 1990s when Buffett – as a minority shareholder – stepped in as Chairman, he said this to a committee of the US House of Representatives in 1991:
In the end, the spirit about compliance is as important, or more so, than words about compliance.
I want the right words and I want the full range of internal controls. But I also have asked every Salomon employee to be his or her own compliance officer.
After they first obey all rules, I then want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children and friends, with the reporting done by an informed and critical reporter.
If they follow this test, they need not fear my other message to them: Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm and I will be ruthless.
Buffett lives and breathes his ethics in his actions, and expects others to do so. The best the Murdochs seemed to manage today is that they issue a pamphlet with details of the company’s code of conduct to all employees. I think this was one of the most telling details revealed today; if they really cared the pamphlet would be just be the written backup of a policy and attitude which pervades the culture of the company. Instead the culture seemend to be of ambition, greed, and success with exclusive stories and increasing circulation at all costs.
The reality is that words are cheap, and actions are everything; Murdoch should play a round of golf with Buffett and take some tips from someone who understands that.