Murdoch cements sons’ leadership roles at News Corp., Fox

His older son, Lachlan, quit a top executive job in the company and retreated to Australia. His second son, James, was battered by the British phone hacking scandal. Some analysts figured Rupert Murdoch’s long-held ambition to leave his vast worldwide empire in the hands of a Murdoch would never happen.

But with one bold stroke Wednesday, the 83-year-old Murdoch cemented a new leadership structure that ensures his two sons will be in charge of his two media companies long after he is gone.

Lachlan Murdoch, 42, was named nonexecutive co-chairman of both companies — 21st Century Fox and News Corp. — a position that places him alongside his father at the top of one of the world’s most powerful media enterprises, which generated a combined $38 billion in revenue last year.

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James Murdoch, 41, was elevated to co-chief operating officer of 21st Century Fox.

“What Rupert Murdoch has done is ensured that a Murdoch is firmly and entirely in control of both of his media companies,” said Douglas McCabe, a media analyst with the research firm Enders Analysis in London. “This is very much about family control of the business.”

The newly created role of co-chairman marks a triumphant return to prominence for Lachlan, who abruptly left News Corp. nine years ago after being marginalized by senior executives who were battling for power.

The patriarch expressed pleasure at Lachlan’s return to the fold, saying in a statement, “I am very pleased he is returning to a leadership role at the company.”

The senior Murdoch simultaneously made it clear that his younger son’s star was shining as brightly as ever. His ascension erases any doubt that James — who currently serves as the No. 3 executive at Fox and has been deeply involved in the company’s television operations — would assume a leadership position in the company, a turnabout after his stock took a beating three years ago.

James now shares the COO title with company veteran Chase Carey, who also serves as Fox president. James, who previously was deputy COO, will continue to report to Carey.

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Both Carey and James are expected to work more closely with Lachlan, who on Wednesday stepped down from his position as chairman of Australia’s Ten Network to comply with Australian media ownership rules. Lachlan retains his holdings in the Australian TV business.

Wall Street reaction was tepid. Fox common stock closed down 44 cents at $32.07 while News Corp. shares slipped 33 cents to $17.03 in regular trading.

The senior Murdoch, who remains in good health, is not planning to step back from his management role as chairman and chief executive of Fox and chairman of News Corp. any time soon, company executives said. But it was a victory for the Australia-born press baron, who long had been trying to coax Lachlan back into the corporate fold. In recent years, Lachlan would pop up as a travel companion and advisor to his father.

Recently, insiders have speculated that Murdoch would install his older son — who is said to share his father’s fondness for newspapers — in the publishing side of the business, News Corp., while James continues in the TV operations. Wednesday’s moves accomplish that goal.

“Rupert views this as a partnership” between the two brothers, said a Murdoch insider, who asked not to be identified discussing family dynamics.

Wednesday’s announcement seemed largely motivated by Murdoch’s determination to resolve any lingering questions of corporate succession, and to make sure that Lachlan’s status within the company was fully restored.

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The promotions come as Carey and Fox’s top television executive, Peter Rice, were renegotiating their employment deals.

James, once the rising star in the family, was pilloried by members of the British Parliament and others for failing to manage the company’s mushrooming phone hacking debacle in Britain, which took place while he was in charge of the company’s British operations.

The scandal forced News Corp. to shut down its profitable News of the World tabloid and cost the company more than $400 million in legal fees and settlements to victims of the phone hacking.

The crisis also tore at the fabric of the family, exposing a rift among the siblings over James’ handling of the crisis.

After the phone hacking crisis exploded into front-page headlines, James moved to New York from London. The relocation was seen as a way to distance him from the political furor in Britain, but it also served to immerse him in the overall operations of the company.

Some analysts dismissed the idea that Lachlan had leapfrogged his younger brother in the line of succession.

“You could now say that the heir apparent once again is Lachlan, but there is no doubt that James is in control of the entertainment company,” McCabe said. “Rupert Murdoch is making sure that both sons are in place and running his business.”

But the changes in leadership were also noteworthy in that Murdoch bypassed his second daughter, Elisabeth, who is known for being a whip-smart TV executive. Elisabeth Murdoch, who is named after the mogul’s late mother, built a British-based television company, Shine, into an independent force before selling it to News Corp. three years ago for $675 million.

That year, Rupert Murdoch positioned Elisabeth for a seat on the company’s board, a decision that provoked howls from some investors who complained that Rupert, Lachlan and James were already on the board. Elisabeth later removed her name from consideration.

“By no means do we know for sure whether Elisabeth might come back in some leadership role,” McCabe said. “I don’t think these moves are necessarily the end of the story.”

Murdoch and his family control 39% of the voting stock of the two companies. His four adult children — Lachlan, James, Elisabeth and his oldest daughter from his first marriage, Prudence — each have a stake in the Murdoch family trust and voting shares in the companies. Murdoch’s two young daughters from his 14-year marriage to third wife, Wendi Deng, whom he divorced last year, are entitled to non-voting shares in the two companies through a separate trust.

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