Could News Corp’s $1 Million Donation Be Legal Trouble For CEO Rupert Murdoch?

murdochAn offhand comment by right-wing media tycoon Rupert Murdoch could land him in hot water with his company’s shareholders. Last June, News Corporation, which Murdoch leads, gave a $1 million donation to the Republican Governors Association. Yet in a recent interview, Murdoch claimed that News Corp. made this donation solely because of Murdoch’s personal friendship with a GOP gubernatorial candidate:

Murdoch, who was in Washington to receive an award from The Media Institute, brushed aside concerns that the gift, which was unusually large and one-sided for a media company, might hurt Fox’s credibility as a news organization that reports on politics.

“It doesn’t reflect on Fox News,” he said. “It had nothing to do with Fox News. The RGA [gift] was actually [a result of] my friendship with John Kasich.”

Unfortunately for Murdoch, there actually are laws against corporate managers treating a publicly-traded corporation as if it were their own personal bank account.  Although News Corp. was founded in Australia, it was recently reincorporated in Delaware and thus must comply with key Delaware court decisions. Significantly, the Delaware Supreme Court determined over 70 years ago that “[c]orporate officers and directors are not permitted to use their position of trust and confidence to further their private interests.”

There are some bright lights for Murdoch. Although the law permits a News Corp. shareholder to challenge Murdoch’s actions in court, these kinds of lawsuits are notoriously difficult to win, so the Delaware courts could ultimately side with Murdoch. Then again, it’s also not every day that a corporate CEO openly admits that he distributed a million dollars from his company’s treasury solely because of a personal friendship.

Just as significantly, even if such a shareholder lawsuit were to succeed, Murdoch would likely only be required to reimburse News Corp. for the $1 million donation — a pittance for a multi-billionaire like Rupert Murdoch.