Could hacking scandal be Murdoch dynasty's end?

LOS ANGELES - As investors punished News Corp.'s stock again yesterday, questions arise anew about the leadership abilities of its chief executive, Rupert Murdoch.

The phone-hacking scandal in Britain now threatens to engulf top executives, and has hobbled the company's stock, which has stagnated for a decade.

If News Corp. operated like many corporations in the midst of scandal, the CEO's job would be in jeopardy. But the media conglomerate runs more like a family dynasty, and analysts suggest that Murdoch, its 80-year-old patriarch, is likely to maintain his grip for now.

As the company's chief executive, Murdoch presides over an empire with a wide array of media assets, including the Fox broadcast network, cable channels such as FX and Fox News, TV stations, the 20th Century Fox movie studio and newspapers around the world, including the Wall Street Journal, the New York Post and the Sun, in the U.K.

He controls the company through a family trust that owns 40 percent of the voting stock and the largest chunk of News Corp.'s shares at 12 percent. One observer praised his ability to parachute into the crisis as he did this past weekend, pulling a maneuver that allowed the British government to put the issue on the back burner while public outrage subsides.

Last week, a public outcry ensued over the years-old hacking scandal after reports that, along with the phones of celebrities and politicians, News of the World tabloid reporters had broken into the phone messages of a slain girl, of other crime victims and of the bereaved families of soldiers.

Murdoch took key actions to stem the fallout from endangering News Corp.'s proposed $12 billion acquisition of the 61 percent stake of British Sky Broadcasting that it does not already own.

Still, many observers point to the crisis as indicating a problem at the top echelons of the company.

Several high-ranking executives may be swept up in a simultaneous criminal probe, including Murdoch's son and deputy chief operating officer, James Murdoch, who, as head of European and Asian operations, authorized payments to hacking victims; the chief executive of U.K. subsidiary News International, Rebekah Brooks, who edited News of the World when some of the hacking occurred; and Les Hinton, who was chairman of News International during some of the years that the abuses took place and who is now chief executive of Dow Jones & Co.

The probe has also raised the specter of possible charges in the U.S. under the 1977 Foreign Corrupt Practices Act; its anti-bribery provisions could ensnare executives if allegations of payoffs to British police officers are proved.

"This is going to have ripple effects over in the U.S., too, but it may take a while for it to all play out," predicted newspaper analyst Ken Doctor, of Outsell Inc.

Doctor speculated that Murdoch could choose to step aside as CEO and retain only his chairmanship. That would leave open a question of who succeeds him, a family member or chief operating officer Chase Carey.

"Like a monarch out of Shakespeare, Rupert has been testing out successor scenarios for years," Doctor said. "The pressures on the share price may force him to do something now because the share price is important to him and his company."

A shareholder lawsuit filed last week called out the company's purchase this year of Murdoch's daughter Elisabeth Murdoch's TV production studio, Shine Group, for $661 million, as an example of nepotism that has plagued the company. The shareholders also pointed to the phone hacking as an example of why News Corp. needs an executive shakeup.

"These revelations show a culture run amok . . . and a board that provides no effective review or oversight," the shareholders asserted in a revised complaint filed late last week in Delaware Chancery Court.