Did the Murdochs hack it?

Having watched today's performance of both the Murdochs at the Parliamentary Select Committee investigation into phone hacking. It was fascinating to see one of the world’s toughest business men Rupert Murdoch, humbly brought down on the hard ground of realism. Flanked by his son James the battle worn hack threw his dignity out of the window and tried very hard to be contrite. In a way it was quite moving, until you listened to the quite feeble answers to the questions posed by a committee of MPs, for once able to take the moral high ground. That’s not happened for years and pretty ironic really.  

Well did they hack it? James’ performance was at times impressive but was badly let down when he kept pleading innocence because he joined after 2007, the last phone hacking scandal. Much of his plea was based around a letter from the solicitors and backed by the police investigation that clearly said that the matter was closed and the perpetrators caught. So as far as News International was concerned, the matter was closed and they moved on. We now know that hacking continued apace leading to the current scandal which is growing rapidly into a crisis.

One could have had some sympathy with James’ position until he fell headlong into a massive hole of his own making. He clearly had not read the details of the case for today’s committee hearing. This was a major folly and indicates the attitude that must have been rebounding around News International, when the top man shows such a lax attitude. The main reason for this being given was the size of his responsibilities and how busy he was jetting around the world. All of the senior advisors in the world will not be of much use, if the top man does not see the importance of keeping on top of situations, especially those which have corporate reputational risk attached.

Rupert started by stating that today was the most humbling of his life. Good start, but from there it appeared that he had taken his hand off the steering wheel, ever since his son James had joined the company. He had a reputation of being always hands on, but now it appears the old lion has lost his grasp. Unable to see the growing situation either because as he said ‘he was let down by people he trusted’. Or maybe he was just too old to keep on top of a huge and complex company, which needs a management structure, which has to have individual responsibility on a global level. But apparently has hazy reporting lines to the top.

Clearly Rupert Murdoch could never be aware of every situation in all the newspapers and business interests he has and that is why the power to delegate is necessary. However, the power to select the right people and ensure the corporate standard is maintained needs a charismatic and forceful leader; once a description of Murdoch.

News International made the fateful error in missing ‘the monster’ that all companies have to guard against. Reputational Risk! There are many companies that have been destroyed by this risk and the phone hacking scandal had reputational risk written all over it.

Why then was it missed? Well, we are back to corporate governance. Obviously the ability to manage and assess the risk to the company is a prime board responsibility and it is here where News International appears to have failed badly.

Either senior managers or the structure below them, seem to have been afraid of giving Murdoch the full facts, or the responsibility was delegated too far away from the board and Rupert to allow those people to manage the situation. Either way the breakdown in communications was fatal.

It remains to be seen if News International and the Murdochs recover from the phone hacking scandal, but it should be seen as a very clear message to every company and every board that any legal issue, of any size, has to be managed as quickly and as efficiently as possible. Ships have been sunk by small slow leaks and in reputational risk you have an iceberg able to sink the largest very quickly.   

Performance of the day goes to Mrs Murdoch who showed how best to deal with hooligans when a comedian rushed past the police protective cordon to throw a shaving foam pie over Rupert only to be given an almighty slap by a very angry Mrs Murdoch.