Rupert Murdoch's oldest son, Lachlan - considered by many to be his heir apparent - resigned July 29, 2005 from his job at the News Corporation amid apparent family discord, adding a new twist to one of the business world's most closely watched succession chronicles.
The decision by Lachlan, 33, to step down leaves just one of Rupert Murdoch's four adult children, James, in an executive position at the company, making him the clear front-runner to one day succeed his father. James, 32, runs British Sky Broadcasting, the satellite television service that is 34 percent owned by the News Corporation. Rupert Murdoch, 74, the chairman and chief executive of the News Corporation, has made clear that he would like one of his children to succeed him.
The reasons Lachlan gave for his exit were his yearning for Australia, where he spent six years helping to oversee operations of the News Corporation there, and a desire to spend more time with his wife and infant son. But the abruptness of his departure suggested a palace intrigue of the kind that some of the News Corporation's media holdings - like The Sun in London or The New York Post newspapers or the Fox News Channel - would follow with great relish. More than just about any business scion, Lachlan - with his tattooed forearm and model wife Sarah O'Hare - is something of a global celebrity.
Lachlan is said by several former colleagues, none of whom would be quoted for fear of reprisal, to have chafed under what he saw as his father's overinvolvement in the running of the businesses. Those included the company's United States and Australian print operations and local TV stations, and The New York Post newspaper, where he was publisher. The father and son, who have not been shy about displaying their affection for each other publicly with hugs and kisses, have not been as close of late, a person who works closely with both men said.
Despite his official title as deputy chief operating officer, Lachlan did not work closely with Peter Chernin, the News Corporation's president and chief operating officer, and the two men had clashed in the past. Neither Rupert nor Lachlan Murdoch, nor other News Corporation officials, would discuss the father-son spat that led to the departure, though two people close to Lachlan said he had seriously considered leaving the company last summer, and perhaps earlier. In all, Lachlan worked at the media company for 11 years. For the last 4 1/2 years he served as its deputy chief operating officer, based at the News Corporation headquarters in New York.
"I am particularly saddened by my son's decision and thank him for his terrific contribution to the company," Rupert Murdoch said in a press release. "I have respected the professionalism and integrity that he has exhibited throughout his career at News Corporation."
In an email message Lachlan sent to the News Corporation employees yesterday afternoon, he called his resignation "a very difficult decision" that was made "only after long and hard deliberations over many months."
Lachlan has told people he does not rule out returning to the News Corporation as an executive someday, leaving him in contention to one day succeed his father. And he will remain on the News Corporation board as the representative of the Murdoch family trust, which owns a 28.5 percent voting interest in the company. He also will serve as an adviser to the company.
The company includes such businesses as The Times newspaper in London, the book publisher HarperCollins, the satellite service DirecTV and the 20th Century Fox film studio.
Gary Ginsberg, a News Corporation spokesman, said Lachlan's resignation does not mean his brother James had been given the nod. "It does not change the succession plan at all," Mr. Ginsberg said. "Rupert has said he plans on staying as chairman as long as he is mentally and physically fit to do so."
In the near-term, Rupert Murdoch has said Mr. Chernin is likely to be his successor as chief executive, but his ambition is for a member of his family to one day take the top job. Mr. Chernin recently extended his contract for five years. Previously, Rupert Murdoch had hinted he envisioned his sons collaborating on running the company.
In a statement, Lachlan said, "I would like especially to thank my father for all he has taught me in business and in life."
In the quarter ended March 31, the News Corporation reported earnings of $400 million on sales of $6 billion, compared with earnings of $434 million on sales of $5.2 billion. Wall Street's reaction to the news was muted, with shares of News Corporation down 23 cents, to $17.34 yesterday.
Merrill Lynch media analyst Jessica Reif Cohen said that with Lachlan's departure she believes James "becomes the heir-apparent to his father's empire. However, this remains a very long-term issue, as we continue to expect Mr. Chernin will take the helm of the company when Rupert Murdoch retires."
Lachlan Murdoch was raised in the United States but spent six years working at, and eventually running, the Australian businesses in the 1990's. His record in that country, where he was chairman of its newspaper operations, was blemished by a $475 million (Australian) investment in One.Tel, a telecom company that collapsed in 2000.
In deciding to pursue what he called "the next phase of my career" in Australia, Lachlan follows a path similar to that of his sister, Elisabeth, 36, who spent several years at BSkyB. She also was seen as a potential successor until she resigned from the company in 2000 after tussling with her father. She subsequently formed a television company in Britain. Like Lachlan, she could play a greater role when their father retires.
In a 2001 interview with an Australian magazine, Mr. Murdoch's ex-wife, Anna - the mother of Elisabeth, Lachlan and James - warned that the pressures of seeing who would succeed Rupert would lead to "a lot of heartbreak and hardship" for their children. "There's been such a lot of pressure that they needn't have had at their age."
Family dynamics have changed even more since then, with Mr. Murdoch's remarriage to Wendi Deng, a former executive at the News Corporation's StarTV arm, and the addition of their two young children, Grace and Chloe, to the clan. In all, there are six Murdoch children ranging in age from 46 to 2. Prudence, from Mr. Murdoch's first marriage, is the eldest.
Lachlan's departure focuses more attention on James, a Harvard dropout who moved slightly out from under his father's wing last summer when he was hired as BSkyB's chief executive. While Lachlan is more pensive and shares his father's affinity for the print newspaper business, which is the company's roots, James is more cerebral and technology-focused. James enjoys more autonomy than other News Corporation division heads in part because BSkyB is a separately traded public company. To emphasize his independence, he resigned from the board of News Corporation board over his father's objections.
Like his younger brother and other scions at publicly listed companies, Lachlan faced an uphill battle showing investors that his position was based on more than genetics. As deputy chief operating officer, Lachlan was paid $3.8 million in salary and bonus last year. News Corporation documents show him as the holder of 1.7 million shares of his own beyond the family's interests, which are held by an entity called the AE Harris Trust. The trust's stake in the News Corporation is currently valued at $6.1 billion. Lachlan played a visible role last year in convincing Australian institutions to support the company's recent re-incorporation as a United States company.
Despite frequent international trips, his highest-profile position was as publisher of the feisty New York Post. In that position, Lachlan relished the fight to overtake its rival, The New York Daily News. The Post has increased its circulation significantly against its rival, although News Corporation executives who said they could not be quoted because they were ordered not to speak about the matter, said the paper's losses under Lachlan hit as much as $70 million a year.
In the statement, Rupert Murdoch praised Lachlan for "driving all of his reporting divisions to record profits and The New York Post to its highest-ever circulation."
The paper did not name a replacement as publisher.
Lachlan and Sarah Murdoch recently sold their home overlooking Sydney's harbor and purchased a new home near the city's Bondi Beach area. They will live there with their son, Kalan, who was born last November. It is unclear whether they'll keep the five-story building in New York's SoHo district that the Murdochs purchased and are in the midst of renovating to transform into a single-family residence.
Lachlan's departure also comes amid what appear to be cooling tensions between his father and John Malone, the media financier who has amassed an 18 percent voting stake in the News Corporation. Mr. Malone had acquired the stake last year to put pressure on Rupert to trade some News Corporation assets for the stock; but Mr. Malone's move also raised the question of whether the News Corporation is vulnerable to takeover. In recent weeks, people close to both camps have said they are exploring a new, friendly deal by which Rupert Murdoch might gain a proxy to vote Mr. Malone's shares, or an agreement that Mr. Malone would not buy any more shares. If either comes to fruition, the Murdoch family's control over the News Corporation would be secure for now.
