Rupert Murdoch has reportedly failed in his to place full power over his empire in the hands of his eldest son Lachlan after a courtroom battle played out behind closed doors.
The media mogul had sought to rewrite the structure of the multi-billion-dollar Murdoch Family Trust, set up in 1999 after Murdoch’s divorce from Anna Maria Torv. Currently, the trust divides control of the company equally between Murdoch’s four adult children: Lachlan, Prudence, James and Elisabeth.
The row centres on control of News Corp and Fox. Rupert Murdoch’s empire, which spans multiple continents and encompasses media outlets like The Times, The Sun, The Australian, and The Herald Sun. Over the years, Murdoch has built a dynasty that includes his children from multiple marriages.
Murdoch, 93, was applying to give the reins of his sprawling media business to Lachlan, his child thought most politically aligned to him. The trial began in September in a closed court, despite efforts by the media to have it played out in the open. On Saturday, a Nevada court recently ruled against Murdoch, citing bad faith in his efforts to entrench Lachlan’s executive dominance, the New York Times first reported.
[See also: Why female heirs still miss out in succession planning]
The succession lessons learned from the Murdoch saga
Family dynamics, especially in businesses like the Murdoch-controlled empire, can have a significant impact on decision-making.
Rupert Murdoch stepped down as chairman of News Corp and Fox Corp in September last year, assuming the title of chairman emeritus. Lachlan Murdoch took over as CEO of ‘new Fox’ following the $71 billion sale of most of 21st Century Fox’s assets to Disney in 2019, while also serving as chairman of News Corp, which owns HarperCollins and other publishing assets.
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There have been disagreements between Lachlan and his siblings over the company’s future, particularly over political leanings and divergent views on the future direction of both News Corp and Fox Corporation, which may be a risk to shareholders and threaten the future direction of the Murdoch empire.
Vincent Billings, Corporate Partner at SA Law, previously told Spear’s: ‘There can be a power struggle in respect of the corporate decision making which can impact the entire business such as the direction that the company is going to take, borrowing and remuneration due to the emotional nature of the dispute rather than decision-making based on sound business principles.’
How bad planning can devastate a family business – as well as a family
‘Unbelievable mayhem can result from a badly drafted Will, or where insufficient attention has been paid to inheritance tax, which then lands unforeseen, the family suddenly realises that there is a huge and unexpected liability,’ warns Rosamond McDowell, partner Payne Hicks Beach.
Keeping family disputes private is also critical to maintaining the business’s image, Spear’s Top Recommended Reputation and Privacy Lawyer, Dominic Crossley, partner Payne Hicks Beach, says.
‘Whilst arbitration can allow for disputes to be handled confidentiality, in bitter disputes and during crisis situations, private and confidential information is often weaponised and can emerge into the public domain via endless different forms of media,’ Crossley tells Spear’s.
He adds: ‘Disputes with those who know you so well pose a particularly acute reputation and privacy risk. Advisors need to be alive to this issue, put in safeguards at the outset and be ready to act immediately in the event of a breach.’
How can other super-wealthy families avoid a similar feud?
The Murdoch family’s legal fight comes despite years of preparation and serves as a reminder that succession planning is not a one-off and needs regular attention.
Changing circumstances and priorities, widening differences in political views, and leadership styles and vision for the future can derail even the most detailed succession plan.
The saga is also a reminder that succession planning is more than simply deciding who will take over the business. Managing family dynamics, protecting the company’s legacy, and preparing the next generation to lead are vital parts of succession.
Key steps to succession planning
‘Consider the strengths and weaknesses of your business and your family, [and] work on enhancing and encouraging the strengths, and shoring up the weaknesses,’ says McDowell.
‘Frank and open conversations and communication are key, so that there are no surprises. Ensure the legal frameworks in place (partnerships, companies, trusts, wills and insurance products) are part of a joined up plan for the succession of the business, and that appropriate exit routes are possible for family members not interested in continuing as partners or shareholders,’ she says.
The Spear’s experts agree that it is important to work with an adviser to identify key areas for risk. Sarah Foster, contentious trust and probate partner at Freeths, recommends that succession plans are reviewed every three to five years ‘to ensure that it reflects any fluctuations in the law and family dynamics even if no changes are necessary’.
She adds: ‘Most importantly, ensure the team are in place who will carry forward your plan, in the form of good lawyers, accountants and trustees.’
Family lawyer, Ben Parry-Smith, partner Payne Hicks Beach, encourages family members to sign up to shareholders’ agreements, and to sign prenups before marriage – and to consider asking family members already married to sign postnups.
‘Where possible, ensure that all children have similar approaches to assets and trust interests set out in their nuptial agreements,’ he says.
‘If possible, ensure trustees treat all children the same and that decisions are properly recorded. Ideally, have arbitration clauses in shareholder and nuptial agreements so any disputes are dealt with confidentially and away from court,’ Parry-Smith adds.
See also: ‘My father’s succession planning took two decades – now I help other wealthy families’]
Engaging the younger generation
David Barker, senior wealth planner UK at Bank Lombard Odier tells Spear’s that entrepreneurs should engage younger family members early in the process to ensure they are equipped to handle future wealth, including gradually introducing them to investment and governance structures.
One of the first steps in this preparation is fostering relationships between the younger generation and the family’s investment advisers, Barker says.
These professionals play a critical role in guiding and preparing heirs for their future roles as stewards of family wealth. Entrepreneurs should encourage meaningful interactions, allowing advisers to provide tailored financial education to those lacking prior experience.
‘It is important that they meet and build a relationship with the family’s investment advisers who can prepare them for receiving wealth in the future.
‘This could take the form of financial education for those without financial experience, perhaps as part of a structured programme with a peer group. If there is a family wealth-holding structure such as a trust or a family investment company, the entrepreneur can gradually involve younger family members in investments discussions, if not the decision-making.’
Barker adds families should be realistic and recognise that not all heirs will be suited for or interested in running the business.
[See also: Succession at the House of Arnault: who will wear the crown?]
‘Irrespective of ownership, establishing the right successor management structure, with or without family participation, will be crucial to the successful future of the business. Getting the governance of any holding structure right is also key. Any structure, whether a trust, partnership, or family investment company, needs to be drafted with the flexibility to be adaptable to the family’s changing circumstances.”
Staying flexible
A well-designed governance framework is key to managing family wealth and businesses effectively. Structures such as trusts, partnerships, or family investment companies must be adaptable to evolving family dynamics and changing circumstances. Flexibility in governance ensures that the structure remains relevant and effective, supporting the family’s goals across generations.
Wearing his private client hat, Robert Hill, director at national law firm Freeths, said that many individuals set up a trust for ‘practical and tax saving reasons’ but at the expense of control.
‘As can be seen in the Murdoch case, it may no longer be possible for the person who settled the trust (a settlor) to direct how it should be run or who should benefit from it, even if specific powers are reserved to the settlor in the trust document, as was the case here,’ he said.
[See also: Worried about children-in-law inheriting your wealth? This is how to avoid it]
‘Family circumstances can and do change, so even though Rupert Murdoch may have had good reasons for choosing a trust structure, that has come at the cost of relinquishing control.’
‘Even the best laid plans can go awry, but with good communication, and a good Will, a good plan will hopefully see you through,’ McDowell says.
There is some suggestion Murdoch senior and Lachlan will appeal the Nevada court’s decision.
The sequel to the Murdoch family succession could be even more box office.
