By Eleanor Bloxham, contributor
FORTUNE — The “right tone at the top” and “good governance.” Although these phrases are often brushed off as meaningless, in the midst of crisis, these phrases sound both sweet and powerful.
When a major crisis hits, as is currently the case with News Corp (NWS), it is no longer possible to simply perform touch-up repairs to a company’s governance practices or tone. These things often need to be remade whole cloth.
And that is why it is curious that any current board member would be considered apt to fix News Corp’s governance woes.
It has been suggested that, to fix governance at the beleaguered company, News Corp. board member Tom Perkins is shareholders’ “best hope.”
But would he make the best choice? He’s been on the News Corp board since 1996 and he has already had 15 years to influence governance there. He sits on all three of News Corp’s board committees, the only director with that distinction. Certainly, he has had some level of responsibility for the tone at the top.
A less-than-stellar record at Hewlett-Packard
Perkins, who was a director at HP (HPQ) before his resignation in May 2006, has said that he helped recruit Mark Hurd to the CEO spot at that company. Perkins also helped Hurd get a News Corp board seat. (Hurd left the News Corp board after his resignation from HP amid an HP board investigation into his ethical conduct.)
Prior to Hurd’s scandal and fall from grace, Perkins was at the center of the earlier HP pretexting, or spying, scandal, which began as an investigation into leaks of confidential information to reporters.
A May 24 document describing HP’s secret leak investigations that was published by the New York Times indicates that Perkins made suggestions about how to handle the secret investigations, recommending the use of lie detectors, and sharing his views, which changed over time, on the potential source of the leaks and how the board should handle the outcome of its investigation.
Given Perkins’ active interest, what efforts, as a board member and as chair of HP’s governance committee, did he make to oversee the investigation’s processes and procedures? What was his role in what he has characterized in a letter cited by Newsweek as “improper board procedures and breakdowns in corporate governance” at the company?
“I am categorically against leaking from boards, and I was not involved in any of the leaks,” he told Chief Executive magazine in a 2008 interview, referring to the HP scandal, saying “a leak usually [refers to revealing] negative stuff that is [confidential].”
But, according to a 2007 New Yorker article, he confessed to then-CEO Carly Fiorina that he had spoken to a Wall Street Journal reporter in 2005 about details of board deliberations concerning Fiorina’s performance. Although Perkins said the reporter already had many of the details, “Perkins apologized” to Fiorina, the article said.
After resigning from HP’s board, Perkins sent emails in late May 2006 that revealed information from confidential HP board discussions to a headhunter named Andrea Redmond, who was credited with bringing Hurd to HP, and to all of the then-members of the News Corp board.
The HP fallout
Immediately following his resignation at HP’s May 18, 2006 board meeting, Perkins had a conversation with outside counsel about the reason he left the board, according to the New Yorker article. At that time, he said it was personal (between him and the chair), not a dispute with the company, and outside counsel should just say he resigned. (The SEC later rebuked HP for failing to fully disclose the reasons for Perkins’ resignation early on.)
Perkins said in an email on July 18 that he requested that just he and the board chair, rather than the full board, handle the outcome of the leak investigation at HP.
Patricia Dunn, HP’s chair at the time, did not comply. “Tom’s view of corporate governance is that a few people … should make the decision…. That’s the Silicon Valley cowboy way,” Dunn told the The New Yorker. Another concerning sign: When Dunn became chair of HP, she had asked Perkins, who headed the governance committee at the time, about “inconsistencies between the company by-laws and the director’s handbook.” “Perkins recalls replying, ‘I’ve never read either one, nor do I intend to.’”
Perkins wrote about his views on governance in a Wall Street Journal op-ed in 2007, expressing his belief in a model that is very different from a “Compliance Board, with its focus on legal issues.” “As a director who once fired a firm’s auditors just in the nick of time, I relied upon the ‘smell-factor’,” he wrote.
Despite his reliance on it, his smell factor didn’t work quickly enough, however, to sniff out and snuff out the pretexting at HP or the risky culture and behavior at News Corp.
Perkins may not be the best fit to solve News Corp’s woes. Moving forward will require not only expertise in handling a crisis but also tact, and that is not necessarily his strongest suit.
Alternatives to Perkins
If not Perkins, then who might be able to dig News Corp. out of its mess? Looking farther afield, the majority of directors currently lack independence, measured by current or past relationships to News Corp, or through their long tenure on the board.
Viet Dinh — a Georgetown Law Professor who advised Perkins following his departure from HP — is a seven-year veteran of the News Corp board. He wrote in a September 2006 opinion piece in the Wall Street Journal: “Henceforth, no one, least of all corporate America, should be able to claim that they didn’t know that obtaining telephone records without consent is improper and illegal.”
But where was independent board oversight of the culture at News Corp when public concerns of telephone hacking first arose in 2005? And what oversight did the board provide related to the police inquiries that followed?
Did they use the “the guiding light of director conduct: business judgment,” which Dinh touts in his opinion piece – or did they simply rely on management?
Before last Friday, the response by News Corp to the crisis was muted. Sure, they closed down News of the World and pulled out of a deal to buy BSkyB that would have likely failed anyway, but what are their priorities — a stock repurchase in the midst of an ethical scandal?
On Friday, chief executive of News International and former News of the World editor Rebekah Brooks resigned, as did Dow Jones CEO and former News International chief Les Hinton.
The PR machine is now up and running. But where are the changes in the boardroom or a meaningful internal review?
Right now, the News Corp board could use a whole new set of independent members.
One of their first tasks should be to reset the goals and jobs of the CEO, the board, and the audit committee.
Currently at News Corp, “the Audit Committee is responsible for reviewing the Company’s policies and practices with respect to risk assessment and management, [but] it is the responsibility of the Chief Executive Officer and senior management to determine the appropriate level of the Company’s exposure to risk.”
It’s time for an independent board to weigh in on acceptable risk management and other practices at this company.
Until the board changes hands, the Murdochs and those who work for them, both on and off the board, shouldn’t be let off the hook.
It’s time for this media empire to turn a new page.
Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://thevaluealliance.com), a board advisory firm.