What Mark Zuckerberg could learn from the demise of the Murdoch dynasty

26th April 2012

The social network that once seemed set to propel James Murdoch to Facebook-style success now seems as dead in the water as Friends Reunited.

Revelations at the Levenson enquiry yesterday may have political implications far wider than the scalp of the culture secretary, James Hunt.

Based on the evidence from James Murdoch, he seems determined that if he is going down, he'll take the British Prime Minister down with him.

The son of media mogul Rupert Murdoch asserted yesterday that he did indeed discuss News Corporation's controversial £8 billion bid to buy out BSkyB with David Cameron, a conversation the Prime Minister has long denied.

Where was this talk alleged to have happened? Not in the corridors of power, or a discrete London restaurant.

Instead, James Murdoch knows Cameron socially as part of the "Chipping Norton set", centred around the Prime Minister's Oxfordshire constituency home.

Cameron claims the cosy chat occurred at the Cotswolds home of Rebekah Brooks, an employee of the Murdoch empire as the then chief executive of News International, during a Christmas dinner on 23 December 2010.

Brooks, previously described as a "fifth daughter" to Rupert Murdoch before she was sacrificed on the altar of the phone hacking scandal, lives hardly a mile away from Cameron's Oxfordshire constituency home.  One of Rupert Murdoch's actual daughters, Elizabeth, married to PR supremo Matthew Freud, lives just down the road.

Now this powerful social network of politicians, PR and press seems set to splinter.

Ron Weiner, a social psychologist who works with top management teams, said: "This social network was a system closed to the outside world, with all members reinforcing each other and telling each other how wonderful they are. They stopped being able to perceive the outside world, and see how the outside world perceived them."

Facebook founder Mark Zuckerberg could yet learn from the faltering Murdoch empire, shattered by the failure of this social network.

The top three lessons are:

1.     Learn to lessen control

Like Rupert Murdoch, Zuckerberg has also maintained iron control of his business via voting rights in company decisions.

To date, investors have been willing to cede control, stunned by Zuckerberg's success. Facebook filing with the US Securities and Exchange Commission (SEC) as part of the planned float reveal that although Zuckerberg owns just 28% of the company's shares, he has struck an agreement with 56.9% of shareholders that gives him control over their votes.

Murdoch's News Corp provides an example of the problems that arise in a company controlled by an individual or family, when their ambitions no longer fully align with those of a majority of their shareholders. The majority of the owners of News Corp not sharing the name "Murdoch" snubbed the nomination of his sons, James and Lachlan, to the board. Yet extra voting power allowed Rupert to ignore their votes, according to Rob Cox writing on Breaking Views.

2.     Beware of anointing your own successor.

Rupert Murdoch's preference for appointing his own progeny is coming back to bite him, with James Murdoch evicted from his role as chairman of News International, and forced to resign as chairman of British Sky Broadcasting Group earlier this month.

Zuckerberg has also attempted to ensure he can control who succeed him – even from the afterlife.

The SEC Facebook filings reveal that "in the event that Zuckerberg controls our company at the time of his death, control may be transferred to a person or entity that he designates as his successor", according to the Daily Telegraph.

May Zuckerberg use his power more wisely than Murdoch?

3.     Find a peer group to provide a reality check

Rupert Murdoch's hunger to succeed could be partly attributed to a desire to score one over his media mogul peers. Murdoch is only now being called to account, while other newspaper barons have already fallen foul of the authorities. Robert Maxwell's mis-appropriation of the Mirror Group's pension fund was only discovered after his demise. Conrad Black is currently in prison, convicted of fraud and evicted from Hollinger International, the publishing company that owned his prize assets including The Daily Telegraph, the Jerusalem Post and the Chicago Sun-Times.

In contrast, not only is Zuckerberg free of any taint of legal scandal, but his stellar success at such a young age leaves him lacking in a peer group.

Social psychologist Wiener said: "Zuckerberg was able to do so much, so quickly, that probably in his own head everything is possible. Who could tell him when he is going over the edge? Potentially only Bill Gates or the late Steve Jobs would ever have been in that position."

So Zuckerberg might be well advised to find a Facebook court jester, able to tell him when the emperor is wearing no clothes, should an Instagram ever turn into fool's gold.

 

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