SEC Decision: Fox Avoids Shareholder Vote on News and Opinion Label Differentiation
By Ross Kerber
(Multibagger) - In a significant regulatory decision, the U.S. Securities and Exchange Commission (SEC) has allowed media giant Fox Corporation to bypass a shareholder vote on a proposal that urged the company to distinguish between its news and opinion programming. This decision comes as a relief for Fox, the parent company of the conservative-leaning Fox News Media, ahead of their annual fall meeting.
Fox's Argument and the SEC's Decision
The SEC's ruling, detailed in a letter obtained by Multibagger, sided with Fox's stance that the proposal from activist investor John Chevedden pertained to "ordinary business." This classification is one of the few criteria the SEC uses to permit companies to exclude shareholder proposals from their proxy statements. Essentially, the SEC agreed that the matter was a routine business concern, not a strategic policy issue requiring shareholder input.
Background of the Proposal
Chevedden’s proposal is not new. A similar proposal was withdrawn before last year's meeting. Both proposals highlighted Fox's $787.5 million settlement with Dominion Voting Systems over allegations of defamation stemming from Fox's coverage of unfounded vote-rigging claims during the 2020 election. The proposal argued that the lawsuit underscored the risks associated with a news organization failing to adequately distinguish between factual news reporting and opinion or entertainment content.
Chevedden and other proponents, including activist shareholder group As You Sow, have asked Fox to publicly differentiate between its news and other programming categories and to provide a report by the Fox board on the matter.
Fox's Rebuttal
Fox countered the proposal by asserting that the differentiation between news and opinion is inherently complex and, thus, the proposal was misleading. Lyuba Goltser, an attorney from Weil Gotshal & Manges LLP representing Fox, argued that journalism often blends news and opinion, making a clear-cut differentiation impractical and misleading.
The SEC, however, did not weigh in on whether the proposal was misleading, focusing solely on its classification as ordinary business.
Reactions from Activist Shareholders
Luke Morgan, an attorney for As You Sow, expressed disappointment with the SEC's decision. "There can hardly be a more significant issue for Fox than its misinformation problem," Morgan stated in an email. He emphasized that this issue is precisely the kind that should involve shareholder input.
Breaking It Down: What This Means for You
- Understanding the Issue: Fox Corporation faced a proposal urging it to differentiate between its news and opinion programming. The SEC allowed Fox to exclude this proposal from a shareholder vote, citing it as an ordinary business matter.
- Financial Implications: For investors, the decision indicates that Fox can continue its current programming practices without immediate pressure for change from shareholders. This could affect the company’s reputation and, subsequently, its financial performance, depending on public and advertiser perceptions.
- The Bigger Picture: The ruling underscores a broader debate about media responsibility and the fine line between news and opinion. It also highlights the challenges shareholders face when trying to influence company policies on complex issues like media content differentiation.
- Your Takeaway: If you’re an investor, staying informed about such regulatory decisions is crucial as they can impact the company’s operations and stock performance. As a viewer, recognizing the blend of news and opinion in media programming can help you better interpret the information presented.
By understanding these dynamics, you can make more informed decisions about your investments and consumption of media content.