Lachlan and Rupert Murdoch
Odd Andersen  /  AFP-Getty Images file
Lachlan Murdoch, left, Rupert Murdoch’s son and a possible heir to his father’s leadership of News Corp., recently resigned his executive position with the firm.
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updated 8/4/2005 1:54:38 PM ET 2005-08-04T17:54:38

At a meeting in Rupert Murdoch's office, a senior News Corp executive takes a deep breath. Mr. Murdoch is telling him a consultant has been hired to assess one of the businesses managed by the executive. There was no discussion beforehand, nor did Mr. Murdoch see anything wrong with his unilateral decision to interfere.

"Rupert does what he wants and he gets involved in absolutely anything that he wants to," said the executive, who has worked for Mr. Murdoch for many years. "It has always been like this, and nothing has changed as Rupert has gotten older. Anyone who is sensitive about the extent to which they control their businesses should not work at News Corp."

One executive who decided last week partly due to such interference not to work there any more is Mr. Murdoch's eldest son, Lachlan. Now 33, Lachlan has spent his entire working life at News Corp, built up by his father from a modest inheritance of small newspapers in Australia into one of the biggest media companies in the world.

Lachlan was the son Rupert Murdoch had told the world was likely to succeed him, in part because he was older than his brother, James. But James, chief executive of BskyB, the British satellite television company in which News Corp has a stake, is now the only child with an executive role in the group. His sister, Elisabeth, left the family business five years ago.

"Lachlan has been doing some serious soul-searching in the last year," said an executive who has worked with him. "He has looked in the mirror and decided he did not like what he saw."

Lachlan started working for the business in Australia, where he ran the group's newspaper operations and developed his love for the newspaper business. Then, five years ago, he was made deputy chief operating officer of News Corp. The grand title, however, did not mean very much.

Many of the divisions that reported to him — the Australian papers, the U.K. papers, the HarperCollins publishing business — were run by experienced and capable executives who neither needed nor desired much interference. The exception was the New York Post newspaper. Lachlan took over as publisher and turned it into a tabloid with Australian newspaper editors at the helm. Despite soaring circulation, sharp price cuts meant the paper continued to make a loss.

Friction between father and son centered on the U.S. Fox television stations group, which generate over $2 billion of annual revenues for News Corp. This group was also part of Lachlan's responsibilities, but on numerous occasions his father stepped in. In the background was pressure on Lachlan Murdoch from his wife, the Australian model Sarah O'Hare, to move back to Sydney with their baby son. Another factor which persuaded Lachlan to leave was his father's attempt to change how his inheritance will be split.

Rupert Murdoch's stake in News Corp is worth about $6 billion. He controls just under 30 percent of the voting shares in the conglomerate his stake has been gradually reduced as he has expanded his empire through acquisitions and these are held in a trust.

The trust was set up as part of a divorce settlement between Rupert Murdoch and his second wife Anna, mother of Elisabeth, Lachlan and James, who gave up a stake in her ex-husband's fortune to secure control of News Corp for her children. Prudence, the daughter of Mr. Murdoch's first marriage, is also part of the deal.

Mr. Murdoch's desire to include his two young daughters from his third marriage to Wendi Deng in the trust, reported in the New York Times and the Wall Street Journal, has angered his adult children.

"Tensions over the future of the trust aren't about the financial value of any inheritance, but about control," said a person familiar with the discussions. "The [adult] children are pretty united in this."

It is possible the trust will be changed and a compromise will reached. The youth of Rupert Murdoch's children and his wife Wendi, in her thirties, means the issue over family succession will continue for some time. Mr. Murdoch himself, who is 74, has no intentions to retire or take a back seat. Ned Minor, an attorney who specializes in advising family-owned business, says rifts over future control are very common.

"It gets very complicated when you have more than one child. If you have multiple children from multiple marriages . . . you can watch any sitcom on television to see what goes on then," Minor said.

The next episodes in the Murdoch family drama will make for gripping viewing.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.

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