Shareholder passivity: a viable explanation for corporate governance failures at NewsCorp?

Why would shareholders remain passive despite economic incentives to address corporate governance failings at the company level? In crafting a response to this question, our article addresses contemporary debates on the monitoring role of investors in ensuring the companies they own maximize shareholder value and adhere to high standards of corporate governance. Although rich, the existing literature primarily addresses the normative issue of whether shareholders should take on oversight functions, rather than factors that may induce or inhibit oversight. Responding to this gap in the literature, we examine shareholder passivity through a qualitative case analysis of the behaviour of NewsCorp investors. We argue that the corporate governance failures at NewsCorp resulted not just from absent internal controls at the Board level, but also from the failure of available external governance mechanisms. Our findings show that agency-level, structural and cultural barriers stymied the efforts of activist investors seeking corporate governance reform at NewsCorp. We draw the insights of investors together within a set of policy recommendations that could mitigate shareholder passivity. In keeping with our exploratory focus, we propose promising theoretical trajectories for advancing the related research programme through approaches that better account for the interplay between structure, agency and culture.