War at the Wall Street Journal

by Sarah Ellison

  James Murdoch, who ran Star TV from 2000 to 2003, joined in. He had a history of his own on these topics. In a speech in Los Angeles in 2001, James attacked the Falun Gong. That same year, the Journal won a Pulitzer Prize for its coverage of China's brutal suppression of the group.

  Leslie knew about this history, and her mind focused on a letter written the previous month by the Journal's seven Pulitzer Prize– winning reporters in China that urged her family not to sell the paper to Murdoch. It read:

  We are correspondents who report from China for The Wall Street Journal, and we are writing to urge you to stand by the Bancroft family's courageous and principled decision to reject News Corp.'s offer to acquire Dow Jones & Co.

  There are only a handful of news organizations anywhere with the resources and the integrity to pursue the truth in matters of national and even global importance. Thanks to your family's committed stewardship, the Journal is at the head of this dwindling group.

  Our China team won the Pulitzer Prize for international reporting this year for a series of stories detailing the consequences of China's unbridled pursuit of capitalism—for China and for the rest of the world. Many of those stories shed an unflattering light on the government and business interests.

  The prize is a reflection of the Journal's substantial investment in covering what is perhaps the biggest economic, business and political story of our time: how China's embrace of markets and its growing global role are reshaping the world we live in. It is an important example of the coverage that we fear would suffer if News Corp. takes control.

  News Corp. Chairman Rupert Murdoch has a well-documented history of making editorial decisions in order to advance his business interests in China and, indeed, of sacrificing journalistic integrity to satisfy personal or political aims.

  Mr. Murdoch's approach is completely at odds with that taken by your own family, whose unwavering support of ethical journalism has made the Journal the trusted news source it is. It is fair to ask how News Corp. would change the Journal's coverage.

  In 2001, for example, our colleague Ian Johnson shared the Pulitzer for international reporting for his articles about the Chinese government's sometimes brutal suppression of the Falun Gong spiritual movement.

  Under Mr. Murdoch, these articles might never have seen the light of day. That year, Mr. Murdoch's son, James, the CEO of Brit ish Sky Broadcasting, delivered a speech in California echoing the line of the Chinese government in terming Falun Gong a "dangerous" and "apocalyptic cult," which "clearly does not have the success of China at heart."

  Newspaper accounts of the speech say that James Murdoch criticized the Western media for negative coverage of human-rights issues in China, concluding that "these destabilizing forces today are very, very dangerous for the Chinese government."

  We believe that it is important for all of us—from reporters and editors to you, the owners of the company—to keep constantly in mind the fact that the Journal is an institution that plays a critical role in civic life. We take pride in knowing that Journal readers trust us to uphold these principles, even in the face of risks.

  Your family established and is now entrusted with a unique and important institution. Safeguarding it is a responsibility that you have fulfilled admirably for decades. Yours is the kind of stewardship journalists on the ground in China will require in the years to come if they are to accurately frame one of the world's most critical news stories. We have enormous respect for your continued willingness to defend the journalistic standards so important to all of us.

  Leslie felt an obligation to grill the mogul and, typically, broached the topic directly. "How do you deal with coverage of China given your substantial business interests there?" she asked. She spoke glowingly of the Journal's coverage of China. In praising Journal reporters' dedication to their craft, she invoked the death of Daniel Pearl.

  Murdoch gave a rambling response and pointed out that the Times of London had done several stories critical of the Chinese government. James looked at his father and grew defensive of the old man. He was at a loss at what he was hearing. Here, the Bancrofts were acting like an august group on the other side of the table. "He has more work experience in his pinky finger," James thought of his father.

  James quickly jumped in, speaking in his staccato tone. "Look, we were the only broadcaster in China to broadcast September 11 live," he said. "We were the only broadcaster to cover the Taiwanese election," he added. "We did it carefully, but we did it." News Corp. had journalists risking their lives all over the world, he thought to him self. He felt that American journalism smacked of self-importance. He remembered the New York Times's Jayson Blair debacle in 2003, when the young reporter fabricated details and plagiarized others' work in his coverage of significant news events. When the Times assigned Blair to cover the story of the rescue of the prisoner of war Jessica Lynch, Blair co-wrote a story full of details from Lynch's home in Palestine, West Virginia. It turned out that Blair never went to Palestine, and his entire contribution to the story consisted of rearranged details from other wire services and papers. What James remembered from the incident was that nobody from the Lynch family did anything, even after they saw the story in the Times and knew neither of its authors had ever been to their home. To him that showed how far out of whack journalists' impressions of themselves were from those of the broader public. Leslie, he thought, was championing the same misguided self-importance. He didn't share the thought out loud. Instead, he went on to outline News Corp.'s business strategy and his personal view about opportunities. "If it doesn't make money, we don't do it," he said.

  Then, perhaps to soothe fraying nerves across the table, the elder Murdoch reiterated his willingness to set up an editorial board as he had done with the Times of London twenty-five years earlier. He took a copy of the editorial agreement he had given the Times and pushed it across the table. In it, he proposed a board whose members were partly chosen by himself, a structure that had allowed him to force out the Times's editor, Harold Evans, shortly after Murdoch took over the paper.

  Elefante then handed over a copy of the family's proposal. Murdoch perused the document as Elefante ran through its main points. The Bancroft proposal suggested that the initial members of Dow Jones's editorial board be chosen by the Bancroft family, who would choose their own successors in perpetuity. It was their way of cementing control.

  Murdoch furrowed his brow. Clearly, he didn't like the agreement in front of him. Under the current configuration of the Times's board, he explained, he could appoint the paper's editor but the editor would need to be approved by the independent board. Similarly, he could not remove the editor without the concurrence of the board. There was a wide distance between the two sides, but they continued to look for areas where they could compromise. Encouraged by the progress, Lipton said, "Maybe we should get back together tonight and see if we can't get this done."

  The comment surprised Dow Jones chairman Peter McPherson, who thought the meeting was set up as a way for the Bancrofts to get more comfortable with Murdoch, not for them to sign any agreements or commit to any portion of a deal. He thought this meeting would be the first of many. So did the Bancrofts. Here, Lipton, supposedly the Bancrofts' adviser, was trying to hijack the process, McPherson thought, and get the deal done that day.

  McPherson quickly suggested the two sides take a break and meet again in an hour and a half at about 5:00 p.m. The two sides agreed to do so, and Murdoch, with his son and his associates, left the room. "I don't think we want to sign anything today," McPherson told the family once they were alone. "I agree," said Elefante. "We have time to figure this out." Without saying where he was going, Chris left the building while his cousins, McPherson, and Elefante stayed in the lawyer's office to continue to look over the editorial agreements. His cousins, paranoid about press leaks, feared Chris had left to go talk to reporters. In fact, he left to get a break from his family and make some business calls. He had started to think about how he coul
d come up with enough money to buy out his family members and preserve Dow Jones's independence. The meeting reconvened, but only briefly, and the two sides left Lipton's office without committing to anything. The Bancrofts would take a look at the Times of London proposal and then spend some time coming up with a revised proposal of their own for News Corporation. When Murdoch left the building that day, photographers and television cameras greeted him. He told them blandly that after more than four hours in the conference room together, "we had a very long, constructive meeting, and we've both gone away to consider both sides." He and his cohorts went to a cigar bar around the corner afterward to celebrate.

  The meeting would turn Leslie Hill completely against Murdoch. She felt he had dodged her questions about China. She didn't trust him. She would spend the rest of the summer scouring the East Coast trying to find alternatives to Murdoch.

  13. Editorial Independence

  IN THE ABSENCE OF any real power over the deal proceedings, people started grasping at Murdoch's promise of editorial protections for the Journal. The morning after Murdoch's meeting with the Bancrofts, Marcus Brauchli picked up the Journal at 5:30 a.m. on his way to the gym, gazing with satisfaction at the four-thousand-word story stripped across the paper's front page, outlining the many ways in which Rupert Murdoch had interfered with his newspapers and editors throughout his career. This kind of story was, he thought, what it meant to work at an independent paper. He then read the New York Timess account and his own paper's account of the previous day's meeting, frustrated that the Times's was more complete. Especially with this story, he wanted his paper to beat the competition every day.

  His frustration grew as he realized the Bancrofts had walked into the meeting with Murdoch without any representative from the newsroom, or even an executive who might have understood how the Journal operated. "There's such hypocrisy in talking about editorial independence and making it an issue," he thought, and then not worrying about how it is actually implemented. Eager to mine his own sources of information and exert some influence on the proceedings, he texted Robert Thomson. The two had a competitive but friendly rapport, each respectful of the other's intellect and talent. Brauchli wanted to tell Murdoch that whatever the Bancrofts had said in the meeting, they had done it without the support of the newsroom. In his text, Brauchli was almost painfully obscure: "What if Lord Macartney had visited the Qianlong Emperor without having the Parliament who make the laws and organize society behind him?" It was the typical kind of intellectual jousting Brauchli liked to engage in. He was referring to Britain's first envoy to China, who tried, and failed, to establish trade relations with the Chinese. His message: What if the representatives in the meeting yesterday didn't represent the Wall Street Journal journalists responsible for putting out the paper? Thomson, married to the daughter of a general in the Chinese army, kept up effortlessly: "The Emperor would assume that the King's emissary represents the King, and the parliament is His Majesty's." Thomson's response was clear: Murdoch would not see it as his problem if the Bancrofts agreed to a deal that the journalists didn't like. Brauchli attempted to extend the now tortured analogy by saying, "Of course the rifts of the Macartney mission doomed it and later produced the Opium Wars that weakened the Qing." Even as he typed it, he knew his attempt was too obscure. Brauchli knew, too, that Thomson had little sympathy for the Journal newsroom.

  Leslie Hill wasn't going to let this slide. Fresh from the meeting with Murdoch, she felt disgusted by the man whose company she had just left and increasingly annoyed by her cousins. Lisa followed Mike Elefante blindly, she thought. Chris was impossible to read and seemed not to know his own mind. She didn't like Murdoch's response to her questions in the meeting, nor did she trust that he was even telling the truth when he spoke. She had asked him three different ways to explain how he would treat China once he owned the Journal, and he kept dodging the question, she thought. She didn't trust Marty Lipton, who seemed ready to sign a deal before they had even begun negotiating. Elefante was doing his best, but he himself admitted that doing deals wasn't his specialty; he was, in the Bancrofts' long tradition, leaving it to the "professionals." Meanwhile, her brothers were agitating to explore a sale. Her brother Tom said it most succinctly: the family had stopped benefiting from the company and the company had stopped benefiting from the family. It was time to part ways.

  Leslie wasn't entirely convinced of that point, especially now that she had met Murdoch. Her first step was going to be to talk to Marcus Brauchli. She wanted to know more about the editorial agreement he had mentioned. An editorial agreement offered a tantalizing possibility for her family. It could allow them to extract themselves from the disastrous business of Dow Jones and newspaper publishing and still feel they had played a role in preserving the integrity of one of the nation's great papers. At best it would really protect the Journal; at worst it was a salve on a guilty conscience.

  The family had little reason to believe any of Murdoch's promises to abide by the editorial agreement. Leslie knew what had happened to Harold Evans. Still, the Bancrofts wanted to believe. Leslie, tired of feeling as if she had been led around by the lawyers and executives surrounding her, was determined to take a leading role. "If we're going to protect these people, shouldn't we ask them how they want to be protected?" she asked herself. On June 7, the Thursday after she and her cousins had sat down with Murdoch, she spoke to Brauchli on the phone. Leslie had gotten a copy of the editorial agreement the Bancrofts were considering from Elefante and ran Brauchli through it. It didn't bear any resemblance to the agreement Elefante had given Rich Zannino, Brauchli told her. At that time, the flurry of potential agreements traveling among Elefante, Zannino, and others was almost comical. All of them felt they could come up with a structure that would keep Murdoch at bay. Leslie wanted to know if it was possible to give the editor of the Journal veto power over how the Journal brand would be used. She didn't trust Murdoch, she told Brauchli. He hadn't done much to win her over, and what charm he attempted, she found false. Brauchli told her Murdoch was like an escape artist. "We're all trying to put Murdoch in a straitjacket, wrap him in chains, put him inside a lead box, padlock it shut, and drop it into the East River," Brauchli said. "And five minutes later he will be standing on the bank, smiling."

  While the Bancrofts worked and reworked the editorial agreement during the month of June, Murdoch waited. He became frustrated with the prolonged time frame. "The final approval is in the next two, three weeks' time or not at all," he told Reuters in late June during a trip to Warsaw. "Everything is done. We are just waiting for a final approval of the Bancroft family." He made the pronouncement just as due diligence was beginning on the deal, a sign of how little the business results of Dow Jones—good or bad—were likely to sway his resolve to own the company.

  Almost daily, advisers for the Bancrofts and Dow Jones sent (hopeful) signals that the family was about to send their revised version of the editorial agreement to News Corporation. And every day, the agreement stayed mired in the back-and-forth among Leslie Hill, Elefante, Brauchli, Crovitz, Stuart Karle, the Journal's general counsel, and any number of consulting players who were brought in to weigh in. Dow Jones's chairman, Peter McPherson, had started looking for individuals who might people the editorial board. He was consulting Peter Kann. Elefante was busy acting as the intermediary between Zannino and the family board members. He was talking to Jimmy Lee, News Corporation's banker, who would call him daily to check on the family's progress.

  Three weeks after they met with Murdoch that rainy June afternoon, the family just gave up. Exhausted from the to-ing and fro-ing over the structure of the editorial independence agreement, the Bancroft directors handed their negotiating power over to Dow Jones's board. While they had once been set on maintaining control over the discussions with Murdoch, their own internal weaknesses had only grown since they sat down with the aging mogul. After 105 years of ownership, the Bancroft stewardship of Dow Jones was over. All that remained was the
signing of the papers.

  It took just three days for the Dow Jones board, eager to see these proceedings come to a close, to send the agreement to News Corporation.

  Marty Lipton, the Bancroft family's lawyer, had been telling the Murdoch camp for weeks that the proposal was forthcoming. Finally, at 3:00 p.m. on Friday, June 29, Rupert Murdoch received the call from Rich Zannino. "We're sending over the editorial independence proposal," he said, his voice relaxed and easy. "I think you're going to be happy with it." Murdoch alerted his entourage, who gathered for the momentous event. The day's proceedings were lent an air of siege, thanks to a burst pipe on the tenth floor that had flooded the three floors below. On Murdoch's eighth floor, dehumidifiers had been hum ming and roaring for three weeks, and executives decamped to drier offices to escape the growing scent of damp and mold. The executives gathered around Murdoch—general counsel Lon Jacobs, corporate communications executive vice president Gary Ginsberg, and deputy CFO John Nallen—were drawn into the drama of the moment.