The two big stories of the past week have been the budget negotiations between the President and Congress and, amazingly enough, a scandal at a British tabloid all but unknown to most Americans, News of the World.
By now most Americans know the top line facts about the News of the World fiasco. The paper is owned by Rupert Murdoch’s Newscorp. The paper was (Murdoch shut it down, effective after yesterday’s edition) the archetypal London tabloid. It carried a lot of celebrity gossip, hounded Royals to the point that surely made them yearn for medieval powers of retribution if only for an hour, and sported screaming headlines. Its former editors went on to positions of power both inside their corporation and in the British government. The scandal is over revelations that investigators for the paper hacked not just into Royals’ phones but those of a murdered child and victims of the 9/11 attacks. Everyone in the UK who has a score to settle with Murdoch – it’s a long, long list – is jumping with glee and doing all they can to stick in another knife.
So here is the question I ask: If you were Rupert Murdoch, what would you do? He fumbled his first move. He appointed to investigate the scandal the paper’s former editor, who later became the senior Newscorp executive in the U.K. He has pulled back from that error now. But the second move – closing the paper – looked like what you would do if you had no better ideas: take away the offending brand, if only to stop reminding the public of the story.
The stakes have become immense, and could get bigger. Murdoch could lose his bid to take full ownership of British Sky Broadcasting, a major strategic move for his company. Some are saying that criminal liability over the hacking reaches into his inner circle. Some are surely hoping that the liability goes to the very top.
My advice? Look at how Ronald Reagan handled Iran-Contra, perhaps the best management of a major scandal in our lifetimes. I have written before that the first task for a CEO in a crisis is to have actions he initiates become the standard of truth. Iran-Contra is the best example on record of how to do that under extreme circumstances.
The Contra part of the story had clearly caught Reagan unawares. He had known of and directed negotiations with Iran. But he had not approved or even been told of the use of funds from the sale of weapons to Iran to finance the anti-communist Nicaraguan freedom fighters. Briefed by a compromised staff, he made statements at an early press conference that were revealed to be false almost as soon as the cameras cut to outside commentary.
From the start, Reagan realized he had to go beyond the White House staff both for information and to regain control of events. As Watergate had demonstrated, anything that even looked like a cover-up would deepen the crisis. He made two moves that changed the game and ultimately allowed his presidency to proceed to its triumphant conclusion.
The first came as soon as Reagan had a sense that something was amiss. He appointed Attorney General Edwin Meese to conduct the internal investigation. The second came after the disastrous news conference with the creation of the Tower Commission. Here is what these actions should tell Rupert Murdoch.
Edwin Meese was Reagan’s longest-standing official confidant, having served as his chief of staff in Sacramento and counselor to the President in the first Reagan presidential term. While controversial in Washington, his honesty was unquestioned. He knew the ins and outs of the national security process, but was not directly involved with the staff of the National Security Council. And once becoming attorney general, he was outside of the White House.
In other words, the internal investigation was headed by someone who was informed, trusted and independent. Meese’s report was so thorough that Reagan was able to say from then on that nothing new was learned from any quarter beyond what the attorney general initially discovered.
Where would Murdoch find his Meese? Not in his British inner circle. He should look to his most respected journalistic holdings outside the U.K. The staff of the U.S.-based Wall Street Journal would be one such place, though there may be others. He should look for a widely known and respected figure who has had management as well as reporting experience — someone like a Dan Henninger (deputy editorial page editor of the Journal), a William McGurn (a columnist who also has management responsibilities) or, most likely, a Gordon Crovitz (a columnist who ran much of the Dow Jones Asian operations before becoming the Journal’s publisher and creating much of its successful online strategy, all prior to Murdoch’s taking over and putting in his own team). Run by an insider who is also an outsider, a Crovitz-style investigation would carry credibility in all quarters.
The equivalent of the Tower Commission would be an independent group from outside the company who could review the journalistic practices of Murdoch’s other UK holdings. Murdoch’s other properties, particularly his other tabloid, The Sun, may harbor surprises. Better that a well-regarded group of Murdoch appointees find them and suggest reforms than that the story of one out-of-control paper become the story of an out-of-control empire. Also, while the commission was working, Murdoch could defer answering questions, saying he was waiting for the results, buying time to determine what to do once the results were in.
Both the internal investigation and the independent commission would have to move quickly. The British and global media are hot on this story. But Murdoch needs to take initiative. Ronald Reagan should be his model for how to do it.