For Murdoch, in a corporate sense at least, the outcome of this meeting represented a near-death experience. News Corp's financially challenged newspaper assets form the basis of the (new) News Corp. Credit:Phil Carrick Thus Rupert Murdoch has been put on notice that his family's control of News Corporation – the company that owns his international stable of newspapers, Australian pay television, book publishing and digital directory assets – is vulnerable. The Sun king's dictatorship is being threatened by several of the company's large shareholders, who have been behind this push to force democracy on the company. This is not the first time Murdoch, the executive chairman of News Corp, has been challenged by shareholder detractors. But it is the closest shave so far. A massive 47.4 per cent of votes cast supported a proposal to eliminate the company's dual-class share structure which, had it passed, would have diluted his voting interest from almost 40 per cent to a mere 14 per cent.

Murdoch has become a master of defence tactics – having warded off fellow media mogul John Malone in 2004. At that time, News Corp created a poison pill bulwark to make itself near impregnable from takeover. On the sidelines: Saudi billionaire Prince Alwaleed bin Talal. Credit:Bloomberg But now News Corp's lacklustre performance, and its new corporate structure, have made it a far bigger target. Last year the Murdoch media empire was split in two. The glossy growth assets in cable, television and film were packaged up into one company – 21st Century Fox. The more financially challenged newspaper assets, including those in Australia which compete with Fairfax Media titles, formed the basis of the sister company – the (new) News Corp. Size and performance-wise News Corp became the runt of the litter, despite retaining a few gems including a stake in Foxtel, the online real estate assets, book publishing and the education unit.

The company's recent first-quarter results paint the picture clearly. Earnings before interest, tax, depreciation and amortisation from the news and information services division fell 21 per cent while digital real estates improved 30 per cent and cable network programming (Foxtel and Fox Sports) grew 10 per cent. The potential that sits inside News Corp to either rationalise the underperforming assets or jettison them altogether creates a tempting arbitrage opportunity for activist shareholders. A report last week from investment bank Credit Suisse highlighted News Corp as one of handful of Australian companies that could be targeted by activist shareholders looking to extract the hidden value. The report concludes there is a $1.7 billion to be had if News Corp sold its Australian and UK newspapers and closed down the online education business. But this won't happen while Murdoch holds the reins. And the clock has already started ticking on next year's meeting. One shareholder has already stated there will be another attempt to alter the company's undemocratic share structure – the key to unlocking Murdoch's control.

Murdoch must now realise he is not bulletproof and has only a year to reinforce his corporate armoury.

The most intriguing aspect to the Murdoch v shareholders battle was the absence of voting support from Murdoch's biggest ally – Prince Alwaleed bin Talal.. Why the Prince failed to vote his 6.6 per cent stake in News Corp remains a mystery. A statement this week from Alwaleed said "We never vote against our partner Mr Murdoch". But it said nothing about declining to vote at all. For many years the Saudi prince, whose worth has been estimated at US$27 billion, has been Murdoch's fail-safe supporter. It's a relationship fortified by Murdoch's 20 per cent stake in Alwaleed's own media company, Rotana.

But eight days ago when his votes were most needed, Alwaleed, who has been variously described as a calorie-counting cellphone junkie, was missing in action. News Corporation, like its sister group, 21st Century Fox, has a gerrymander voting structure. Two classes of shares exist – one with voting rights and the other with very limited voting rights. Murdoch controls almost 40 per cent of the super-voting stock while Alwaleed's 6.6 per cent is also held in these more powerful securities. If all of the News Corp shares were to be treated equally, Murdoch would speak for only 14 per cent. It's nowhere near enough to cement control. Clearly Murdoch's non-aligned shareholders have lost patience. It only took one aggrieved shareholder – in this case philanthropic group the Nathan Cummings Foundation – to place a proposal on the agenda that could let the democracy genie out of the bottle.

The proposal called for the abolition of the company's dual class capital structure – in other words all shares would be the same: one share, one vote. Had the Nathan Cummings Foundation, whose mission "is rooted in the Jewish tradition and committed to democratic values and social justice", been a lone voice it would have been easily dismissed. Instead the proposal was greeted with a wave of support. Chief among those who appear to have voted against Murdoch was News Corp's second largest shareholder, Southeastern Asset Management, which until very recently had a 12.7 per cent stake in News Corp and runs $US43 billion of funds under management. Southeastern is a media-shy organisation but one that swings a mean punch as an activist shareholder. It successfully teamed up with legendary investor Carl Icahn last year to torpedo Michael Dell's privatisation of Dell. It was clearly gunning for News Corp.

But its representatives were not among the half-dozen investors who weathered the bizarre security-based logistical circus to attend the meeting. And in a twist, it was confirmed on Friday that Southeastern sold the bulk of its stake in News Corp late in the week. An intriguing question is who has bought the shares and where they will stand next year when the resolution is put forward again. Murdoch is unlikely to have bought any more shares, due to a poison pill mechanism. Speaking to the proposal to abolish the dual class structure last week was left to the chief financial officer of the Nathan Cummings Foundation, Bill Dempsey, who politely and dispassionately delivered a withering account of the pitfalls of the voting gerrymander. "Despite owning only 14 per cent of outstanding shares, Mr Murdoch controls 40 per cent of the voting power," he said. "This kind of governance structure may be exactly what we would expect in, say, Cuba or North Korea but is at odds with good governance practices here. That's why we urge our company's board to restore our company's reputation by allowing normal corporate governance reforms."

Dempsey went on to say that dual-class voting structures, like that at News Corp, often damaged corporate performance and "insulated" management and the board from shareholder concerns. Dempsey's comments were supported by Australian veteran shareholder activist Stephen Mayne who has a long history of metaphorically shirtfronting Murdoch at annual meetings. Mayne had managed to be among the half-dozen shareholders at the meeting after crowdsourcing the $4000 for his travel funding. While he was on hand to listen to the comments of Dempsey, in real time he was not aware of how profound the meeting was as the company didn't post the proxy voting results for several hours after the clutch of shareholders had reboarded the bus back to the carpark. By the time the vote numbers had been placed on the Securities Exchange Commission site the deadline for US newspapers had passed. Media stage-management aside, Murdoch now has a problem that goes well beyond image control.

He needs to bolster his control of the votes in News Corp. The first and most obvious option is to re-enlist the support of his friend the Saudi prince. There is no way to determine whether Alwaleed's absence in the voting line-up was an oversight or a harbinger of things to come. But if he is a lost cause, then Murdoch needs to use his own resources to defend his position. The most logical solution is for Murdoch to simply buy more stock. There are two wrinkles in this plan. The first is that Murdoch's ready cash is not necessarily all that plentiful. His companies do not pay hefty dividends, and he has paid the price of divorcing a couple of wives.

But the more important impediment is that thanks to Murdoch's defensive corporate tactics News Corp has in place a poison pill that (while designed to keep aggressive outsider predators at bay) restricts Murdoch from being able to buy more of his own stock. He has thus queered his own pitch. To dissolve the poison pill provisions would leave the company exposed to other takeover aggressors. Option two would be to undertake a share buyback. The option to restrict a buyback to just the voting shares is somewhat fraught, albeit more capital efficient. Would shareholders who own non-voting shares mount a legal class action based on the fact that they would not be included? Quite possibly. If a buyback was expanded to cover all shares it would require an outlay of close to a billion dollars. And how could this profligacy be justified when its aim would be to cement Murdoch's control?

News Corp cash reserves could be more economically spent on buying growth assets, such as the US online real estate directory business, Move Inc, which it recently acquired for $US950 million . And as shell-shocked as the News Corp camp must be from the shareholder attacks, there is one thing that would frighten Murdoch more. There is always the possibility that activist shareholders are staging a dry run – practising for the really big prize: 21st Century Fox.