News Corp. (Nasdaq: NWS) (Nasdaq: NWSA) CEO Rupert Murdoch is living in a fantasy world that puts anything that Walt Disney ever dreamed up to shame. It's time he did the decent thing and resigned.

Defending his ground
In an interview with The Wall Street Journal -- which, you'll recall, he owns -- the Australian-born media tycoon gave his beleaguered media empire kudos for how it has handled the phone hacking crisis that has shaken it to the core. The parent company of Fox News Channel, the New York Post, and 20th Century Fox is doing "extremely well in every way possible," and making "minor mistakes," according to the Journal. The 80-year-old Murdoch also rejected criticism that his son James, also a top News Corp. executive, had failed to act quickly enough as the News of the World scandal threatened to engulf the media giant.

Murdoch and some shareholders seem convinced the scandal will blow over -- eventually. Unfortunately, there is no way to determine the timetable for assessing when the public will find something else to obsess over. For now, the scandal is blowing through News Corp. like a hurricane, leaving a path of destruction in its wake. Shareholders are suffering the most.

Going, going, gone
Shares of the New York-based media conglomerate are in a free fall, plunging nearly 12% since the start of the month, erasing billions of market valuation. At the same time, Time Warner (NYSE: TWX) dropped 2.1%, Viacom (NYSE: VIA-B) fell 1%, and Walt Disney (NYSE: DIS) was off less than 1%. Of course, it's an overreaction, based solely on the numbers. News Corp.'s newspapers are a tiny business and an underperformer to boot. The BSkyB deal wasn't going make or break News Corp., either. But this story of a newspaper spying on the private lives of celebrities and ordinary people has touched a nerve that is difficult to quantify on a spreadsheet. Suffice it to say, anyone who thinks this will blow over anytime soon is either mad or deluded.

The Murdochs are making more enemies by the hour. They first blew off a request to appear before a parliamentary committee, only deciding to go when it was clear they would be forced to attend.  Murdoch backed his protege Rebekah Brooks, the executive in charge of the British papers, even though few believed her claims that she knew nothing about the hacking. She finally had the good sense to resign.  Another top Murdoch lieutenant, Les Hinton, the CEO of Dow Jones who preceded Brooks, resigned as well.

Now, not surprisingly, comes word that the FBI is investigating the scandal amid reports that News Corp. employees hacked the mobile phones of 9/11 victims. Experts have said that the conglomerate may face prosecution under the Foreign Corrupt Practices Act, which makes it illegal for U.S. companies to pay bribes as they do business overseas.

Enough is enough
The company's board has clearly let the Murdochs to do as they pleased for years. News Corp. and its shareholders have to contemplate a world where they would no longer be a part of the company, remote as that might be.

Murdoch has been criticized for years for his lack of succession planning. That fact is shown in the company's latest proxy. Murdoch's total compensation was $22.7 million in 2010. Should he be forced out of the company, he would be eligible for a payment of $1.567 million. His son James, however, would be eligible to receive $32.2 million while Fox News head Roger Ailes would be able to receive $31.568 million.

The tycoon, whose wealth is estimated by Forbes magazine at $6.2 billion, clearly does not need the money. He is more motivated by a desire for influence than anything else.

For shareholders, that's bad news, because it indicates he is thinking only of himself. Just another reason to avoid this stock.

Jonathan Berr does not hold any shares of the companies mentioned above. Motley Fool newsletter services have recommended buying shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.