James Murdoch Steps Down As BSkyB Chairman

By Dan Sabbagh and Dominic Rushe, Guardian UK

03 April 12

Rupert Murdoch's son quits as chairman of UK pay-tv giant to avoid becoming a 'lightning rod' for the phone-hacking scandal.

ames Murdoch, once thought of as corporate heir apparent to his father Rupert, is stepping down as chairman of BSkyB after concluding it would be too damaging to stay on and risk a critical verdict from a British parliamentary inquiry into phone hacking.

The 39-year-old, who has been chief executive and then chairman since 2003, said he was leaving the company "as attention continues to be paid to past events at News International", News Corporation's scandal-hit UK newspaper division.

By stepping down, it will mean that no Murdoch occupies a top position at the satellite broadcaster for the first time in years.

Murdoch's decision to quit at this point has surprised friends, given that only a few weeks earlier he resolved to stay on at Sky, despite relocating to New York and having given up his job as executive chairman of News International.

In a statement, the board of BSkyB, which is controlled by News Corporation through a 39.1% stake, said James Murdoch would continue as a non-executive director. He will be succeeded by Nicholas Ferguson.

James Murdoch, in his letter to the BSkyB board, said: "I have been privileged to serve first as chief executive and then as chairman of this outstanding company and I am proud of what we have achieved over this period.

"As attention continues to be paid to past events at News International, I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this company.

"I am aware that my role as chairman could become a lightning rod for BSkyB and I believe that my resignation will help to ensure that there is no false conflation with events at a separate organisation."

In a statement issued in New York, Rupert Murdoch said: "We are grateful for James Murdoch's successful leadership of BSkyB. He has played a major role in propelling the company into the market-leading position it enjoys today – and in the process has been instrumental in creating substantial value for News Corporation shareholders."

In London, MPs from the culture media and sport select committee are split on how to characterise James Murdoch's performance as executive chairman of News International, in the period after it emerged that phone hacking at the News of the World went deeper than was originally admitted by the company.

That left open the risk that they would deliver a hostile report after Easter, and would leave Murdoch little option but to quit under a cloud. By standing aside now, James Murdoch hopes to draw the sting from any criticism, but it remains the case that members of the committee will try to agree a verdict on his running of News International, which publishes the Sun and the Times.

Murdoch appeared before them twice, once with his father last summer, and on a second time to answer outstanding questions about what he knew and was told at the time he authorised a £425,000 phone-hacking settlement to football boss Gordon Taylor in 2008.

James Murdoch is also under investigation by Ofcom, the communications regulator, which is looking at whether the satellite broadcaster meets the "fit and proper" test in the light of his stewardship of News International. Failing it would mean that Sky could no longer broadcast, although if Murdoch leaves the board of Sky completely, that aspect of the test would become moot.

Ofcom is also looking at News Corporation's relationship with BSkyB. The Murdoch media group controls 39.1% of BSkyB and has long dominated its board. James Murdoch succeeded his father Rupert as chairman in 2007, in a business that was created in the early 1990s when Rupert Murdoch's Sky merged with rival BSkyB to leave News Corporation as the largest single shareholder.

By quitting from the chairmanship of Sky, James Murdoch will be left with a reduced area of responsibilities in his new role in New York with responsibility for News Corp's non-US television interests. His remaining remit leaves him with responsibility for News Corp businesses such as smaller pay-TV businesses in Italy, Sky Italia, and Star in Asia.

Sarah Wilson, chief executive of corporate governance consultancy Manifest, said James Murdoch's resignation as chairman would put an end to the Murdoch family's day-to-day control of BSkyB.

Wilson, who has long campaigned against corporate governance failures at BSkyB, said investors had become "very angry" at the effect the phone-hacking scandal was having on BSkyB's reputation. "Most of the independent shareholders will be happy with the news," she told the Guardian. "Shareholders don't like uncertainty – it is the right thing to do. It's better that he goes rather than be removed at a shareholder meeting."

Harriet Harman, culture spokeswoman for the opposition Labour party, said that Murdoch's resignation should not be a distraction from the "fundamental problem of monopolistic ownership" of media companies in the UK.

She said: "Murdoch owns too many newspapers. Never again must we allow any individual or organisation to acquire such a concentration of power when it comes to media ownership.

"The problems revealed by the Leveson inquiry [into UK press standards] are a result of the absence of a proper complaints system and too great a concentration of media power. It is this combination of impunity and invincibility which lies at the heart of the problem and must be addressed.

"We await the forthcoming reports from Ofcom, the culture media and sport committee and the Leveson inquiry, but it is clear that there is a fundamental problem of monopolistic ownership."

Activist shareholders called on James Murdoch to resign completely from BSkyB and to relinquish his directorship at News Corp. "The ongoing rush of new revelations in the hacking scandal makes it clear that no shareholders at any company can trust James Murdoch to represent their interests and operate scrupulously within the law," said CtW Investment Group research director Richard Clayton.

Christian Brothers Investment Services (CBIS), which allied a massive vote against the Murdochs and several of their appointed directors last year, called for Rupert Murdoch to be replaced with an independent director at News Corp.

Julie Tanner, assistant director at CBIS, said Rupert Murdoch had to take responsibility for News Corp's continuing woes following the hacking scandal at his UK newspapers that has led to dozens of arrests and the closure of the News of the World.

"This is a situation that has to be dealt with from the top. This company has a long history of corporate governance concerns and it is no surprise that it has been unable to deal with this scandal as it has happened," she said.