The Guardian, Jill Treanor, James Robinson, Rupert Neate, Wednesday 13 July 2011
James Murdoch admitted that he authorised out-of-court settlements to victims of phone hacking by the News of the World. Photograph: Warren Allott/AFP/Getty Images |
Concerns are surfacing in the City about James Murdoch's role as chairman of BSkyB, as investors consider the implications of the phone hacking scandal on his position at the satellite broadcaster.
Informal conversations are understood to have taken place among institutional investors – who own BSkyB shares on behalf of pensioners or holders of life insurance policies – about whether Murdoch's position is tenable while the hacking investigations take place. One investor, requesting anonymity, said: "James Murdoch's position is a concern."
Another said investors were trying not to prejudge the ongoing investigations at News of the World, but that investors were monitoring the situation closely.
James Murdoch's role is under scrutiny in the wake of his admission last week that he authorised generous out-of-court settlements to victims of hacking three years ago, but that he "did not have a complete picture when he did so".
Murdoch, who is also chairman and chief executive of News Corp, has yet to confirm whether he will give evidence to MPs on the culture, media and sport select committee on Tuesday, together with his father, Rupert, and Rebekah Brooks, the former Sun editor who is now chief executive of News International, running News Corp's stable of British newspapers.
The media regulator Ofcom is considering whether the Murdochs still meet the "fit and proper person" test for holders of broadcasting licences. Ofcom wrote to the Metropolitan police and two parliamentary select committees on Wednesday to ask for any relevant evidence.
No investors are thought to have expressed their views directly to the company yet. Any approach could be made to BSkyB's senior independent non-executive director, Nicholas Ferguson, who is also deputy chairman.
As News Corp owns 39% of BSkyB, investors believe they would need to gather the support of non-executive directors to have any impact should they decide to press for James Murdoch to go.
An influential body that advises investors on corporate governance issues was more forthright. Alan MacDougall, managing director of PIRC, whose clients are largely pension funds and local authorities, said: "In light of current events it is time for the board to review whether BSkyB and its shareholders would benefit from a new, independent chair. And if shareholders agree it is time for reform, they should say so. This is a good company with good prospects: it should have governance standards to match."
BSkyB is on course to make profits of £1bn a year and is regarded by the City as one of the few media businesses with growth potential. It flourished in the downturn and continued to add subscribers despite sluggish economic growth. Years of investment in new technology including high definition and personal video recorders, have started to pay off, which made it such a compelling prospect for News Corp.
Even though the company is not directly involved in the hacking allegations, Jeremy Darroch, chief executive of BSkyB, was booed at yesterday's annual meeting of Marks & Spencer, where he is a non-executive director.
The structure of the BSkyB board has been a concern for investors for some time. Aviva, Baillie Gifford, L&G and Co-operative Asset Management voted against Murdoch's election as chairman of BSkyB in 2008. He was chief executive between 2003 and 2007. The Co-op said it maintained its opposition to him holding the role.
A BSkyB spokesman said: "We have a very robust governance framework that's worked well for a number of years. There are no changes planned to the existing arrangements".
News Corp said: "People should look at his track record at Sky, they wanted him to stay as chairman, there is no sense that he oversaw or deliberately covered up any wrongdoing at News International."
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