Bloomberg News

BSkyB Chairman Murdoch Loses One Third of Independent Vote

November 29, 2011

(Updates with new directors in 18th paragraph.)

Nov. 29 (Bloomberg) -- James Murdoch failed to win the support of almost one third of independent shareholders in his re-election as chairman of British Sky Broadcasting Group Plc amid a phone-hacking scandal.

Murdoch was re-elected with 81.2 percent of votes cast at the company’s annual shareholder meeting in London today. He is also deputy chief operating officer of News Corp., which owns 39 percent of BSkyB, the U.K.’s biggest pay-TV company.

Murdoch, 38, faced investors after two parliamentary hearings into his role at News Corp.’s U.K. unit where tabloid employees hacked into the phones of celebrities and politicians and bribed police. His failure to act promptly triggered a scandal that engulfed News Corp. and thwarted a 7.8 billion- pound ($12.2 billion) bid to buy all of BSkyB.

“James Murdoch will have to work hard in the years to come to overcome this issue,” Sanford C. Bernstein analyst Claudio Aspesi said via phone. At the shareholder meeting last year, Murdoch was re-elected with 98.2 percent of the vote.

Of almost 2,500 director elections at companies in the U.K.’s FTSE 350 Index this year, only 1 percent of executives were opposed by 15 percent or more of shareholders, according to research compiled by investment adviser PIRC.

‘Murdoch Mafia’

Outside the venue of BSkyB’s shareholders meeting in central London, a small group of protesters waved banners referring to the “Murdoch mafia.”

Tom Watson, a Labour Party member who has led Parliament’s inquiry into phone hacking, said this month that Murdoch “must be the first mafia boss in history who didn’t know he was running a criminal enterprise.”

CCLA Investment Management Ltd. said today James Murdoch shouldn’t be chairman because of his News Corp. role.

“Can he genuinely be independent when actually he is an employee of News Corporation?” James Bevan, who oversees $10 billion as CCLA chief investment officer, said on Bloomberg Television’s “On the Move” with Francine Lacqua.

PIRC said on Nov. 15 that it does not support the appointment of a chairman linked to the controlling shareholder and that his involvement in the hacking inquiry raises concerns over whether he is fit to fulfill his role.

Opposition

Murdoch’s re-election was also opposed by New York-based proxy advisory firm Glass Lewis & Co., which said his “powerful position” at News Corp. compromised his ability to act in BSkyB’s interest. Franklin Resources Mutual Series, which owns about 3 percent of BSkyB according to Bloomberg data, said in October that Murdoch should step down as chairman.

BSkyB’s board backed James Murdoch on Nov. 11 and the company’s senior independent director Nicholas Ferguson said that Murdoch’s handling of the scandal at parent company News Corp. had “no effect on sales, customers or suppliers over the last five months.”

Speaking at today’s meeting, Guy Jubb, head of corporate governance at Standard Life Investments, which voted against Murdoch’s re-election, said he is “deeply disappointed that not one of the independent directors, not a single one, shares our belief.”

Ferguson today reiterated his support for Murdoch, saying “we have seen nothing that makes us question his honesty. We believe he’s telling the truth.”

Grilling

Testifying for a second time before a U.K. parliamentary committee, Murdoch this month blamed executives at the News Corp.’s News of the World tabloid for not telling him in 2008 that intercepting the phones of celebrities and politicians went beyond a single reporter.

Murdoch’s second testimony came after News Corp. investors lodged a protest vote at the annual meeting against Rupert Murdoch, the company’s chairman and CEO, and his sons. James received the highest percentage of votes against his election to the board, at 35 percent.

James Murdoch joined News Corp.’s U.K. publishing unit News International as chairman in December 2007, after the hacking took place. Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

BSkyB today also appointed Martin Gilbert and Matthieu Pigasse as independent directors to its board to replace retiring members David Evans and Allan Leighton.

BSkyB dropped 0.1 percent to 745 pence in London trading. The stock had fallen 12 percent from this year’s high of 850 pence before the Guardian reported July 4 that News Corp.’s News of the World employees intercepted murder victim Milly Dowler’s voice mails in 2002.

“The fundamentals at BSkyB remain pretty strong,” Patrick Yau, a media analyst at Peel Hunt, said in an interview. “What’s going on at board level and elsewhere across the News Corp. empire, that’s another issue.”

--Editors: Simon Thiel, Robert Valpuesta.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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