James Murdoch’s re-appointment as Sky chairman raises concerns

With broadcaster Sky’s AGM taking place on 13th October investors have a chance to show their concern about the re-appointment of James Murdoch as chairman of the company.

Murdoch has previously been chief executive and chairman at Sky. He stepped down as non-executive chairman in the 2012 financial year but continued as a non-executive director at Sky. There are two principal concerns about Murdoch – first he is not independent because he is chief executive of 21st Century Fox, which owns 39% of  Sky’s shares – and secondly because of the criticisms made of him in the light of the phone hacking scandal when he was in charge at News International and its subsidiary News Group Newspapers (NGN) – now re-branded as News UK part of the News Corporation group run by the Murdoch family – which was the owner of the defunct, News of the World. He would also fail an independence test based on his tenure as he has now served on the board since 2003.

In 2012, following the phone hacking scandal, OFCOM carried out an investigation “to consider whether Sky was fit and proper to continue to hold its broadcast licences.” Although a decision was made that the broadcaster could continue to hold its licence the inquiry highlighted a number of failures by Murdoch which could lead you to question his suitability to now become the chairman at Sky.

OFCOM’s report on its decision stated that “Ofcom considers on the basis of the evidence available to date and for the reasons set out in this decision that James Murdoch’s conduct in relation to events at NGN repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman.”

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Nicholas Ferguson was appointed as chairman in 2012 having served as the company’s lead independent director and deputy chairman – and at the time, he stated that he intended to stay on for sufficient time to ensure the necessary continuity of the board. The company has reported that upon Ferguson announcing his retirement James Murdoch advised Martin Gilbert that he would like to apply for the chairman position and he was then excluded from playing any part in discussions on chairman succession which followed. The company said that the independent directors agreed that James Murdoch was a strong candidate to succeed Nick Ferguson with unique strengths, who had successfully chaired the company in the past. The appointment was based on his experienced and the continuity and stability he provided, the company said. Sky admits the appointment does not comply with the UK’s corporate governance code.

In its pre-meeting analysis Manifest commented that, “Shareholders may feel disappointed to note that the board make no suggestion as to whether any potential candidates other than Murdoch were put forward for the position of chairman. Given that Ferguson had announced his intention to retain the position as board Chairman only as long as needed to ensure board continuity, it could be construed that the Board would have had ample time to undertake a proper and thorough succession process for his replacement.”

Major institutional investor Royal London Asset Management is among those that expressed its disapproval at the appointment which it said is not in the interests of the minority shareholders at the company.

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