By PAUL SONNE
LONDON— James Murdoch stepped down as chairman of U.K. pay-TV company British Sky Broadcasting Group BSY.LN -0.81% PLC, as News Corp. NWSA +0.10% aimed to shield the prized asset from a scandal over illegal voice-mail interception and alleged bribery of police by the parent's British newspaper stable.
News Corp. Deputy Chief Operating Officer James Murdoch is stepping down as chairman of U.K. pay-TV giant British Sky Broadcasting Group, Bruce Orwall reports on the Markets Hub. Photo: Getty Images.
Mr. Murdoch, who served as chief executive of BSkyB from 2003 to 2007 before becoming News Corp.'s head of Europe and Asia, ceded the chairmanship of the British broadcaster to fellow board member Nicholas Ferguson on Tuesday. Mr. Murdoch will maintain a seat on the board and remain deputy chief operating officer of News Corp., which owns 39.1% of BSkyB.
Bloomberg News
James Murdoch, deputy chief operating officer of News Corp.
The resignation was the latest in a string of moves that have steadily eroded the turf and responsibility of Mr. Murdoch. In February he relinquished oversight of the U.K. newspaper unit, News International, which has been at the center of the storm over reporting tactics.
Until last year, he was widely seen as the likely successor to his 81-year-old father, News Corp. CEO Rupert Murdoch. However, James Murdoch's future has been clouded by his handling of the phone-hacking affair, a job he took over in 2007 when he moved to News Corp. from BSkyB, inheriting the task of managing the scandal while it was at a lull.
The scandal has risked contaminating News Corp.'s lucrative TV operation, possibly endangering BSkyB's broadcasting license.
Media Scion in Spotlight
See a timeline of key dates in James Murdoch's career.
"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," James Murdoch said in a prepared statement. "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 connection with events at a separate organization."
The success of the U.K. pay-TV operator was at the heart of the argument that James Murdoch would be a worthy steward for News Corp. in the future. The 39-year-old Mr. Murdoch helped build BSkyB into a dominant force in U.K. broadcasting.
By moving him out as BSkyB's chairman but leaving him on the board, the Murdochs and News Corp. are attempting to navigate a tricky course. The company is trying to remove Mr. Murdoch as a flash point for criticism of BSkyB, the biggest pay-TV company in the U.K., with more than 10 million subscribers. But they also are seeking to preserve the younger his authority as deputy operating chief, the heart of which centers on News Corp.'s international TV operations.
News Corp. owns The Wall Street Journal.
Critics called Mr. Murdoch's resignation inevitable but described it as too little, too late.
Alan MacDougall, managing director of Pensions & Investment Research Consultants Ltd., a U.K. shareholder lobbying group, said Mr. Murdoch should leave the board entirely. "In reality the company should have appointed an independent chair last summer, to create a clear separation between the management of the business and the scandal at News Corp.," he said in a prepared statement. "Failure to act more quickly has resulted in self-inflicted reputational damage."
The phone-hacking saga has brought the closure of the company's 168-year-old News of the World tabloid, three criminal investigations in Britain, the resignation of top executives and the July collapse of News Corp.'s multibillion-dollar bid to take full control of BSkyB.
Within the next few weeks, a U.K. parliamentary committee is expected to release a final report on News Corp.'s handling of the phone-hacking affair. One issue in the report is expected to be whether the company, including James Murdoch, misled lawmakers about the phone-hacking problem in years past. In one high-profile dust-up, he has been battling with two former underlings over whether in 2008 he knew the full implications of authorizing a large, secret settlement in an early phone-hacking lawsuit.
The U.K. communications regulator, Ofcom, has begun keeping close tabs on developments to evaluate whether News Corp. is a "fit and proper" owner for BSkyB. The regulator can revoke a broadcasting license if an owner doesn't meet the loosely defined classification, which takes into account criminality, the propriety of directors and other behavior. Ofcom is unlikely to act before the conclusion of the criminal investigations.
British police first made arrests related to voice-mail interception at the tabloid News of the World in 2006. The long-simmering issue became a full-blown scandal last July amid revelations that the paper hacked into the voice-mail box of a murdered British girl. Since then, police have arrested dozens of current and former News International employees on suspicion of phone hacking, bribing police and conspiracy to pervert the course of justice. No one has been charged. News Corp. has apologized for the wrongdoing and settled over 50 lawsuits related to phone hacking. The company says it is cooperating with the police probes.
Rupert Murdoch and News Corp. Chief Operating Officer Chase Carey said Tuesday that they were grateful for James Murdoch's 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," the pair said in a written statement.
In March 2011, two months after British police reopened a dormant probe into phone hacking at the News of the World, News Corp. announced that the younger Mr. Murdoch would move to New York to become News Corp.'s deputy operating chief. At the time, the company said he would continue to oversee operations in Europe and Asia, but he stopped overseeing News International in February.
The appointment to deputy operating chief was seen as a promotion at the time. But people familiar with the matter later described it as an attempt to rein in the younger Mr. Murdoch, who increasingly was running his own show in London, leading to tensions with News Corp.'s upper management in New York.
This year he has left the board of pharmaceutical company GlaxoSmithKline GSK -0.26% PLC and the auction house Sotheby's, BID -0.80% the only corporate boards on which he had been serving, besides those of News Corp. and BSkyB. As a consequence of giving up oversight of News International, he has left several boards related to the company's U.K. newspapers.
—Dana Cimilluca
contributed to this article.Write to Paul Sonne at paul.sonne@wsj.com
Tuesday, April 3, 2012
James Murdoch to Quit as BSkyB Chairman
via online.wsj.com
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