LONDON, July 28 (Reuters) - James Murdoch was unanimously confirmed as chairman by BSkyB's BSY.L board, winning a reprieve from a phone-hacking scandal that threatens to draw him into multiple investigations, two sources briefed on the board meeting told Reuters.
Thursday's meeting of the BSkyB board was its first since the crisis forced News Corp (NWSA.O) to close the News of the World newspaper, drop a $12 billion bid for BSkyB and offer up James and his father Rupert to answer questions in the UK parliament.
Several shareholders had demanded he step down to avoid conflicts of interest, fearing contamination from the scandal that acquired new dimensions earlier this month when it was revealed that a murdered schoolgirl had had her phone hacked.
One of the sources said: "The role of chairman was discussed at some length," and added that the board would be monitoring external developments that might prove relevant to Murdoch's continuing chairmanship.
Murdoch did not oversee operations at the News of the World at the time the hacking occurred but did approve large payoffs to victims after he took charge of News Corp's British newspaper operations.
He was chief executive of BSkyB before moving to News Corp and is widely considered to have done a good job.
On Thursday, a children's charity said the mother of another murdered schoolgirl, who was championed by the News of the World's "Sarah's Law" anti-paedophile campaign, had been told that her own phone may have been targeted. [ID:nL6E7IS1GK]
The Phoenix Foundation, a children's charity that Sara Payne co-founded after her daughter Sarah was killed by a paedophile 11 years ago, said police had found her details on a list seized from an investigator employed by the tabloid.
The anti-paedophile campaign was a pet project of then-editor Rebekah Brooks, who was arrested earlier this month.
ARC OF A CRISIS
The phone-hacking affair is now the subject of three separate investigations in Britain: a criminal police investigation, a parliamentary probe and a judicial inquiry that opened on Thursday.
Murdoch's testimony given in parliament last week has already been called into question by two ex-News of the World executives, who say he was aware of evidence that showed the hacking was not limited to a couple of "rogue" individuals.
The now defunct-tabloid's last editor and its chief lawyer said Murdoch had been mistaken when he told parliament he had not been aware of an email containing evidence of hacking when he approved a large payoff to the victim.
Murdoch said he stood by his statement, while the chairman of the parliamentary committee in charge of questioning the Murdochs has said he will seek further clarification.
Richard Levick, president and CEO of Levick Strategic Communications, who has advised countries and companies on issues including the U.S. prison camp at Guantanamo Bay and the recent Wall Street crash, says the crisis is far from over.
"If you look at the arc of a crisis, their worst days are not yet behind them. It's parallel in many ways to Watergate. Watergate took 18 months to unfold. It appears that this is one of those elongated crises," he told Reuters.
The Murdochs face further questions from a judge-led inquiry ordered by Prime Minister David Cameron in response to the public outcry.
Cameron's own image has been tarnished by his support for his ex-spokesman Andy Coulson, a former News of the World editor who was arrested earlier this month.
Judge Brian Leveson, who prosecuted serial killer Rosemary West in the 1990s, is leading the inquiry into the phone-hacking allegations, media ethics, and the relationship between media organisations, police and politicians.
On Thursday, he urged all parties to consider the public interest, not only their own. He has authority to call any party to give evidence under oath to the inquiry, which is planned to take about a year.
"It may be tempting for a number of people to close ranks and suggest that the problem is or was local to a small group of journalists then operating at the News of the World," he told a news conference in London.
"I would encourage all to take a wider picture of the public good and help me grapple with the length, width and depth of the problem."
Shareholders in News Corp have called for an overhaul of corporate governance as the crisis spreads.
A spokesman for Co-Operative Asset Management, a small investor in both News Corp and BSkyB, said on Thursday: "We believe radical reform is needed at both companies but at News Corp in particular, and indeed in the newspaper industry in the UK to stamp out the kind of illegal and grossly invasive practices that are alleged."
Thursday's BSkyB board meeting in London took place on the eve of the company's quarterly results announcement. The results are expected to continue a strong run for the company, and investors hope a special dividend will also be announced.
The board had said for the last year that it would not be appropriate to consider such a measure while it was a takeover target, and many brokers are stoking hopes of a payout now.
Analyst Ian Whittaker of Liberum Capital cautioned, however, that the moment may be too sensitive politically.
"Given the fast-moving events of the past two weeks, management may feel now is not the right time to announce a special dividend, especially given the potential complications of returning a significant level of cash back to its 39 percent shareholder News Corp," he said.
"Historically, BSkyB management have emphasised investment over a return of cash back."