* Murdoch says does not want hacking scandal to damage BSkyB
* Decision ahead of crucial parliamentary report
* Investors welcome move
By Kate Holton and Georgina Prodhan
LONDON, April 3 James Murdoch resigned as
chairman of BSkyB on Tuesday to prevent his links to a
tabloid phone-hacking scandal from undermining the pay TV group,
which has so far escaped the worst of the damage convulsing its
controlling shareholder News Corp.
In a bitter blow to Murdoch, until last year seen as heir
apparent to his father Rupert's media empire, James said he
would step down from the British pay-TV company where he made
his name as a talented executive in his own right.
"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 conflation with events at
a separate organisation," Murdoch said.
The 39-year-old is a previous chairman of News
International, News Corp's British newspaper arm that
published the News of the World tabloid at the heart of the
scandal. News of the World was shut down last year.
"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," Murdoch wrote in a letter to the BSkyB board.
The youngest son of Rupert had long held off the demands for
him to step down at BSkyB, where he earlier overcame allegations
of nepotism to prove his critics wrong with an assured four
years as chief executive (2003 to 2007) and an expansion of the
James Murdoch's conduct now, however, is under scrutiny by
a powerful parliamentary committee that is expected to deliver a
critical report in the coming weeks, as well as by the UK TV
regulator and a judge-led inquiry into press ethics.
The regulator, Ofcom, has been investigating whether BSkyB
is a suitable owner of a broadcast licence given its close
relationship with Murdoch and its 39 percent owner News Corp.
"We continue to gather evidence which may assist us in
assessing whether BSkyB is and remains fit and proper to
continue to hold its broadcast licences," a spokesman said.
Murdoch arrived at News International after the
phone-hacking had died down but has been criticised for failing
to uncover the scale of the wrongdoing.
He will remain on the BSkyB board and will be replaced as
chairman by Nicholas Ferguson, who was previously deputy
chairman and senior non-executive director.
While people close to the company said News Corp remains
"fully committed" to James Murdoch's role with the company, this
latest resignation will raise questions about his future at the
New York-based company he has long been expected to run when his
father Rupert, 81, steps down.
A person familiar with the company summed up James'
reputation in the U.S. as "shaky" and said that in his opinion,
News Corp President Chase Carey should be made CEO.
"Rupert would definitely like to have one of his kids run
the company, but the best-laid plans go awry."
The problem for James Murdoch has been the unpredictability
and the scale of the new information that has come out of
internal and external inquiries into the phone-hacking issues.
When it comes to the investigation "more stuff keeps popping
up" and "I have no idea where this investigation is going to
lead," said the person.
Investors and analysts welcomed James Murdoch's resignation,
although they said they had no complaints about Murdoch's
conduct at BSkyB. Shares in BSkyB were largely unaffected,
closing down 0.8 percent and broadly in line with the FTSE 100
"He's stepped aside to ensure that his personal issues are
no longer issues that could affect BSkyB," said Cato Stonex,
partner at Taube, Hodson and Stonex, a top 15 Sky investor.
"I have said before that if he was no longer considered to
be a fit and proper person, then he could no longer be a
director. This is a sort of halfway house. It is a pity but I
can understand why he has done it."
Thomas Eagan, a U.S.-based analyst with Canaccord Genuity,
said: "I think it makes it easier for News Corp to pass the fit
and proper test and it is a gesture made by Sky and News Corp
for them to keep their licence."
Rupert Murdoch and News Corp Chief Operating Officer Chase
Carey said they were grateful for James's leadership of BSkyB.
"He has played a major role in propelling the company into the
market-leading position it enjoys today," their statement said.
A source close to the company said James would retain his
position on the News Corp board, although other News Corp
executives have suggested he will struggle to take over the top
job, and indicated the focus could turn to his sister Elisabeth.
After long denying that phone-hacking was institutionalised
at the News of the World, the tabloid eventually admitted last
year it had hacked into the phones of a murdered schoolgirl and
British war dead as well as politicians and celebrities in its
search for ever more-sensational front-page stories.
The affair rocked the British newspaper establishment,
politicians and police, as links were exposed between the
powerful Murdoch press, Prime Minister David Cameron and senior
police officers, two of whom resigned.
Cameron was forced to accept the resignation of his
spokesman, ex-News of the World editor Andy Coulson, and was
cornered by opposition leaders newly emboldened to challenge
Rupert Murdoch's long-established influence over the government.
James Murdoch has continued to plead his innocence but the
investigations have hurt his chances of inheriting his father's
media empire, once thought to be his for the taking.
"You've got to see whether he can really seal himself off
from any further criticism," said media commentator Roy
Greenslade, a former Murdoch editor, adding that investigations
by U.S. authorities would be key.
The Federal Bureau of Investigation has been looking into
News Corp practices. To date, its investigation has found no
evidence of phone hacking or other questionable reporting
practices inside the U.S., a law enforcement source said on
Tuesday. The source said an investigation into possible
violations of the U.S. Foreign Corrupt Practices Act, which
prohibits U.S. companies from bribing foreigners, is continuing.
As well as an investigation into phone-hacking, British
police are also probing allegations of bribery and computer
hacking by News International.
Murdoch, who was previously chief executive of BSkyB, was
dealt a heavy blow in November when more than 40 percent of the
company's independent shareholders failed to back his
re-election as chairman.
Since then he has stood down from his board positions at
News Corp's British newspaper arm, as well as from the boards of
other companies, and moved to the United States to take up his
new role running international pay-TV.
Greenslade said the multiple investigations into News
International and its executives, with both James and Rupert
Murdoch expected to be hauled in front of a judge-led inquiry in
the coming weeks, had likely prompted James's departure.
"I do think the Leveson inquiry, Commons Select Committee
report and the Ofcom fit and proper test are a triple whammy. He
really must have known it was better to go sooner rather than
later," he said.
The chairman of the parliamentary select committee, John
Whittingdale, told Reuters that James Murdoch had not seen its
"We have not given wind to anybody of what might be in the
report," he said, adding that the removal of Murdoch as chairman
of BSkyB would allow the successful pay-TV group to distance
itself from the wider problems at News Corp.