Business

BSkyB backs James Murdoch despite fresh investor doubts

James Murdoch
Image caption James Murdoch is deputy chief operating officer of News Corporation and chairman of News International

BSkyB deputy chairman Nick Ferguson has written a letter to investors explaining why James Murdoch should remain chairman of the broadcaster.

The letter says News International chairman Mr Murdoch has done a "first class job" and is respected and trusted by senior management.

However, the Association of British Insurers said on Friday that some investors had governance worries.

The ABI issued an Amber Top alert, which warns investors about concerns.

The letter from Mr Ferguson says that the News of the World (NoW) phone-hacking scandal has had no negative effect on the company.

It comes after Mr Murdoch denied misleading MPs over the issue.

On Thursday, he appeared for the second time in front of the Commons culture committee to answer questions about phone hacking.

He again insisted he did not know until recently that the illegal practice went beyond a lone reporter at the now-defunct NoW.

But former News International lawyer Tom Crone later accused Mr Murdoch of giving "disingenuous" evidence. Mr Crone says he made Mr Murdoch aware of the paper's wider involvement in hacking three years ago.

During the hearing, Tom Watson - the MP who has led the pursuit of News International over the scandal - suggested its UK arm operated like the Mafia, adopting the "omerta" code of silence. Mr Murdoch dismissed this as "offensive and not true".

Unanimous decision

In his letter, Mr Ferguson says the independent directors of BSkyB have agreed unanimously that Mr Murdoch should continue as non-executive chairman.

Investors are set to vote on the matter at the company's annual general meeting on 29 November.

The letter says the directors agree Mr Murdoch is a "visibly a good chairman with good well-structured and open meetings".

The letter, a copy of which was sent to Reuters news agency, continues: "He is respected and trusted by the CEO and other senior management; and he has excellent strategic insights."

The letter raises the question of Mr Murdoch's integrity, about which Mr Ferguson concedes there has been "a great deal of speculation" - but he dismisses this, saying the board of directors will deal only with "substance".

No negative effect

"We have known James for some eight years, and during that time he has always acted with integrity in the eyes of both the board and the senior management. If this was to change, clearly the independent directors would re-evaluate the position," the letter says.

Mr Ferguson also considers whether there has been any negative reputational effect on the company as a result of the NoW scandal.

The letter states: "We have seen no effect on sales, customers or suppliers over the last five months.

"We have seen no effect on the share price.... Finally, we have seen no negative effect internally."

ABI concerns

Doubts about Mr Murdoch's role at BSkyB were raised in July in the wake of the phone-hacking scandal and after the evidence he gave during his first appearance before MPs on the scandal was challenged.

On Friday, the ABI flagged that its members had concerns about corporate governance and Mr Murdoch's independence on the BSkyB board, given his links to News Corporation - the biggest shareholder in the pay-broadcaster.

ABI spokeswoman Linsey White said there were also concerns about BSkyB board remuneration and the role of the non-executive directors.

Amber is one of 3 colour coded warnings from the ABI to shareholders, and advises them to think seriously about how they vote at a company's annual meeting.

Red which is a warning of a serious breach of policy or governance. Blue means there are no issues of likely concern.

News Corporation's bid to take full control of BSkyB, of which it already owns 39%, collapsed following the hacking scandal, which saw the NoW shut down in July.

It followed an admission by NoW bosses that the papers' journalists had been illegally accessing the voicemail messages of prominent people to find exclusive stories.

It later emerged the practice was more widespread than had been initially thought, and revelations that the tabloid had targeted the mobile phone of murdered schoolgirl Milly Dowler sparked widespread revulsion.

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