Rupert Murdoch is preparing to step down as chief executive officer of 21st Century Fox Inc. and hand the title to his son James, according to a person familiar with the matter, confirming a long-expected generational succession.
Murdoch, the company’s 84-year-old founder, will remain chairman, said the person, who asked not to be identified because the deliberations aren’t public. The changes will include the appointment of Murdoch’s older son, 43-year-old Lachlan, to the role of co-executive chairman.
“The matter of succession is on the agenda at our upcoming, regularly scheduled board meeting,” Fox said in a statement Thursday, without elaborating.
The Murdochs control Fox, which owns film, cable and broadcast businesses, through a family trust, as well as News Corp., owner of the Wall Street Journal. A phone-hacking scandal at their now-defunct News of the World newspaper four years ago led to questions in the U.K. about their fitness to lead a media empire and forced the Murdochs to abandon efforts to gain full control of Sky Plc, the European pay-TV provider.
“It’s a logical succession,” Mario Gabelli, chairman and founder of Gamco Investors Inc., said in an interview in New York. The Murdochs “control the vote. This is expected.”
The elder Murdoch will still drive strategy at Fox, according to the person. James, 42, is currently the co-chief operating officer with Chase Carey, who is expected to stay on in an advisory role, the person said. The board meeting will take place in the next few weeks, the person said.
“Chase Carey has done a fantastic job,” said Gabelli, a longtime media investor whose company owns both voting and nonvoting shares of Fox. “I don’t think very much changes in terms of allocating of capital.”
Fox closed little changed at $32.90 in New York. The Class A nonvoting shares have declined 14 percent this year.
CNBC reported the changes in leadership earlier Thursday.
Succession in family companies raises questions of corporate governance, according to Doug Creutz, a Cowen & Co. analyst who has a neutral rating on Fox shares. Best practices would involve a search by the board to find the best candidate for the position, he wrote in a note Thursday.
“James does have extensive operational experience, and could turn out to be a good or even great CEO who is more sensitive to shareholder concerns than Rupert was,” Creutz wrote. “However, the bigger issue is the appearance that he is inheriting the role largely by dint of his last name rather than exclusively due to his qualifications.”
Fox and News Corp., operated separately since billionaire Murdoch split his media empire in 2013, were embroiled in a scandal over hacked voice-mail accounts by journalists at the News of the World newspaper.
The 2011 scandal led Murdoch to close the tabloid, and both he and James were called to testify before a parliamentary committee in the U.K. News Corp., which at the time owned both the publishing and entertainment businesses, dropped a 7.8 billion pound ($12 billion) bid for full control of Sky.
James Murdoch, who led the U.K. newspaper unit of News Corp., dropped his role as chairman of BSkyB, as Sky was then called. Lachlan is now co-chairman of News Corp., along with his father.
The U.K. regulator Ofcom concluded in 2012 that BSkyB was a fit and proper holder of a broadcast license, while criticizing board member James Murdoch’s reaction to the phone-hacking revelations at News Corp.
In February of this year, after an investigation into the voice-mail interception and payments to public officials in London, the U.S. Justice Department said it wouldn’t prosecute Fox or News Corp.
Fox has struggled with shrinking ratings at its flagship Fox broadcast network, once the audience leader with the former hit show “American Idol.” Revenue, excluding the sale of some European TV assets, was little changed in the latest quarter, and operating income at the parent company shrank.
Creutz, at Cowen & Co., expects Fox to lower its fiscal 2016 profit outlook in August, when the company is scheduled to report fourth-quarter results for the year ending this month.
“A CEO transition at the same time would give James a chance to start with expectations having been reset to a presumably low bar,” Creutz said in the note.
The elder Murdoch rocked the media world last year with an unsuccessful $75 billion bid for Time Warner Inc.
“He is one of the all-time greatest business guys that I have ever met and certainly within the U.S.,” Dish Network Corp. CEO Charlie Ergen said of Rupert in an interview with Bloomberg TV. “He is a strategic thinker. He understands how the whole thing goes together, which is not normal for most CEOs.”