James Murdoch Board Seats Dwindle Amid BSkyB Scrutiny

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A year ago, James Murdoch was promoted to News Corp.’s deputy chief operating officer, moving ever closer to succeeding his father as head of the media company. Now he’s struggling to keep his career alive.

Auction house Sotheby’s said March 16 that Murdoch will leave its board, following demands he resign over his role in a U.K. phone-hacking scandal. It was the third influential position he gave up in as many months, resigning from the board of GlaxoSmithKline Plc in January and as executive chairman of News Corp.’s U.K. publishing unit News International last month.

News Corp., based in New York, said the moves will allow Murdoch, 39, to focus on his main job. Tim Bale, a professor of politics at the University of Sussex, said Murdoch’s role in the scandal may force him to step down as chairman of pay-TV company British Sky Broadcasting Group Plc, a position that is crucial to his position overseeing the international television operations of News Corp.

“It will be very difficult for him to stick around,” Bale said in an interview. “His personal brand has been trashed so comprehensively and continues to be trashed with each new revelation.”

Murdoch’s future at BSkyB hinges on a report that U.K. lawmakers are preparing on the phone-hacking scandal following testimony he gave that has been contradicted by former subordinates. The committee began its inquiry in July after Murdoch said lawmakers had been misled about the extent of phone hacking during a previous probe in 2009. It has questioned him twice for the new report, once alongside his father Rupert, News Corp.’s 81-year-old chief executive officer.

Tarnished Reputation

U.K. media regulator Ofcom will take parliament’s report into consideration when evaluating whether James is “fit and proper” to hold a broadcast license on behalf of BSkyB.

Murdoch’s prospects for remaining chairman of BSkyB, in which News Corp. owns 39 percent, are also diminished because the scandal tarnished his reputation as a manager, said Jeffrey Sonnenfeld, senior associate dean of the Yale University School of Management.

“He’s certainly not bringing better management competence or insight or a reputation where his character is beyond question,” Sonnenfeld said in an interview. “A lot of things under his watch at best are a failure of management oversight, even if he’s not directly complicit in any of the scandal.”

A News Corp. spokeswoman, Julie Henderson, declined to comment on the Sotheby’s departure, which takes effect May 8. Robert Fraser, a spokesman for London-based BSkyB, in which News Corp. owns a 39 percent stake, also declined to comment.

‘More Questions’

BSkyB shares dropped 0.1 percent to 690.5 pence as of 9:13 a.m. in London trading. The stock has declined 16 percent in the last 12 months.

On March 14, Murdoch told U.K. lawmakers he should have dug deeper to uncover the phone hacking at the company’s U.K. unit, which saw News Corp. journalists hack into the phones of celebrities and a murdered schoolgirl.

“I could have asked more questions, requested more documents and taken a more challenging and skeptical view of what I was told,” Murdoch said.

Murdoch told lawmakers in November that News of the World editor Colin Myler failed to tell him in 2008 that phone hacking at the now-defunct tabloid was common. Myler and the newspaper’s lawyer Tom Crone have repeatedly insisted that they discussed evidence with Murdoch.

The phone-hacking scandal prompted News Corp. to close the News of the World in July and drop its 7.8 billion-pound ($12.4 billion) bid for full control of BSkyB, the U.K.’s biggest pay-TV company.

‘Little Advantage’

James’s decision to leave the boards of Sotheby’s and Glaxo may already signal a diminishment of his perceived management value, Edward Wasserman, Knight Professor of Journalism Ethics at Washington and Lee University, said in an interview.

“It’s tempting to say that in both cases, the boards saw little advantage to whatever wisdom or adornment James brought to being on the boards of these companies,” he said.

Murdoch was a Sotheby’s director for two years. Sotheby’s, based in New York, said it benefited from Murdoch’s “broad-based marketing and brand management experience, his guidance regarding the company’s strategic initiatives in Asia and his insight into digital media.”

Report Delayed

Murdoch is leaving to “focus on his core responsibilities at News Corp.,” Sotheby’s said. Glaxo Chairman Christopher Gent said in January that “James has taken this decision to focus on his current duties as non-executive chairman of BSkyB, and following his decision to re-locate to the U.S.”

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

James was appointed CEO of BSkyB in 2003 amid accusations of nepotism. He was promoted in 2007 to run News Corp.’s television, newspaper and digital operations in Europe, Asia and the Middle East, while becoming non-executive chairman of BSkyB.

The U.K. lawmakers are behind schedule with their report, as they debate how critical they can be of Murdoch, two people with knowledge of the panel’s discussions said in February. There is no question of Murdoch escaping criticism completely, the people said at the time. They said panel members are unimpressed by his statements that he was ignorant about what was going on at the News International unit.

Protest Vote

News Corp. shareholders in October lodged a protest vote against Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family’s control. James received the highest percentage of votes against his election to the board, at 35 percent.

In November, one third of BSkyB’s independent shareholders voted against James Murdoch’s re-election as chairman.

Professor Bale says the public criticism of Murdoch’s role in the scandal is increasingly becoming a problem for BSkyB itself.

“For the board as a whole and the company as a whole it’s very difficult when someone is under such pressure,” Bale said. “It’s a story he can’t control and there’s more to come. What’s out there already is really bad.”