Sky Shareholders Protest James Murdoch’s Return as Chairman

  • Polling: 28% of vote opposed to Murdoch’s board re-election
  • Sky statement: Company will ‘engage with those shareholders’

In a rare display of investor dissent, a significant minority of Sky Plc shareholders are protesting James Murdoch’s return as chairman of the British pay-TV company, over concerns about board independence and a past phone-hacking scandal.

More than 28 percent of votes cast at the company’s annual meeting on Thursday opposed Murdoch’s re-election to the board, Sky said in an e-mailed statement. The magnitude of the opposition was notable, given that his father Rupert Murdoch’s 21st Century Fox Inc. is Sky’s largest shareholder with a 39 percent stake.

Excluding votes representing Murdoch interests, about 51 percent were against James Murdoch’s re-election, according to Manifest, a London-based proxy voting agency that has raised governance concerns about his role. Pensions & Investment Research Consultants Ltd., a proxy advisory company, also recommended opposing him, noting the phone-hacking scandal at British newspapers published by News International, where he was chairman. A big concern is whether Sky investors will get a fair shake if Fox, which 43-year-old James Murdoch leads as chief executive officer, were to seek a merger.

“We continue to believe that James Murdoch’s reappointment as chairman of Sky is inappropriate,” Piers Hillier, chief investment officer at Royal London Asset Management, said in a statement before the meeting. Royal London said it holds 0.35 percent of Sky’s shares, worth 52 million pounds ($63 million). “Should Fox make a bid for Sky, investors need a strong independent chairman to protect the interests of minority shareholders and negotiate the best possible deal.”

In a statement after the meeting, Sky’s board said it noted the “significant” vote against the re-election of James Murdoch and said it will “engage with those shareholders.” About 85 percent of the voting capital was represented and the board’s decision to re-appoint the younger Murdoch as chairman in January was unanimous, Sky said.

Eight of 10 of the company’s top U.K. institutional shareholders supported his reappointment, Rowan Pearman, a spokeswoman for Sky, said by phone.

The meeting, held outside of London, represented the first opportunity for Sky shareholders to weigh in on Murdoch’s second act as chairman. He had stepped down from that role in 2012, while remaining on Sky’s board, in the wake of the hacking scandal. News Corp. subsequently split in two, and James Murdoch stayed with the film and TV business at 21st Century Fox.

For more on a possible Fox bid for Sky, click here.

News Corp. in 2010 made a 7.8 billion-pound bid for the 61 percent of Sky it didn’t own, but abandoned efforts following revelations that two of its newspapers hacked into the mobile phones of celebrities and politicians. James Murdoch previously ran Sky as CEO from 2003 to 2007 before becoming chairman for the first time.

Sky has lately again been the subject of extensive deal speculation. Much of the recent focus, driven by the weakness of the pound, has been based on the possibility of Fox buying the rest of Sky, Neil Campling, head of technology research at Northern Trust Capital Markets, said in a research note this week.

It’s clear from Thursday’s vote that independent shareholders are very concerned about James Murdoch’s position at the top of Sky, Sarah Wilson, CEO of Manifest, said in an e-mail.

“It is extremely rare for a U.K. vote to go against a director in this way, however the Murdoch interests have ensured his re-election,” Wilson said.

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