Outlook: Why Murdoch must step down as Sky chairman

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The Independent Online

Should James Murdoch step down as chairman of BSkyB, a move for which there is a growing clamour? Of course he should: even putting aside the controversies of the past two weeks, Mr Murdoch should never have become chairman in the first place. That he did so in 2007 was a breach of not one but two principles of the UK's Combined Code on corporate governance, the City's rulebook on such matters.

The code makes it clear that it is not good practice for a company's chief executive (the post Mr Murdoch previously held at Sky) to become its chairman, since this encourages a cosy game of musical chairs in which senior executives are not properly held to account.

The code also makes it clear that a company's chairman should not have a connection to a major shareholder. Mr Murdoch could hardly be more in breach of that one.

Sky and Mr Murdoch were able to overcome these difficulties, because the code operates on a "comply or explain" principle – whereby if acompany chooses not to abide by its provisions, it must give an account of its actions. Sky's explanation wasn't particularly convincing – it said the board had decided Mr Murdoch was the best man for the job – but it was enough. Although some shareholders did vote against Mr Murdoch'selevation, the rebellion, in the end, was relatively small.

Three-and-a-half years on, it is worth noting that one of the prominent figures doing the explaining for Sky back then was its senior independent director, Nicholas Ferguson, the man who is now being tipped to replace Mr Murdoch should he stand down or be forced out. We shall have to see if Mr Ferguson presses his independence more forcibly this time around.

He must do so. For never mind the theory of corporate governance, think about more practical matters. Sky, now a prominent FTSE 100 company, deserves to have a chairman who is able to devote the sort of time to its affairs that befits an operation of such scale.

Can Mr Murdoch really make that commitment, given the rather pressing demands of his day job just now, as the man in charge of News Corp's European operations?

Then there are the conflicts of interest to worry about. One of them, it is true, has gone. Mr Murdoch had to absent himself from all board discussions of News Corp's bid to buy the company in full, but that matter is resolved, for now at least. Sadly, it has been replaced by the worry that Ofcom might declare News Corp not fit and proper to hold such a large stake in Sky. That one is going to be tricky for the current chairman too.

Sky's next board meeting comes in 10 days' time. By then, Mr Murdoch should be gone.

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