One of the country's most powerful shareholder groups, The National Association of Pension Funds, yesterday urged investors to oust BSkyB's senior non-executive director, Lord St John of Fawsley.
The row centres on the appointment of a new chief executive at Sky, a post which is thought to be almost certain to go to James Murdoch, the son of the company's chairman Rupert Murdoch.
The confrontation between the board of the satellite TV group and independent shareholders, over corporate governance standards and the appointment of a new chief executive, escalated dramatically after publication of the NAPF's scathing report on the company. As well as advocating that shareholders vote against the re-election of Lord St John at the AGM on 14 November, the NAPF recommended a vote against the company's remuneration report.
The NAPF rarely urges investors to vote against a resolution before an AGM. Robert Talbut, chief investment officer at Isis Asset Management, a Sky shareholder, said: "Lord St John is in danger of having a very substantial vote against him."
The NAPF also urged Sky to appoint new independent non-executive directors "at the earliest opportunity". The organisation, whose members control one-fifth of the UK stock market, did not, however, come out against the election to the Sky board of James Murdoch.
Christine Farnish, chief executive of the NAPF, said Sky was shaping up to be a key corporate battle for shareholders this year. The prospect that James Murdoch might be a "shoo-in" for the vacant chief executive's post, leaving a father and son team at the helm of the company, has alarmed shareholders. The NAPF said it could make no judgement on Murdoch Jnr as a potential chief executive. It only backed him as a non-executive director.
Ms Farnish told The Independent: "There is serious concern about the handling of the succession process. It is unfortunate that shareholders have lost a degree of confidence in that process."
Lord St John, a former Conservative minister, and the man charged with liaising with shareholders on the issue of the appointment of a new chief executive, will be up for re-election at the forthcoming AGM. As well as being the senior non-executive director, he also heads Sky's nominations committee, which is charged with appointing the new chief executive.
The NAPF said that, after 12 years on the Sky board, Lord St John could not be considered independent. The organisation "would have expected such a fundamentally important task [filling the chief executive job] to be led by a director whose independence was not open to question".
The shareholder group went on to blame Lord St John for not acting upon the obvious concern that would come from consistent reports that James Murdoch was being lined up for the Sky job. "Lord St John must bear some responsibility for the company becoming engaged in a very public - and, in some cases, antagonistic - debate on the identity of the future chief executive," the NAPF said. Sky declined to comment, while Lord St John's office did not return calls.
The NAPF took issue with Sky's remuneration report, and called for speedy disclosure of any pay-off to the current chief executive, Tony Ball.
It is understood Sky's institutional shareholders have been taking back the stock they own in the company, which has been "lent" out, so shareholders can vote and deliver a blow at Sky's AGM. Rupert Murdoch's News Corp holds over 35 per cent of Sky shares, making a defeat of a company resolution difficult.
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