Rebels take on Murdoch at BSkyB

Lord St John survives by skin of his teeth * Unprecedented show of institutional anger over new chief
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The Independent Online

The block vote of Rupert Murdoch's News Corporation was needed yesterday to prevent the ousting of BSkyB's senior non-executive director and to save Sky's remuneration report from being voted down at the annual general meeting.

The event, a showdown between the company and institutional shareholders, also delivered a sizeable vote against James Murdoch, the newly installed chief executive of the satellite television company chaired by his father. Mr Murdoch Snr also chairs News Corp, which has a 35 per cent stake in Sky.

In a highly unusual act of rebellion, several mainstream City institutional investors stood up at the AGM and criticised corporate governance standards at Sky and the process that led to the appointment of James Murdoch.

Many private shareholders also put protests to the AGM but they were mostly swatted away by Rupert Murdoch with cursory answers and a suggestion that unhappy investors should sell their shares.

Sky gave some ground to the concerns of independent shareholders by setting up a corporate governance committee, to be chaired by Lord Wilson of Dinton, a non-executive director and a former head of the civil service. Two non-executive directors will also "undertake a complete review" of remuneration policies, another source of concern.

Mr Murdoch Snr told the AGM, held at London's Queen Elizabeth II Centre: "We take our responsibilities in all areas of regulation, including corporate governance extremely seriously." After the event, he was overheard pillorying shareholders to his wife, Wendi Deng. He told her: "Some of them were so bloody insulting, they were saying we are thieves. There were some crackpots ..."

The AGM voting saw two resolutions defeated on a show of hands, which then went to a formal poll. The resolution to re-appoint Lord St John of Fawsley, Sky's senior non-executive director, was eventually passed, with 59 per cent of votes cast in favour and 41 per cent against. A resolution on passing Sky's remuneration report got the backing of 61 per cent of votes, with 39 per cent against. Shareholders pointed out that both these resolutions would have been defeated, if it were not for News Corp's 35 per cent stake being voted in support. The resolution on the election of James Murdoch saw 18 per cent of votes cast against him.

After the event, Peter Montagnon, head of investment affairs at the Association of British Insurers, a powerful shareholder organisation, said: "There was a remarkable amount of dissent ... Most companies would be pretty worried about this degree of dissent." He said it was "never realistic" to have expected it to be defeated on any resolution, given its "35 per cent head start".

Jeff Lindey, of the National Association of Pension Funds, who spoke at the AGM, said afterwards: "Independent shareholders have rejected Lord St John. A man of integrity should take note of what was said and resign."

The institutional shareholders that made critical points at the AGM were Legal & General, Morley Fund Management, which voted against seven resolutions, Deutsche Asset Management and the Universities Superannuation Scheme. In response to a question about any pay-off that would be made to Tony Ball, who resigned as chief executive this month, Mr Murdoch Snr said he would only be paid for agreeing not to work for a rival for two years.

AGM Showdown: What They Said

Rupert Murdoch in his speech to the AGM: "Speaking personally, I can fully understand the suspicion of possible nepotism with my son as a candidate, not to speak of the salivations of my newspaper competitors."

Rupert Murdoch, in response to a question from a private shareholder: "If you don't believe us then I think you should sell your shares."

John Marshall, private shareholder: "I'd like to congratulate the board on scoring a monumental own goal. Lord St John may be a constitutional expert but he's clearly not an expert on corporate governance ... It is most unfortunate that we have father and son as chief executive. The only other example I can think of is the Mirror Group where a domineering father led his sons astray."

Lord St John, in his only intervention in the meeting, to a private shareholder who called him "Lord John" when saying he did not understand his responsibilities: "It's much more of an insult to get my name wrong."

Unnamed private shareholder to the meeting: "Major decisions ... are being decided over a family meal. You're turning this into a family concern rather than a public limited company ... There is sheer arrogance and almost complete contempt of shareholders."