Shareholders stepped up the pressure yesterday on BSkyB to make the selection of its next chief executive an open and competitive process, following concerns that James Murdoch would be installed in the post.
The National Association of Pension Funds met Lord St John of Fawsley, the senior non-executive director at the pay-TV company and head of its nominations committee, to demand that a proper procedure be put in place to find a successor to Tony Ball, who gave notice last month that he is quitting.
James Murdoch, the 30-year-old son of the company's chairman, Rupert Murdoch, is the clear favourite to get the job, a prospect that has led to deep misgivings among Sky shareholders. Some investors simply want there to be genuine competition to succeed Mr Ball. It is understood that other investors would be unhappy with a father-and-son top team, even if James is the best qualified person for the job.
A spokesman for the NAPF said the meeting, in London yesterday afternoon, had been "constructive, useful and frank". It is thought the shareholders demanded new governance safeguards if James Murdoch gets the job. The Association of British Insurers has already met Lord St John and delivered a similar message.
New accountability measures could be secured, for instance, by Rupert Murdoch standing down as chairman or a special oversight committee of non-executive directors being set up. The independence of Sky's non-executive directors has been criticised.
Investors have over the last few years demanded that companies split the chairman and chief executive jobs, in order that power is not concentrated in one person. Sky shareholders argue that the father-son relationship is so close that it would amount to one person holding both jobs.
One shareholder said: "It would take quite a person to provide any sort of check on Rupert Murdoch but his son seems uniquely unqualified to even attempt that task."
Brokers say US investors are much more comfortable than UK shareholders with James Murdoch getting the job. Lord St John of Fawsley leads a four-strong nominations committee officially charged with appointing a new chief executive, with a headhunting firm also employed. The committee includes Allan Leighton, the Post Office chairman, whose independence is generally recognised by shareholders.
James Murdoch currently runs News Corp's Star TV operation in Asia, so has relevant experience, though not of leading a public company. Sky has insisted that other candidates, internal and external, will be considered. Internally, the front-runners are Martin Stewart, the finance director, and Richard Freudenstein, the chief operating officer, with the latter particularly fancied if the company does not go for James Murdoch. There were reports last night that Mr Stewart, 39, had applied for the job.
There has been speculation that the new chief executive might come from elsewhere in the News Corp empire, especially from its Fox television operation in the US. Rupert Murdoch has looked within his News Corp business for the last two Sky chief executive appointments. The deadline for applications is thought to be the end of this week.
Bernstein Research downgraded Sky shares to "underperform" from "market perform" yesterday, saying: "The potential hiring of James Murdoch as CEO adds another layer of entanglement."
Others mentioned as possible candidates from outside News Corp include the Cox Communications' chief executive, Jim Robbins, and EchoStar's president, Michael Dugan.Reuse content