Shareholders and analysts rounded on BSkyB yesterday as City anger grew over the appointment of James Murdoch as chief executive of the company.
Morley Fund Management, a Sky shareholder, said it would vote against James Murdoch at the forthcoming annual general meeting and also said that it would oppose three other directors up for election that it did not consider independent. The fund manager, which owns a 1.2 per cent stake, said eight Sky directors in total could not be considered independent.
Lord St John of Fawsley, Sky's senior non-executive director and head of the satellite television company's nomination committee, has been sidelined. The Tory peer, 74, will not be at meetings with the National Association of Pension Funds (NAPF) today or the Association of British Insurers tomorrow, even though he led past meetings with both organisations. Lord St John is up for re-election at the AGM on 14 November and the NAPF has already called on shareholders to vote him out.
Allan Leighton and Gail Rebuck, both members of the nomination committee, will be meeting shareholder groups this week instead to explain the appointment of 30-year-old James Murdoch, son of the chairman, Rupert Murdoch.
In addition, Mr Leighton and James Murdoch will be touring individual City institutional investors this week. In a newspaper interview, James Murdoch said: "One of the first things I'm doing is trying to meet with a number of our shareholders and start a dialogue and listen to their concerns."
Iain Richards, the head of governance at Morley, said: "We were dismayed at James Murdoch's appointment, though hardly surprised. We now need to see significant review and changes of practices in four areas - the structure of the board, the extensive related party transactions with News Corp, remuneration and auditor independence."
Sky shares fell 7.5p to 656p yesterday. News Corp, also chaired by Murdoch Snr, has a 35 per cent stake in Sky, making it difficult for the independent shareholding, which is highly fragmented, to put together enough votes to defeat the Sky board.
A spokesman for Standard Life, which has a 1.4 per cent stake, said: "We are disappointed with the process that led to the appointment of James Murdoch. This serves to highlight ongoing concerns about corporate governance at BSkyB."
Even some headhunters spoke out against James Murdoch's appointment, which was done with the aid of the leading recruiters Spencer Stuart.
Nicholas Cobbold, a director of the executive search specialist Norman Broadbent, said: "The appointment of James Murdoch comes as no surprise, but the manner in which it has been done is a disgrace that flies in the face of corporate governance practices, regulatory bodies and shareholders. There is nothing new about nepotism. One would have understood if the appointment had just been made and presented as a fait accompli. Instead we have seen a hypocritical charade of a democratic process, with head-hunters - whoever they are - and a paper nomination committee engaged merely to deliver a shortlist of one, beneficiary of a pre-determined process."
Shareholders are worried that with a father-and-son team in the two top jobs at Sky, there is no effective separation of the roles of chairman and chief executive - a basic point of good corporate governance.
Analysts pointed to a possible change of direction now at Sky and the concern that it may be used to pursue other News Corp interests.
Merrill Lynch said: "While strategy is unlikely to change for now, we believe cash could ultimately be diverted to other News Corp entities - Sky Italia or others? - inhibiting debt pay down and dividend rises."Reuse content