James Murdoch bowed to pressure and resigned as BSkyB chairman today as he admitted his links to the News International phone-hacking scandal threatened to damage the satellite broadcaster's reputation.
Mr Murdoch, who relinquished his role as NI executive chairman in February, said he did not want his position to become a "lightning rod" for BSkyB as he stepped down with immediate effect following months of pressure to leave the FTSE 100 company.
The deputy chief operating officer at News Corporation, BSkyB's controlling shareholder with a 39% stake, will stay on the board as a non-executive director and will be replaced by deputy chairman Nick Ferguson.
Shareholder lobby group Pensions & Investment Research Consultants (Pirc) called for Mr Murdoch to leave the BSkyB board entirely, while his father Rupert, News Corp chief executive, released a brief statement thanking him for his "successful leadership".
Mr Murdoch leaves the position just weeks before a Parliamentary report is published into reporting practices at the News of the World and an expected appearance alongside his father at the Leveson Inquiry.
His departure comes despite receiving backing from BSkyB shareholders, who reappointed him at the company's annual general meeting last November. Mr Murdoch recently stepped down from the boards of auctioneer Sotheby's and pharmaceutical firm GlaxoSmithKline.
In a letter outlining his resignation, Mr Murdoch, who was appointed BSkyB chairman in December 2007, said: "As attention continues to be paid to past events at News International, I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this company.
"I am aware that my role as chairman could become a lightning rod for BSkyB and I believe that my resignation will help to ensure that there is no false conflation with events at a separate organisation."
Tom Mockridge, News International chief executive, which publishes The Times, the Sunday Times and the Sun, as well as the NotW before it was shut down, will replace Mr Ferguson as deputy chairman.
Alan MacDougall, managing director of lobby group Pirc, which urged shareholders to oppose Mr Murdoch's re-election as chairman, said the "decision was inevitable" and called for his complete removal.
He said: "We are pleased that there has been a belated acknowledgement of the need for change, but dragging the process out was the wrong approach to take.
"In reality, the company should have appointed an independent chair last summer, to create a clear separation between the management of the business and the scandal at News Corp. Failure to act more quickly has resulted in self-inflicted reputational damage."
Mr Murdoch said in a letter to the Department for Culture, Media and Sport Committee last month that he accepts his share of the blame for not uncovering phone hacking at the NotW sooner but denied he had turned a "blind eye" to allegations of criminal wrongdoing.
The DCMS committee is reportedly considering censuring him for failures to investigate fully allegations that accessing the voicemail message of celebrities and others was widespread at NI.
Media regulator Ofcom is likely to extend its inquiry into Mr Murdoch if the parliamentary committee finds against him. It is considering whether he remains a "fit and proper" person to oversee an organisation with a licence from the regulator.
John Whittingdale, chairman of the DCMS committee, said he was not wholly surprised by the decision. He said: "The name Murdoch is a powerful one and the fact he was in the chair at BSkyB was always going to continue to provoke controversy."
Mr Murdoch received the support of 75.4% of BSkyB shareholders, with 17.4% opposed and 7.2% withheld, at last year's annual meeting.
BSkyB stood by its chairman and said there had been "no effect on sales, customers or suppliers" in the wake of the phone hacking allegations.
Mr Ferguson heaped praise on his predecessor following the announcement.
"With his vision, drive and strategic insight, the company has performed exceptionally," he said. "The board's support for James and belief in his integrity remain strong."
Rupert Murdoch said in a statement with News Corp chief operating officer Chase Carey that it was "grateful" for Mr Murdoch's "successful leadership" at the broadcaster.
They added: "He has played a major role in propelling the company into the market-leading position it enjoys today - and in the process has been instrumental in creating substantial value for News Corporation shareholders."
Mr Murdoch said he decided to step down from NI to devote himself to other roles at News Corp - not because he had known about alleged criminal wrongdoing at the News of the World.
The accusations first came to light last summer when it emerged the phone of murdered teenager Milly Dowler was hacked by a private investigator employed by the newspaper.