News Corp investors call for James Murdoch's head

James Murdoch faced further calls to quit News Corporation's board yesterday after a shareholder activist group representing £100bn in assets said he was causing the company "significant reputational damage".

The Local Authority Pension Fund Forum (LAPFF), the majority of whose 54 members own shares in the US-based News Corp, called for an overhaul of the board, and added that Mr Murdoch's continued presence on the board was "no longer in shareholders' interest". News Corp declined to comment yesterday.

Mr Murdoch runs News Corp's operations in Europe. In the wake of the phone hacking scandal, the LAPFF circulated a briefing paper to its members advising they oppose his re-election to the board. It also demanded a "genuinely independent chair" criticising Rupert Murdoch holding both that and the chief executive role. News Corp investors will vote on whether to re-elect the Murdochs at the company's annual general meeting in California later this month.

The LAPFF said its members "want a line drawn under the hacking". Yet the forum's chairman, Ian Greenwood, said it would only be possible to move on "if the board accepts the need to demonstrate real accountability. That requires a change in the structure and make-up of the board".

He concluded: "Whilst these are difficult issues for the company to address, we believe that to secure News Corp's long-term future such reform is necessary."

The LAPFF's pension fund members met on Wednesday for a scheduled quarterly meeting, and the issue of the structure of News Corp's board was top of the agenda. One source close to the meeting said none of the members opposed the points raised in the briefing paper "and no dissenting voices were heard".

The phone-hacking scandal, with allegations that journalists tapped the phones of celebrities and crime victims and their families, continues to engulf News Corp and prompted it to close the News of the World.

The forum said that it had drawn up its recommendations for its members after "extensive research into the phone-hacking scandal" and after engaging News Corp directly. The forum said: "The News Corp board must take responsibility for the hacking scandal."

The group did back three of the 15-strong board to maintain their roles. It supported lead director Rod Eddington as well as Viet Dinh, who carried out an internal review in response to the hacking allegations and which "must be given time to reach its conclusions". It also backs Andrew Knight, saying he had played a "positive role" in engaging with the forum.

It is understood that the forum has not yet drawn up recommendations over Sky, which News Corp failed in its attempt to buy this year and where James Murdoch is chairman.

The LAPFF was advised by Pirc, an investor advisory body that has long raised issues about James Murdoch's presence on the News Corp and BSkyB boards. In a recent note, Pirc recommended opposing all but two of the News Corp directors seeking re-election. Those two were chief operating officer Chase Carey, and chief financial officer David DeVoe. On James Murdoch, Pirc said: "There is sufficient doubt surrounding when Mr Murdoch became aware that the practice of phone hacking went beyond a rogue reporter.

"We also have concerns about the failure to respond robustly to initial allegations of phone hacking."