A Sky shareholder has called for James Murdoch to be replaced as chairman, arguing that his appointment breached the corporate governance code and is a major conflict of interest because he is the chief executive of its biggest shareholder, 21st Century Fox.
Royal London Asset Management, which owns £52m in Sky shares, said shareholders needed an independent chairman and criticised the process by which Murdoch was appointed earlier this year.
Murdoch, a non-executive director at Sky, was the only candidate put forward by its nominations committee to take over from the then chairman, Nick Ferguson.
Murdoch had been forced to stand down as chairman of Sky in 2012 after the phone-hacking scandal at News International, publisher of the Sun, Times, Sunday Times and now defunct News of the World, where he had been chairman.
Piers Hillier, the chief investment officer at Royal London, said: “We continue to believe that James Murdoch’s reappointment as chairman of Sky is inappropriate.” Hillier was speaking as Sky held its annual general meeting (pdf) at the company’s Osterley campus in west London on Thursday. “Should Fox make a bid for Sky, investors need a strong, independent chairman to protect the interests of minority shareholders and negotiate the best possible deal,” he said.
Murdoch, speaking to the Guardian after the annual meeting, dismissed concerns about the conflict of interest of his role. “Well I’m not qualified as independent because I’m not an independent director, being associated with the major shareholder,” he said. “You saw there were no questions from shareholders here. So It’s not for me to comment on.”
Murdoch was appointed by a three-member committee of Sky directors, including the Aberdeen Asset Management chief executive, Martin Gilbert, now the Sky deputy chairman, and the independent director Dave Lewis, the chief executive of Tesco, who will stand down from the board after Thursday’s shareholder meeting.
Murdoch was then unanimously voted in as chairman by his 11 fellow board members, six of whom are independent directors. “No attempts were made to advertise the position externally, or appoint an agency, which goes against the UK corporate governance code,” Hillier said.
Last week, shareholder advisory firm Pirc said investors should vote to oppose Murdoch’s reappointment as chairman citing similar issues, such as a lack of independence and concerns about appointment process not being an “objective” one.
Pirc also recommended a vote against non-executive directors Chase Carey and John Nallen, both of whom are senior executives at 21st Century Fox, which has a 39.6% stake in Sky.
Broadcasting regulator Ofcom heavily criticised Murdoch’s conduct in handling the phone-hacking scandal, saying it “repeatedly fell short” of what was expected of a chairman.
The culture select committee also weighed in, concluding that Murdoch had showed “wilful ignorance” of phone hacking.
News International, which was rebranded News UK in 2013, is part of News Corp, the newspaper company founded by Murdoch’s father, Rupert. The Fox TV, film and entertainment business was spun out of News Corp as a separately listed company in 2013.
The Murdoch family was forced to give up on an £8bn-plus News Corp bid to take full control of Sky in 2011 as the fallout from the phone hacking scandal made it too politically difficult to complete.
Asked at the AGM about a potential renewed bid by Fox, Murdoch said that the meeting was not the forum to talk about “hypothetical scenarios” but added that Sky had “robust processes and procedures in place to deal with any related party transactions”.
He handed the investor query to Andrew Sukawaty, the non-executive chairman of Inmarsat, who was appointed senior independent director when Murdoch was made chairman.
“In terms of the hypothetical transaction you refer to well the company been through that before,” Sukawaty said. “The independent directors on the board have demonstrated how they can be independent in that particular situation. In addition to all that we have shored ourselves up so to speak. Not only that we have a senior independent director and deputy chairman in Martin Gilbert.
“Together we will stand up and make sure any process that is required to make sure any transaction that is dealt with is dealt with properly. Belt and braces. We [would] take extraordinary measures to deal with that.”
The UK corporate governance code is not legally binding and companies only have to “comply or explain”.
Sky decided against informing or consulting shareholders about the appointment of Murdoch, although there is no legal corporate governance requirement to do so.
In the four years since he moved into a non-executive directorship, investors have never voted against his reappointment at an annual general meeting.
