James Murdoch is likely to remain chairman of satellite company BSkyB (NYSE: BSY) after winning the support of the leading independent director ahead of a crunch meeting later this week.
Nicholas Ferguson, Sky’s deputy chairman, is understood to have given Murdoch his backing after a “long conversation” in a private meeting, despite continuing questions about the role played by Rupert Murdoch’s youngest son in the phone-hacking scandal.
Ferguson, whose role is essentially to act as an intermediary between shareholders and the chairman, has also spoken with leading investors in the publicly listed company following News Corporation’s decision to withdraw its bid for the 61% of Sky it does not already own.
The board is understood to be satisfied that there is support for the chairman, who is also News Corp deputy chief operating officer, despite the phone-hacking furore of the past three weeks.
Murdoch’s record at Sky, where he was a highly successful chief executive before moving to Wapping to head News International in 2009, as well as his continuing good relations with the current chief executive, Jeremy Darroch, is understood to have persuaded several board members to support him. None were available to comment on Tuesday.
“James is very committed to that business. He hopes and intends to stay completely engaged as non-executive chairman,” said one source close to him.
Some investors had argued that Murdoch should resign to deal with the ongoing investigations. Pirc, the pension fund advisors, called for “wholesale governance reforms” at the company.
With criminal as well as parliamentary investigations ongoing into News International’s handling of the crisis and the executives involved, BSkyB is unlikely to launch its own inquiry.
The board of Sky, which includes eight non-executives including Ferguson who are independent of News Corp out of a total of 14, is to meet on Thursday ahead of the company’s annual results the following day.
Directors are widely expected to consider some sort of return to investors either via a share buyback or a special dividend. Analysts have predicted a buyback of as much as £2bn by 2013.
One hedge fund manager, who declined to be named, said there was support among investors for a cash return. “We believe there could easily be enough to return 100p a share to investors – and possibly over 200p.”
Such a move would please investors but could prove politically sensitive given News Corp.’s (NSDQ: NWS) significant stake in the business.
“Handing Rupert Murdoch almost £1bn after all that’s happened could be politically sensitive right now,” according to one financier who declined to be named. Instead, the board could suggest looking at how to use cash reserves in a year’s time.
A number of investors opposed the last buyback scheme in 2005 in response to fears that it allowed News Corp to gain “creeping control” of the company.
At the time, the US-listed company, which also owns the Times, the Sunday Times and the Sun, owned 37%, rather than the current 39%.
Investors have also called for fresh blood to be injected into the Sky board. The independent directors include David Evans, who worked for News Corp before 1998 and several who have been on the board for close to the nine years, recommended as the maximum to ensure independence by the UK’s Financial Reporting Council.
These include Jacques Nasser, the former Ford boss, and Gail Rebuck, the head of Random House. Allan Leighton, the former Asda boss, has been on the Sky board for 11 years.
Non-executive directors whose independence has not been questioned include Andrew Higginson, a director of Tesco, and Ferguson, who is also head of Sky’s remuneration committee. Ferguson was unavailable for comment on Tuesday and his office referred all enquiries to the Sky press office.
This article originally appeared in Guardian.