James Murdoch's resignation as chairman of satellite broadcaster British Sky Broadcasting comes ahead of a government report expected to be critical of his handling of the ethics scandal at News Corp.'s British tabloids.
Murdoch, in announcing his decision Tuesday, alluded to the ongoing investigations into alleged phone hacking and police bribery by News Corp.'s the Sun and the now-closed News of the World. Problems at the tabloids last summer derailed the media conglomerate's plans to take control of Britain's dominant pay-TV provider, in which it holds a 39% interest, with a $12-billion purchase of all outstanding BSkyB shares.
"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 organization," Murdoch, 39, said in a statement.
In a letter to other members of the BSkyB board, Murdoch indicated that he had decided to resign to insulate the company from negative publicity surrounding allegations of illegal voice-mail intrusions, police bribery and computer hacking. He is succeeded by Nicholas Ferguson, who previously served as BSkyB's deputy chairman.
Murdoch's resignation is the latest in a series of developments that diminished his responsibilities since he stepped down in February as head of News International, News Corp.'s British publishing unit, whose tabloids are at the center of the maelstrom. Once seen as the heir to his father's media empire, Murdoch has been severely tarnished by the controversy and his handling of the widening phone-hacking investigation.
The youngest son of News Corp. Chairman and Chief Executive Rupert Murdoch has consistently denied any knowledge of illegal activity at the papers then under his command. Until recently he insisted he was led to believe that phone hacking was confined to one "rogue reporter" at the News of the World who was convicted and jailed for his offense.
In December, the younger Murdoch informed the British Parliament that he did not read an email from senior executives saying that the practice of phone hacking — listening in on voicemail messages left for celebrities, members of the royal family and even crime victims — could be widespread.
More than a dozen journalists and executives with News International have been arrested by Scotland Yard in connection with the scandal. Police are also probing whether News International was engaged in a cover-up of criminal activity at the 168-year-old News of the World and its sibling the Sun.
"The story continues to not go away, and the feeling that somehow James was involved to a greater extent than he's willing to let on continues to persist," said Doug Creutz, media analyst with Cowen and Co. "He keeps falling further and further backwards along the line of defenses in terms of his involvement in the Murdoch empire. There ain't a lot left."
Murdoch's backward moves include relinquishing his position as executive chairman of News International — not long after he moved to New York as part of his elevated role as deputy chief operating officer of News Corp. — his resignation as chairman of BSkyB, and the surrendering of board positions at drug maker GlaxoSmithKline in January and Sotheby's in mid-March. That wasn't enough to satisfy some investors, who called on him to resign as director of News Corp. and BSkyB.
"The ongoing rush of new revelations in the hacking scandal makes it clear that no shareholders at any company can trust James Murdoch to represent their interests and operate scrupulously within the law," CtW Investment Group Research Director Richard Clayton said in a statement released Tuesday. "News Corp. and BSkyB shareholders need a board free of the Murdoch taint."
James and Rupert Murdoch are expected to appear before Parliament again as part of an ongoing inquiry into alleged illegal activities at the tabloids. Both men are also expected to give sworn testimony before a judge-led inquiry into British news-gathering practices, launched in the wake of the hacking revelations. The scandal exploded last summer when the British daily the Guardian reported that News of the World operatives had eavesdropped on voice-mail messages left for a missing teen girl later found slain.
This month, a parliamentary committee is expected to issue a report on its investigation into the scandal — and into whether News International executives, under James Murdoch, misled Parliament. British news outlets have reported that the committee is likely to accuse one or two high-ranking News International officers of misleading Parliament — but that the committee's members are split over whether James Murdoch did so.
Murdoch's resignation as chairman of BSkyB does not mean the powerful broadcaster won't suffer collateral damage from the probe into the newspapers. British regulators may investigate whether News Corp.'s tabloid troubles have made it unfit to be part of BSkyB. One regulator, Ofcom, disclosed in response to a Freedom of Information Act request that its board has had numerous discussions about whether BSkyB is a fit and proper holder of a broadcast license because of News Corp.'s ownership stake.
News Corp.'s efforts to acquire BSkyB had proved to be a headache for the British government, which recommended that the sale proceed before the hacking scandal broke last summer. The ruling conservative party has been accused of bending to Murdoch's will to stay in favor with the media baron's powerful newspapers.
Prime Minister David Cameron reacted tersely to the news of Murdoch's resignation, saying, "It's obviously a matter for him and a matter for his company and of course its shareholders."
Rupert Murdoch and News Corp. President and Chief Operating Officer Chase Carey issued a statement Tuesday lauding James Murdoch's leadership of the satellite broadcaster.
"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 Corp. shareholders," they said. "We look forward to BSkyB's continued growth … and to James' continued substantial contributions at News Corp."
Chu reported from London.