July 27, 2011 / 11:04 PM / 7 years ago

James Murdoch faces BSkyB board, doubts about role

LONDON (Reuters) - James Murdoch faces the board of BSkyB on Thursday and questions over whether his role in a phone-hacking scandal leave him a fit chairman of the satellite broadcaster his father’s company tried to buy.

It will be the first meeting of the BSkyB board since the escalating crisis forced News Corp to close the News of the World newspaper, drop its BSkyB bid and offer up James and his father Rupert to answer questions in Britain’s parliament.

As well as being non-executive chairman and former chief executive of BSkyB, James Murdoch is deputy chief operating officer of News Corp, which owns 39 percent of BSkyB as well as the News of the World tabloid at the center of the furor.

Some shareholders have demanded that he step down to avoid conflicts of interest, fearing contamination from the scandal that acquired new dimensions earlier this month when it was revealed that a murdered schoolgirl had had her phone hacked.

The crisis is far from over, says Richard Levick, president and chief executive of Levick Strategic Communications, who has advised countries and companies on crises including Guantanamo Bay and the recent Wall Street crash.

“If you look at the arc of a crisis, their worst days are not yet behind them. It’s parallel in many ways to Watergate. Watergate took 18 months to unfold. It appears that this is one of those elongated crises,” he told Reuters by telephone.

British corporate governance watchdog PIRC, which advises institutional investors running more than 1.5 trillion pounds ($2.46 trillion) in assets, reiterated its call last week for an independent BSkyB chairman, and said other investors agreed.

“The risk of contagion is great. The governance arguments are also clear. And how, in reality, can someone facing challenges on all sides expect to devote sufficient attention to chairing a FTSE 100 (company)?” the organization said.

So far, there is no sign that the 14-member board, eight of whom are independent, plan a revolt on Thursday. The Guardian reported on Wednesday that Murdoch had won the support of senior independent director Nicholas Ferguson.

But James Murdoch still has questions to answer over a scandal in which at least 10 people including Prime Minister David Cameron’s former spokesman Andy Coulson have been arrested this year.

Last week, two former News of the World executives said James Murdoch had been mistaken when he told parliament he had not been aware of an email containing evidence of hacking when he approved a large payoff to the hacking victim.

Murdoch said he stood by his statement, while the chairman of the parliamentary committee in charge of questioning the Murdochs has said he will seek further clarification.

The BSkyB board meeting taking place in London on Thursday afternoon, a regular meeting on the eve of the company’s quarterly results announcement, is also likely to consider a special dividend payout to shareholders.

The board had said for the last year that it would not be appropriate to consider such a measure while it was a takeover target, and many brokers are stoking hopes of a payout now.

Analyst Ian Whittaker of Liberum Capital cautioned, however, that the moment may be too sensitive politically.

“Given the fast-moving events of the past two weeks, management may feel now is not the right time to announce a special dividend, especially given the potential complications of returning a significant level of cash back to its 39 percent shareholder News Corp,” he said.

“Historically, BSkyB management have emphasized investment over a return of cash back.”

Editing by Louise Ireland

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