James Murdoch is under renewed pressure to resign from the News Corporation and BSkyB boards, after the British broadcasting regulator repeatedly criticised his "character and conduct".
Ofcom yesterday declared that BSkyB, the satellite television business was "fit and proper" to hold a broadcasting licence, but it was unsparing in its assessment of Mr Murdoch, its former chairman. His failure to deal with the phone hacking and police bribery scandals at News International, where he was also chair, was "difficult to comprehend and ill-judged", Ofcom said. It added that Mr Murdoch "repeatedly fell short" of his duties as chairman, raising questions about his "competence" and attitude towards wrongdoing at the company.
The searing criticism stands to stymie Mr Murdoch's progress up the ranks of News Corp, and threatens his existing positions as a non-executive director at BSkyB and as deputy chief operating officer at News Corp. It could also bar him from taking the helm of any public company in which his family does not have a controlling stake, according to corporate governance experts.
Professor Charles Elson, one of America's most respected authorities on the subject, said that "a board would have a very tough time ignoring these concerns. Never say never, but I don't think that sort of finding will make it easy for him to progress". Lucy Marcus, professor of governance at IE Business School, added that Mr Murdoch's "contagion" would taint any organisation which appoints him as a director.
"It makes him persona non grata to sit on any other board right now."
Mr Murdoch stepped down as chairman of News International in February 2011, before the phone hacking row reached fever pitch. He resigned the same position at BSkyB in April this year saying he did not want to become a "lightening rod" for criticism, although he remained as a non-executive director. However, Pirc, the influential shareholder group, said yesterday that Mr Murdoch should come off the board altogether.
"Given he continues to be a focus for severe criticism, it's difficult to see the net benefit shareholders gain from his continued presence on the boards of either News Corp or BSkyB. There were several opportunities for him to dig deeper and address the failings at the News of the World, and he missed every one of them," a Pirc spokesman said. Ofcom's findings also cast aspersions on the rest of the BSkyB board, which gave its unanimous backing to Mr Murdoch, even as he resigned as chair, Pirc said.
"The board took a big risk in allowing James to remain as chair last year. The scale of that risk is revealed by today's report. If he had remained chair, in line with the board's recommendation, Ofcom's judgment today may have been different," it said, pointing to the possibility that the regulator could have revoked BSkyB's broadcasting licence.
News Corp and BSkyB appeared unmoved by the criticism. Sources at the pay-TV broadcaster said its board continued to give Mr Murdoch full backing. "The directors continue to believe strongly in his integrity," a source said.
Ofcom's verdict that BSkyB is "fit and proper" to hold a broadcasting licence could help clear the way for News Corp to make another attempt to by the 61 per cent of the satellite broadcaster that it does not already own. However, the regulator, which has the sweeping power to revoke the licence of any broadcaster that falls short, left a sword of Damocles hanging over BSkyB by making clear that it would continue to scrutinise the company.