The appointment Monday of media mogul Rupert Murdoch's youngest son to run Europe's largest satellite television broadcaster got the cold shoulder from some of News Corp.'s most influential investors.
Critics, including the National Assn. of Pension Funds and the Assn. of British Insurers, said they saw nepotism behind the ascension of 30-year-old James Murdoch to chief executive of one of the company's prized operations, British Sky Broadcasting.
They questioned whether the leadership of a publicly traded company such as BSkyB should be dominated by family members. Rupert Murdoch is chairman of both BSkyB and News Corp., which owns a controlling 35.4% stake in the British broadcaster.
"We have no means of telling that the selection process was robust and impartial," said Leonie Edwards, a spokesman for the Assn. of British Insurers, a BSkyB shareholder. "Our concerns about the corporate governance structure do not seem to be addressed."
As expected, the BSkyB board voted Monday for James Murdoch to replace outgoing CEO Tony Ball, the well-respected News Corp. lieutenant who oversaw spectacular growth at the satellite giant since taking over in 1999. The vote was unanimous.
Company sources say it is doubtful that dissident shareholders will be able to amass the votes needed to overturn the decision in time for the company's annual shareholders meeting Nov. 14.
James Murdoch's becoming CEO of BSkyB will turn up the heat in a rivalry with his brother Lachlan, 32. Rupert Murdoch handed the title of heir apparent to his oldest son several years ago to quiet speculation about the family runoff.
Lachlan is deputy chief operating officer of News Corp., in charge of newspapers such as the New York Post. Sources close to the company say that James, as chief executive of StarTV, News Corp.'s Asian satellite television provider, has had more concrete success.
Although institutional investors wondered whether a 30-year-old was prepared for such a significant job, News Corp. has maintained that James was the best candidate for the BSkyB job because of his successful turnaround of Star TV.
Sources say the board considered several other candidates, including Martin Stewart, BSkyB's finance director, and Richard Freudenstein, its chief operating officer.
The elder Murdoch and three other News Corp. executives on BSkyB's board recused themselves from Monday's vote in response to protests that began brewing in September. Some investors began selling BSkyB shares after rumors circulated in Europe that Ball would resign and be replaced by James Murdoch.
News Corp. stock was up 3.7% Monday. It has fallen 8.3% from an August high. In measures intended to mollify investors, the board Monday named Lord Jacob Rothschild, a member of the influential Rothschild bank, as its first non-executive deputy chairman. The board also said that James Murdoch would resign as a director of News Corp.
News Corp. owns the Fox broadcast network and cable channels, a movie studio, newspapers and satellite TV operations around the world
Bloomberg News was used in compiling this report.