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James Murdoch clears hurdle in bid to hold onto power at News Corp.

Rupert Murdoch's son remains chairman of British Sky Broadcasting despite questions about his handling of the phone-hacking scandal.

July 28, 2011|By Meg James and Joe Flint, Los Angeles Times
  • James Murdoch leaves Parliament in London after giving evidence on the News of the World phone-hacking scandal.
James Murdoch leaves Parliament in London after giving evidence on the… (Kirsty Wigglesworth, Associated…)

James Murdoch cleared the first hurdle in his bid to hold onto power in his father Rupert's company, News Corp., when he was retained as head of Britain's largest pay-TV provider despite questions about his handling of the phone-hacking scandal that has engulfed the media empire.

In London, the board of British Sky Broadcasting, which provides TV service to 10 million homes in Britain and Ireland, reaffirmed its support Thursday for James Murdoch to continue as chairman. The move was a bit of good news for the Murdoch clan after three weeks of daily drubbings in rival newspapers and pointed questions from members of Parliament.

"I would not say that we have an all-clear sign," said Doug Creutz, media analyst with Cowen and Co. "But at least as far as BSkyB is concerned, they seem to be signaling that this situation might begin to recede, allowing investors to move forward."

Rupert Murdoch's 38-year-old son, however, remains under pressure. It is unclear whether the phone-hacking scandal could ultimately force James Murdoch out of his job as News Corp.'s deputy chief operating officer — the No. 3 executive role within the company — or scuttle Rupert Murdoch's plans to eventually hand control of News Corp. to his children.

British lawmakers have said they want James Murdoch, who has run News Corp.'s European operations since 2007, to answer more questions to determine whether he was truthful last week when he told a committee of Parliament that he was unaware of the extent of the phone hacking at News Corp.'s London tabloid News of the World until late last year.

Two former underlings have publicly contradicted his remarks. They said the bespectacled scion was briefed two years earlier — in 2008 — about reporters' rampant use of illegal techniques to ferret out scoops. The Parliament committee that questioned James and Rupert Murdoch last week is expected to meet Friday to form a strategy on how to proceed.

More sordid allegations emerged Thursday. London's Guardian newspaper reported that News of World reporters might have intercepted messages left on the cellphone of the mother of a slain 8-year-old girl, Sarah Payne. The mother accepted the cellphone from the then-editor of the tabloid, Rebekah Brooks, to stay in touch with supporters. A prominent Parliament member called the revelation "a new low."

News Corp. responded with a statement: "News International takes this matter very seriously and is deeply concerned like everyone. As the facts are established, the company and the independent Management and Standards Committee will take all appropriate actions, including cooperating fully with any potential criminal enquiries or civil proceedings which may arise."

The company has paid a stiff price for the News of the World phone-hacking scandal. It shut down the 168-year-old tabloid — the first newspaper that Rupert Murdoch bought outside his native Australia — and shelved its $12-billion bid to acquire the remaining 61% of BSkyB that News Corp. doesn't already own. Buying BSkyB outright was to be one of the mogul's crowning achievements and further solidify News Corp.'s position as one of the world's dominant media companies.

Wall Street has long been concerned about Rupert Murdoch's history of overpaying for properties he wants, including the Wall Street Journal and social media website Myspace. Some investors also are troubled that Murdoch is intent on grooming his children, who some argue lack the experience needed to manage such complex operations.

"This whole situation has really highlighted the risks of investing in Rupert," media analyst Creutz said. "In the long run this company would be better off if it were run by management more responsive to shareholders' concerns, rather than controlled by this family."

Rupert Murdoch has six children by three wives. He has long been grooming his three children by his second wife, Anna Murdoch Mann, for leadership roles in the company, including his second daughter, Elisabeth Murdoch, who this spring sold her British TV production company to News Corp. for $675 million.

Initially Rupert Murdoch tapped his oldest son, Lachlan, 39, for leadership. But after being outmaneuvered by high-level executives, Lachlan Murdoch in 2005 quit as News Corp.'s deputy chief operating officer. He moved to Australia, where he has invested in media ventures and runs a television network. He remains a director on News Corp.'s board.

James Murdoch, the youngest son, joined News Corp. in 2007. The Harvard dropout has been described as intelligent but brash. He is credited with a solid performance as chairman of BSkyB. In March he was elevated to deputy chief operating officer of News Corp. and was in the process of moving to New York, the company's headquarters, when the phone-hacking scandal erupted.

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