Why James Murdoch should resign today

As the tidal wave of comment on phone-hacking at the News of the World gradually recedes, there is a real danger that BSkyB, the UK’s biggest television company, is left stranded on the shore. BSkyB matters. Although it does not pull its weight in commissioning original programmes, relying almost entirely on Rupert Murdoch’s “twin battering rams” of sports and movies, its economic importance is undeniable. Its annual revenues of over £6bn outstrip the combined income of the BBC and ITV. And it recently passed its bold objective of 10m subscribers.

Only six weeks ago BSkyB’s fate seemed certain. News Corp’s undertakings to hive off Sky News as an independent company were to be accepted by the government. For the shareholders the only question was the price for their outstanding 61 per cent. For News Corp this was an attractive opportunity to consolidate the cash flows of a mature and profitable business.

Phone-hacking changed the rules. Before the bid went to the Competition Commission, it was withdrawn by News Corp.

Enders Analysis concluded that, post-merger, News Corp and Sky would have produced 22 per cent of the news Britons consume daily. The UK’s cross-ownership rules are the weakest in any industrialised country, and need strengthening. Any additional market power would be wholly undesirable, given the way recent disclosures have revealed how readily the Murdochs translate media dominance into political influence.

This dominance seems to be over, but News Corp still exerts de facto control over BSkyB through its 39 per cent shareholding, allied to the hereditary nature of the chairmanship, where Rupert Murdoch was succeeded by his son James. The remedy is clear. News should be forced to sell down its stake to a maximum of 29 per cent, and the chairmanship should no longer be an hereditary office.

The Murdoch record at the News of the World has also hardly reinforced their claim to be “fit and proper persons” to hold a broadcasting licence. Although Sky News has provided an excellent independent service, those with longer memories will recall the craven ejection of the BBC from the Star satellite service, and the refusal to publish Chris Patten’s memoirs, both for fear of upsetting China.

If BSkyB is to avoid several months of Murdoch-dominated limbo, its board must be radically reconstructed, starting at the top. James Murdoch’s tenure at BSkyB has been successful. He managed to lose around £350m on investment in ITV, an error of judgment that would for mere mortals have proved terminal. But his strategy of building up a subscriber base, increasing average revenue and diversifying into broadband has worked well.

Nevertheless, he should go. There has always been a conflict of interest in chairing a company for which he was also bidding. That conflict still exists. More importantly, his evidence to the select committee relied heavily on ignorance about crucial e-mail evidence. His “wilful blindness” showed at best a lack of curiosity, and at worst a failure to ask questions, for fear of hearing unacceptable answers. Prime Minister David Cameron has noted that “James Murdoch has got questions to answer in parliament”. Answering these questions, and his day job at News Corp, suggest that he will not have enough time to discharge his BSkyB duties.

Finally, there is the closure of the News of the World. To shut down a profitable newspaper and sack over 200 journalists, almost all of whom had had no involvement in hacking, was impulsive and cruel. When Harold Macmillan dismissed seven of his cabinet in 1962 Jeremy Thorpe memorably remarked: “Greater love hath no man than this, that he should lay down his friends for his life.” The Murdochs have adopted this policy on an industrial scale.

It is possible, although unlikely, that James Murdoch will offer his resignation when BSkyB’s board meets today. If not the board, and in particular the independent directors, should ask him to go. That will be the first step in reinventing BSkyB as a financially strong and totally independent British media business – arguably a far more interesting future than becoming the cash cow for News Corp.

The writer was chairman of the BBC from 1996 to 2001, and chairman of BT from 2001 to 2006

* * This opinion piece has been amended since its publication in the Financial Times newspaper.