Sky shareholders should not be fans of Murdochs’ Game of Chairs

James Murdoch’s role throws up conflicts of interest and influence
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Sky wanted to tell the story of how dynastic fantasy Games of Thrones had boosted its viewing figures and earnings. But, on Thursday, all eyes in Middle Earth — or, at least, Isleworth — were on the TV group’s own fantastic dynasty, and its Game of Chairs.

How could James Murdoch remain as Sky chairman, in the midst of a bid from father Rupert’s 21st Century Fox, a dominion where the young son also serves as chief executive?

Young James stood accused by independent shareholders of wielding undue influence at Sky — much as his venerable father had been, in a more political sense, by the knight Ser Vince de Cable. It had family intrigue to match that of Game of Thrones’ own Lannisters . . . but mercifully without the dragons or the nudity [Note to subs: Is this right? I’m not one of the 4.3 million people who watch this guff].

In the end, James Murdoch survived his ordeal by general meeting, as 51 per cent of the independent shareholders’ votes — after stripping out Fox’s 39 per cent holding — were cast in his favour. But, might this be a case where the perceived sins of the son are more troubling than the father’s?

In some ways, investors should be more worried about James’ influence over the Sky bid than Rupert’s influence over Sky News.

This week, the Competition & Markets Authority said its inquiry into Fox’s £11.7bn bid for the rest of Sky would assess whether Rupert Murdoch could influence editorial decisions at Sky News, or adversely affect “the range of viewpoints” in British media. However, this seems unlikely for at least two reasons. First, Sky News has managed to remain editorially independent with Mr Murdoch Snr as its de facto controlling shareholder for decades. Second, with pundits of the calibre of Apprentice contestant Michelle Dewberry and footballer Graeme Le Saux, Sky News’ viewpoints could never be described as entrenched. Quite the opposite: they are reassuringly broad, and shallow.

By contrast, James Murdoch’s role as chairman of a company that he is bidding for as a chief executive throws up conflicts of interest, and influence, at every turn. Three shareholder advisory groups recommended a vote against his reappointment at Sky, on grounds that investors need an independent chairman to protect their interests in a bid process.

Sky points out that a committee of independent directors has been put in charge of the Fox bid. And a majority of shareholders now seem unconcerned. But it is worth noting that the bid has skewed the shareholder register, by attracting short-term deal arbitrageurs. Longer term shareholders might wish to consider the Murdochs’ governance record at News Corp, and their reluctance to modify pay proposals at Sky — which investors voted against.

Corporate governance is also within the scope of the CMA inquiry — but it will be more likely that of Fox than Sky. So there is every danger the regulator will emulate those pundits: pursue the obvious but rather miss the point.

1970s board games

As all things 1970s become increasingly popular — leftwing Labour politics, strikes, beards, inflation, bearded Labour politicians — Britain’s blue-chip companies are remarkably on trend.

On Thursday, Sir John Parker’s report into boardroom diversity revealed that the percentage of FTSE 100 director positions held by UK citizens from ethnic minorities is exactly representative of the population . . . in 1972. At just 2 per cent. Some 51 of the top 100 companies do not have any ethnic minority Britons on their boards at all, despite this group now making up 14 per cent of the total population. Their directors could not look more dated if they wore flared pinstripes and bowlers. Perhaps some still do.

Sir John argues that UK boardrooms should better represent not only the nation as a whole but the diversity of the countries with which they trade. He therefore recommends a mentoring and sponsoring programme to ensure each FTSE 100 board has at least one director from an ethnic minority background by 2021, and each FTSE 250 board achieves the same by 2024. Government monitoring and a requirement to report diversity in annual reports should help the process — as it has with gender diversity, since the Lord Davies’ report in 2011.

But both these initiatives towards greater equality highlight an obvious omission: social, or class, diversity in the boardroom. Proposals for worker representatives on boards were dropped by the government earlier this year. Ironically, such appointments had worked well in the 1970s, at the British Shipbuilders Corporation and later Harland & Wolff. Just ask their chief executive: Sir John Parker.

WH Smith’s late arrival

After 200 years, WH Smith has returned to its origins as a railway station bookseller, deriving a majority of its revenues from travel outlets. One suspects it hit upon the strategy at Waterloo — where everyone takes an age to get back to where they started.

matthew.vincent@ft.com

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