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Rothschild and murdoch son team up bskyb { November 3 2003 }

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7.30pm update
Rothschild to act as BSkyB buffer

Owen Gibson
Monday November 3, 2003

BSkyB has moved to head off criticism of the appointment of James Murdoch as chief executive by naming City grandee Lord Rothschild deputy chairman to act as a buffer between a father-and-son management team.
The Royal Mail chief and former director of Asda, Allan Leighton, will also take over as the chairman of the company's audit committee.

Rupert Murdoch, who controls 35.4% of BSkyB, said it was a coup to attract someone of the calibre of Lord Rothschild, the 67-year-old merchant banker who founded Global Asset Management.

However, leading investors in BSkyB have already warned the new non-executive deputy chairman is unlikely to be enough to prevent a full-scale shareholder rebellion at next week's annual general meeting.

The four-strong BSkyB nominations committee, headed by Lord St John of Fawsley, was keen to stress after today's three-hour marathon board meeting that Rupert Murdoch's 30-year-old son was considered the best man for the job after what they described as a "rigorous search and nomination process".

In tonight's announcement BSkyB said those directors affiliated to News Corporation had not voted on the appointment of the new chief executive.

The remaining independent non-executive directors "unanimously endorsed" the recommendation put to them by BSkyB's nomination committee, it added.

But Rupert Murdoch, who has backed his son for the job from the start, was this evening unapologetic about the selection procedure.

"The board and I are pleased that the nomination committee has completed its task and it is unanimous in its conviction that James is the right man for this job," he said.

"He follows a series of successful chief executives - Sam Chisholm, Mark Booth, Tony Ball.

"I feel confident James will carry on their work and continue the company's success.

"It is a mark of BSkyB's stature that the board has been able to attract a man of Lord Rothschild's calibre and we are delighted he has accepted the post of deputy chairman."

In a further effort to placate angry investors, James Murdoch will immediately resign from the boards of News Corp and NDS, the satellite encryption company that is also part of his father's global empire.

Mr Leighton, who was also on the nominations committee, will take over as chairman of the company's audit committee.

Philip Bowman, the current chairman, today announced he was stepping down.

James Murdoch, who will take over from Tony Ball tomorrow, said: "Sky is one of a very small group of Britain's great new industrial companies.

"It is a world leader in multichannel television and an innovative business which has, since its inception, been at the forefront in technological and creative advance.

"It is a privilege to have the opportunity to play a part in the company's future.

"I particularly look forward to working with the people at Sky who have played such a key role in its success, and to working for all the shareholders to deliver even greater value."

The announcement has done little to assuage the anger of investors who have accused the BSkyB board and Rupert Murdoch of riding roughshod over recently imposed corporate governance guidelines.

A spokesman for the National Association of Pension Funds said tonight: "It's an interesting development and we will have to look at the explanation and go back to our members to see what they have to say."

Investors are concerned BSkyB will now be too close to News Corp.

One major investor tonight said the appointment of new non-executive deputy chairman was unlikely to be enough to assuage their concerns, particularly given the lack of communication with shareholders during the selection process.

They are also concerned that having a father-and-son team at the helm of the company - on course to be making over 1bn in profits by the end of the decade - flies in the face of good corporate governance.

The headhunter Spencer Stuart confirmed it had shortlisted seven candidates - "three highly qualified external CEOs and four internal, including James Murdoch".

Jan Hall, a partner at the firm, said the search process was "rigorous and independent".

The BSkyB board will be keen to ensure the transition is a seamless one and that the other senior managers who applied for the job - finance director Martin Stewart, chief operating officer Richard Freudenstein and BSkyB's sales and marketing director Jon Florsheim - remain in place to smooth James Murdoch's path into the top job.

Since Mr Ball's intention to step down was leaked to the press in mid-September, pension groups and fund managers have continued to insist the process has not been fair or transparent enough.

On Friday the NAPF issued a scathing indictment of the quest for a new chief executive and urged investors to stage a protest vote at BSkyB's annual meeting.

The association recommended shareholders vote against the re-election of Lord St John because of his lack of independence from the board.

He has been on the board for 12 years and is considered to be closely associated with the News Corp interests.

Today the NAPF chief, Christine Farnish, reiterated her concerns over the appointment of James Murdoch.

Others have also added their voices to the growing rebellion, which is likely to lead to a stormy annual general meeting next Friday.

The general secretary of the Trade Unions Congress, Brendan Barber, has called on shareholders to vote against the re-election of James Murdoch as a non-executive director in protest at the selection procedure.

To contact the MediaGuardian newsdesk email or phone 020 7239 9857

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