Murdoch and Hannam’s departures symbolise power shift
THERE can be no doubt that James Murdoch’s decision to step down as chairman of BSkyB is good news for the company. It will allow its highly capable chief executive, Jeremy Darroch, to continue building one of Britain’s most successful firms without being distracted by endless speculation about the future of its chairman.
That said, the separation is far from complete and the company will remain exposed to the fallout from the phone-hacking saga at Murdoch’s News Corp’s UK newspaper unit.
For a start, Murdoch remains a non-executive director of the UK broadcaster; and of course News Corporation retains its 39 per cent shareholding in the business. It would have made more sense for Murdoch to make a clean break and for News Corp to appoint a different director in his place. It is obviously fair for News Corp to have board representation – but it doesn’t have to be via a Murdoch family member.
Ultimately, News Corp’s large minority shareholding is an unresolved and unsatisfactory state of affairs, and can only end in one of two ways: a full takeover by News Corp at some point in the future, perhaps following an exit from UK newspapers or Rupert Murdoch’s retirement; or a gradual divestment if the US giant gives up and decides to quit the UK TV market.
Last but not least, BSkyB is still the target of an Ofcom inquiry into whether or not it is “fit and proper” to continue to hold a media licence; in practice this means that News Corp could be forced to sell its shares in the business if it is deemed that the phone hacking scandal in its UK tabloids has discredited the entire New York based company. Regardless of what one thinks of Rupert Murdoch and his company, this would be a travesty. The law is wrong and must be changed: the government should focus on preventing and punishing crimes – and of course some were committed by the News of the World and elsewhere and should be punished severely – and not on judging the merits or otherwise of individual owners and companies. There are plenty of rules on content, which all broadcasters much follow, without needing arbitrary rules on ownership.
There was a certain symmetry between James Murdoch’s departure from the BSkyB chair and banking super-star Ian Hannam’s resignation from JP Morgan Cazenove yesterday after he was told by the FSA to pay a £450,000 fine for market abuse (he is appealing the decision). It is important that white collar rule-breaking be penalised.
But I also have some sympathy for the view – forcibly expressed on page one by his friend David Davis, the Tory MP – that the FSA’s procedures can be highly questionable. Now that the regulator has started to prosecute and fine a much larger number of people, the government needs to make sure that the principles of natural justice are always respected. Rules should be clear and simple; and it shouldn’t be excessively costly to appeal a decision.
But yesterday was an important day in the City: two men who undoubtedly once thought they were untouchable were brought down by regulators and politicians. It was of course because of the Leveson inquiry and the House of Commons investigations into phone-hacking that Murdoch decided to step down; the end game of that process for him and his family remains impossible to predict.
But one thing is clear: politics and the state are reasserting themselves, as part of a complex chain of events triggered by political responses to the global recession. In that respect, the UK is becoming more like the US; we should expect many more City scalps.