James falls to earth at Sky
JAMES Murdoch’s decision to step down as chair of BSKYB will be a bitter personal blow. The younger Murdoch’s period as chief executive of Sky sealed his reputation as the most likely successor to Rupert.
In the face of shareholder discontent, he sacrificed income for investment and moved Sky to a new technological level which kept it several paces ahead of potential rivals Ondigital and Virgin.
It was only recently that it was discovered that Sky may have used its technological superiority, through control of Israeli software firm NDS, to potentially gain commercial advantage.
What has been evident for some time is that support among minority shareholders (News Corporation owns 39.1pc) has been ebbing fast as the allegations of abuse at other Murdoch enterprises come through thick and fast.
The endgame was evident at the November 2011 annual general meeting in London when 45pc of the independent investors voted against, or abstained, on the younger Murdoch’s reappointment.
It is my understanding that senior board members made it clear to James Murdoch that his position as chairman would be untenable if a report by a committee of MPS were to be highly critical.
Matters have also been complicated for the younger Murdoch by the decision of media regulator Ofcom to investigate whether he passed the ‘fit and proper’ test for stewardship.
With City grandee Nicholas Ferguson stepping up to be chairman and Jeremy Darroch remaining as chief executive, the BSKYB board no longer looks like a family fiefdom.
But there must be a risk that the forced separation of Sky from the management of the mother ship may rob it of broadcasting nous.
The Murdochs deservedly are paying a heavy price for abuse at the News of the World.
Friends united
AMONG the big criticisms of the Financial Services Authority is that it has been too focused on the small fry on the fringes of the Square Mile.
In the banking crisis those most responsible, including Fred Goodwin of Royal Bank of Scotland and Andy Hornby and Peter Cummings of HBOS, have yet to face any formal disciplinary action.
What is also clear is that in most takeovers the shares move sharply higher before the transaction is announced. Some of this may be down to intelligent speculation from the analysts but there is always the concern that high level, privileged information is escaping.
The decision of the FSA to go after Ian Hannam, chairman of capital markets at JP Morgan Cazenove, marks an escalation in regulatory intervention. JP Morgan Cazenove are, after all, regarded as among the most blue blood of London’s financial houses.
And Hannam, who has resigned, has been a key figure in some of the biggest fund raisings, deals and initial public offerings of recent years, which includes bringing mining phenomenon Xstrata to the London market.
The charge is that in email exchanges, he passed sensitive information about a client, Heritage Oil, to another energy group when the two companies were in potential merger talks.
Friends of Hannam, who believe he has been badly treated by the FSA, note the fine is based on two emails discovered among a cache of more than 20,000 and were innocuous.
They are furious that the FSA has chosen to fine him £450,000 on this basis, even though it acknowledges that ‘ Hannam did not set out to commit market abuse’.
With his reputation and future as City practitioner on the line, Hannam has taken the unusual step of appealing to the Upper Tribunal for a full hearing. The reality is, of course, that if Hannam was sharing confidential material about oil discoveries that was not more broadly available to the public markets, then he was almost certainly in breach of the rules. The fact that such practices are widespread in the City, and the data concerned was routine speculation rather than explosive, is neither here nor there.
Great reputations should not protect City chieftains from the rules, any more than they protect errant sporting figures.
Prize fighter
THE Simon Wolfson prize shortlist ( details page 67) on exiting the euro could not be more timely. It provides a useful distraction for Wolfson from his role as chum, financial backer and hospitality guest of the Prime Minister.
More importantly, it comes at a moment when people are again fearful that the European project can hold together. Youth joblessness in Spain has hit a shocking 50pc.
Finding an elegant way for the euroland weaklings – Portugal, Ireland, Greece and Spain (and possibly Italy) – to get a divorce is becoming a priority. The European Central Bank’s sticking plasters could soon start peeling away.