Sky revolt over plan to crown James Murdoch

Investors say he won’t be an independent chairman

SKY found itself at the centre of a shareholder revolt yesterday over the reappointment of James Murdoch as its chairman.

More than 28pc of shareholders voted against Murdoch, who is the son of media mogul Rupert, over concerns about his independence.

Twenty First Century Fox – owned by 85year-old Rupert, who is one of the world’s most powerful media magnates – holds a 39pc stake in Sky.

There has been speculation Fox will make a bid for the remaining shares, sparking fears Murdoch will fail to negotiate the best deal for minority shareholders.

Royal London, which owns £51.5m of Sky shares, said Murdoch’s reappointment as chairman was ‘inappropriate’.

Piers Hillier, chief investment officer, said: ‘Should Fox make a bid for Sky, investors need a strong independent chairman to protect the interests of minority shareholders and negotiate the best possible deal.

‘Additionally, no attempts were made to advertise the position externally, or appoint an agency, which goes against the UK corporate governance code.’

Murdoch’s return as chairman of Sky in January, after four years away, was mired in controversy.

He had resigned in 2012 in the wake of criticism from industry regulator Ofcom over his handling of the phone hacking scandal.

He had previously built Sky into a powerhouse over four years as chief executive and five as chairman, and was on the verge of selling it to Fox before a bid was abandoned.

However, months before his return as chairman of Sky, 43year-old Murdoch was made chief executive of Fox – receiving a £15m pay check.

He said that, for Fox, holding 40pc of Sky was ‘not an end state that is natural for us’, implying Fox may want to increase its stake.

Yesterday’s shareholder revolt at the annual general meeting in London overshadowed a strong set of interim financial results from Sky, which saw bumper sales boosts in Germany and Italy.

It has posted a 7pc increase in group revenues to £3.1bn in the first quarter, with 106,000 new customers signing up to the subscription TV provider.

Jeremy Darroch, group chief executive, said: ‘ We added customers at a good rate, albeit the quarter got off to a slow start due to the tail end of Euro 2016 and Rio Olympics, both big freeto-air events.

‘But since then you’ve seen demand build across the quarter and September was strong.’

Shares in Sky have fallen 19pc in the last 12 months over concerns it will be squeezed by telecoms companies and Netflix, which offers television content over the internet.

It has also been hit with a £600m increase in its bill for English Premier League rights this year.

But it has continued to come up with fresh ways to win new customers.

It is on the verge of launching its own mobile phone contract offer, and just has just invested in a new virtual reality app – Sky VR. But the potential of a fresh bid from Fox – taking advantage of the fall in the pound and lower share prices – has been a cause for constant uncertainty.

Analysts from Liberum said: ‘ The evidence seems to be mounting that the competitive and cost environments for Sky are getting tougher.’

And earlier this year investment bank Macquarie said the time was ripe for Fox to make a bid.

Sky released a statement after yesterday’s meeting where it noted the ‘ significant vote’ against Murdoch’s re-election.

It said: ‘ The board decision to re-appoint James as chairman was unanimous and recognised that he is a highly experienced executive with extensive knowledge of the international media industry and has been a strong contributor to Sky since he joined the board in 2003.

‘The board is confident that with the appointment of Martin Gilbert as deputy chairman and Andrew Sukawaty as senior independent director, there are strong governance processes in place to protect the interests of independent shareholders.

‘Nevertheless, we will engage with those shareholders who voted against the resolution.’

Sky also said eight out of ten of the biggest UK institutions which holds shares in Sky voted in favour of Murdoch’s re-election.

Shares in Sky fell 1.9pc, or 16.5p to 848p.