Funds fight over Sky succession

THE row over Rupert Murdoch's attempts to install his son James as the new chief executive of BSkyB took a dramatic turn this weekend.

Furious City investors accused the man in charge of the selection team of not being independent. Lord St John of Fawsley heads a four-strong committee to find a replacement for Tony Ball, who resigned from the satellite TV group last week.

BSkyB chairman Rupert Murdoch, who controls 35.4% of the company, has made it clear he wants James, 30, who runs his father's Star TV operations in Asia, to succeed to the post.

But that has caused uproar among other investors, who fear Murdoch junior may not be the best candidate for the job.

They are concerned that Lord St John, a former Tory Minister, will not conduct a rigorous selection process, but merely go through the motions and ultimately bow to his chairman's wishes.

Now the National Association of Pension Funds, whose members represent about a quarter of the stock market, has entered the fray.

It says Lord St John cannot be impartial because he has been a part-time director of BSkyB since

1991. City rules on corporate governance state that any non-executive who has been on the board for more than ten years cannot be regarded as independent.

'In our view, any non-executive who has been on the board that long is not independent,' said a pension funds spokesman.

'For this reason, when Lord St John's appointment was last put to shareholders in 2001, we recommended that investors abstain in the vote to re-elect him.'

Lord St John, 74, a noted monarchist and constitutional expert, dismissed the investor criticism as 'poppycock'. He said BSkyB benefited from the mix of experience and youth on its board. 'I have spent my life with young people, thank God, but you need experienced people, too, who know how the company works,' he said. 'As long as the shareholders keep voting for me, I will stay.'

He dismissed suggestions that Murdoch should step down as chairman if his son became chief executive. He said he had not even raised the question with him. 'When you next meet the Queen, I suggest that if you want to have a constructive conversation, you do not suggest that she abdicates,' he said. 'It would be much worse to lose Rupert Murdoch from this company than anything else.'

The independence of another nomination committee member is also being questioned. John Thornton is a former president of investment bank Goldman Sachs, which was involved in the flotation of BSkyB in 1994 and remains joint broker and financial adviser.

Candidates to replace Ball are likely to include BSkyB finance director Martin Stewart as well as chief operating officer Richard Freudenstein.

Recruitment consultant Spencer Stuart is thought to have been appointed to carry out the search.

A replacement is expected to be found by the middle of November, in time for BSkyB's annual meeting, though some investors have criticised the timetable as being too short.