Murdochs expected to take a back seat at News Corporation in future

Professor Ajay Bhalla, an expert in family owned businesses at Cass Business School, said today's announcement that Murdoch is stepping down as chairman of BSkyB came as "no surprise", but believes it does signal a turning point for the way the family of 81-year-old Rupert Murdoch approaches News Corporation.

Bhalla said: "At this point, James Murdoch has first and foremost an obligation to preserve the Murdoch family’s wealth and reputation.

"Family objectives for wealth, status and power for present and future generations play a vital role in family owned firms. However, this varies depending on the type of family firm. There are two types of family firms which are publicly owned.

"One, where the family not only has the controlling stake, but is also deeply involved in managing the business. The other is where the family may or may not have the controlling stake, but is not involved in the business.

"So far, the Murdochs have opted to be in the first category. What we are seeing now is a shift towards the Murdoch family taking a back seat in managing the businesses, and becoming the second type of family firm.

"In the current situation, the family has to maximize its wealth, which has been tied in the businesses it controls. In the near future, we are likely to see the family opting for private rather public ownership – all in the name of family and the next generation."

Responding to today's news, Rupert Murdoch said: "We are grateful for James Murdoch's successful leadership of BSkyB. He has played a major role in propelling the company into the market-leading position it enjoys today, and in the process, has been instrumental in creating substantial value for News Corporation shareholders. 

"We look forward to BSkyB's continued growth under the leadership of Nicholas Ferguson and Jeremy Darroch and to James' continued substantial contributions at News Corporation."

However, such a positive appraisal was not shared by Alan MacDougall, managing director of Europe's largest independent investment provider, PIRC, who called James Murdoch's resignation "inevitable", but added that he now needed to go a step further and withdraw from the BSkyB board altogether.

MacDougall said: "The combination of parliamentary and regulatory scrutiny and pressure from shareholders meant it was only a matter of time before some ground was given. But we believe it would be best for the company and its shareholders if he left the board entirely, and would find it hard to support his re-election at a future meeting.

"We are pleased that there has been a belated acknowledgement of the need for change, but dragging the process out was the wrong approach to take. In reality, the company should have appointed an independent chair last summer, to create a clear separation between the management of the business and the scandal at News Corp. Failure to act more quickly has resulted in self-inflicted reputational damage.

"Sky still isn't out of the woods, not least because of the Ofcom 'fit and proper' test. Therefore, shareholders will be looking to see substantial governance reforms, and will be watching new board appointments with interest."

Follow Arif Durrani on Twitter: @DurraniMix

This article was first published on mediaweek.co.uk