James Murdoch survives as bid to axe him is rejected by Sky shareholders

James Murdoch avoided a revolt over his position on the board of BSkyB yesterday despite concerns about his position voiced by the media watchdog in the wake of the phone-hacking allegations.

His re-election as a non-executive director came after the group revealed a 5 per cent rise in operating profits in the third quarter to £310 million, while its customer base added 48,000 subscribers in the period.

Murdoch’s re-appointment at the group’s annual general meeting came with the backing of almost 95 per cent of shareholder votes, although nearly 20 per cent failed to back the company’s pay report.

He stepped down as BSkyB’s chairman earlier this year amid fears that the News International phone-hacking scandal would damage the firm, but he stayed on as a director.

Fresh concerns had been raised by shareholder groups over criticisms levelled at Murdoch by telecoms regulator Ofcom in its review of Sky’s broadcasting licence in the wake of the hacking allegations.

But his re-election did not come without some friction as investor John Marshall argued that “the name Murdoch is toxic” among a large number of investors and that his presence on the board risked damaging the company.

Shareholder Louise Rouse, a director of engagement at responsible investment campaigners FairPensions, asked for reassurance that Murdoch was living up to his pledge to “do better”.

But BSkyB chairman Nicholas Ferguson defended Murdoch and his position on the board, saying he had shown the “highest level of competence and integrity”.

Shareholder group Pensions Investment Research Consultants (Pirc) had urged shareholders to vote against his re-appointment in light of Ofcom’s comments.

In addition, the group said Murdoch is not considered to be independent as his father Rupert is the ultimate controlling shareholder through News Corporation.

Ofcom determined that BSkyB was “fit and proper” to hold a licence but Murdoch was spared no criticism in its concluding report.

It said: “We consider that the events set out above raise questions regarding James Murdoch’s competence in the handling of these matters and his attitude towards the possibility of wrongdoing in the companies for which he was responsible.”

Ofcom launched its review of Sky after Murdoch and News Corporation, which owns 39 per cent of its shares, were engulfed in the hacking scandal which led to the closure of News Corp’s News of the World.

Murdoch had no involvement with News International until the end of 2007, almost a year after the sentencing of News of the World’s royal editor Clive Goodman and private investigator Glenn Mulcaire for phone hacking.

But after he took over as chief executive he received an e-mail suggesting that criminal activities were more widespread, although he claimed that he failed to read the correspondence fully. News Corp defended Murdoch at the time of September’s Ofcom report, arguing that the statements relating to his actions as an executive and director were “not at all substantiated by evidence”.

Yesterday’s third-quarter figures showed that retail subscription revenue grew by 4 per cent to £1.4 billion, helped by the launch of a dedicated Formula One channel.