BSkyB (NYSE: BSY) deputy chairman Nick Ferguson’s letter to investors explaining why James Murdoch should remain chairman of the broadcaster…
I thought it would be helpful if I set out the reasoning behind the Independent Directors’ unanimous decision that James Murdoch should continue as Chairman. We are quite clear that it is an important issue and we have handled it as such. The Independent Directors have always acted in the interest of all the shareholders and we will continue to do so.
We start with the basic judgement on the key roles of the Chairman. In essence, these are responsibilities for leading an effective board, as set out in the UK Corporate Governance Code; and providing strategic advice and facilitating a constructive relationship with the senior management team.
On both of these, we agreed that James Murdoch has done a first class job. In terms of the Board, he is visibly a good Chairman, with good well-structured and open meetings, and sound procedures. He has also put in place robust governance, as you saw from the bid process, on which shareholders have universally complimented the Board.
The relationship with the CEO is key in any chairmanship. On this, he gets very high marks. He is respected and trusted by the CEO and other senior management; and he has excellent strategic insights.
We then considered carefully other factors which could affect his position. The first was his available time, given his executive role at News Corp. (NSDQ: NWS) James has assured the Board of his availability; and Jeremy Darroch confirms that since the end of the bid, James has been fully available as required.
The next was the question of integrity. Clearly there has been a great deal of speculation on this, but your Independent Directors will always deal with substance. We have known James for some eight years, and during that time he has always acted with integrity in the eyes of both the Board and the senior management. If this was to change, clearly the independent directors would re-evaluate the position.
A few shareholders have raised with us their concern of having a Chairman who comes from News Corp, when they expect a further bid. News Corp have made clear that they are not contemplating a bid, and the focus of the entire Board is on helping the company to run well. If there was another bid, we have shown that we have clear governance procedures to deal with it.
I would note that a year ago, five months after the bid was announced, 98% of the shareholders voted for James Murdoch to be re-elected. Finally, the independent directors believe that from time to time there is an advantage in having a News Corp Chairman to facilitate agreement on key actions, such as the recent buy-back announcement, and the progressive dividend policy, which the company has adopted.
We’ve also considered whether there would be any negative reputational effect on the company, as a result of the News of the World issues. We have seen no effect on sales, customers or suppliers over the last five months. The recent results substantiate that. We have seen no effect on the share price, which has materially outperformed the peer group and the FTSE since the bid ended. Finally, we have seen no negative effect internally.
Clearly, before coming to our decision, we also took soundings from shareholders, both directly and through the brokers, most of whom were either in favour of continuation or wished to leave the decision to the Board. We will continue to listen to shareholders at all times.
After considering all of these issues, the Independent Directors reached the unanimous conclusion that James should continue as Chairman.
BSkyB deputy chairman
This article originally appeared in Â© Guardian News & Media Ltd..