Monday, 29 October 2012

BSkyB - don't expect an upset

BSkyB's AGM takes place this Thursday and, inevitably, James Murdoch's re-election has become the focus of attention once more. At last year's AGM he was re-elected with a vote of almost 19% against. That would register as a big protest in any company as votes against directors are very low typically. But of course BSkyB isn't an ordinary company, as it has News Corp as a controlling shareholder. Once you take account of its 39% stake, the vote from other shareholders in favour of James Murdoch (ie excluding votes against and abstentions) was about 55%.

Since last year's AGM three things have happened. James Murdoch has stood down as chair, though he remains as a non-executive. He has been criticised by the DCMS select committee, which found his role in the hacking scandal unimpressive, and was unable to decide how reliable his evidence was. (It's worth noting, by the way, that his loudest defender on the committee is now a columnist for The Sun). Thirdly he has been criticised by the broadcasting regulator Ofcom, I think in stronger terms than the DCMS committee did. Ofcom ruled in BSkyB's favour, as expected, on the 'fit and proper' test, but there is an implication in its report that had James remained as chair then its thinking might have been different (though its decision might still have been the same, obviously).

Already there is a bit of noise around the AGM thanks to Fair Pensions' valiant efforts to keep this issue alive. But I would be surprised if the result of Thursday's meeting is anything other than an easy win for James. For some investors, giving up the chairmanship was enough. Others won't take a view on the hacking scandal, and essentially give James the benefit of the doubt. In addition, the fact that BSkyB cleared the 'fit and proper' test means that a big threat to the company has passed. Add all that together and you can see that there's enough wriggle room for mainstream investors to back off. (And bear in mind that some big players backed him last year anyway).

For what it's worth (and everybody look what's going down...)   I think this is problematic. It demonstrates, to me, the enormous gap between the idea that shareholders can/should play a quasi public interest role in companies and the reality on the ground. In other fields individuals in leadership positions subject to this level of criticism would be forced out, even if there was no 'smoking gun'. In a PLC, especially one with a powerful controlling shareholder, things are different. These kinds of judgments are easily ducked if you can construct a case why the individual remaining in post is good for the business, and thus shareholders. And when you consider that this will be the third time that James Murdoch has been awarded such latitude (appointment as CEO and appointment as chair previously) you realise how familiar the arguments for letting it happen are.

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