Murdoch appointment sparks investor fury

Nov 04 2003 by Brian Amble Print This Article

The appointment of Rupert Murdoch’s 31-year old son James as CEO of pay-TV company BSkyB and the youngest-ever chief executive of a FTSE 100 company has raised the hackles of institutional investors as never before.

Coming as it did on the same day that the revised Combined Code of Corporate Governance came into effect - incorporating the majority of Derek Higgs' recommendations on how UK boardrooms ought to be structured - the BSkyB appointment has been – to put it mildly –badly timed.

With Murdoch senior’s News Corporation holding a 34.5 per cent share stake in BSkyB, the company’s other shareholders are concerned that BSkyB will become a personal fiefdom for the Murdoch family.

The mood of BSkyB’s shareholders was neatly summed up by the Association of British Insurers head of investment affairs, Peter Montagnon, who said that it “stretched credulity” that Murdoch Junior was the best person to run the company and added that "it is difficult to conceive of an arrangement whereby a father is chairman and a son chief executive to be a structure with appropriate accountability,"

Meanwhile, the National Association of Pension Funds has raised the prospect that investors may call an extraordinary general meeting in an attempt to vote off BSkyB's entire board.

Although this is unlikely to succeed, at the very least it seems inevitable that shareholders will demand major reforms in BSkyB’s corporate governance procedures at the company’s annual meeting on November 14.

Nomination committee chairman Lord St John is likely to find himself an early casualty of this shareholder anger, with the NAPF already calling on its members to vote against his reappointment as a non-executive director.

While Murdoch Junior breaks the record as the youngest FTSE 100 CEO, a study earlier this year by Dr Elisabeth Marx of Search and Selection firm, Hanover Fox International showed that CEOs are getting younger.

According to Dr Marx’s figures, only six FTSE 100 chief executives were under 45 in 1996, a figure that has now more than doubled to 13. Marks and Spencer, Reuters and the Royal Bank of Scotland are among those companies with younger CEOs.

But it is the retail sector that leads the way for youthful high-flyers. Belinda Earl was 38 when she became CEO of Debenhams in 1999, the same age as Kate Swann, who was appointed CEO of WH Smith earlier this year. Charles Dunstone, founder and CEO of Carphone Warehouse, is 39, while Toby Courtauld became CEO of Great Portland Estates in 2002 aged just 34.

In contrast, the oldest FTSE 100 director is Masao Inagaki, 80, who holds a non-executive post at communications group WPP.

But Murdoch Junior’s rapid rise also reminds us that good old-fashioned nepotism can still provide a useful shortcut to the boardroom.

His predecessor as the UK’s youngest FTSE 100 CEO, Simon Wolfson, was 33 when he took the reins of clothing retailer Next in 1999. His father, Lord Wolfson of Sunningdale was chairman at the time.

George Weston, the executive deputy chairman of Associated British Foods was appointed aged 36 and is a member of the firm’s founding family.

Viscount Rothermere was aged 30 when he became chairman of newspaper group Daily Mail & General Trust on the death of his father in 1998, while the CEO of Independent News & Media is 36 year old Gavin O'Reilly, son of executive chairman Sir Anthony O'Reilly.

A report earlier this year by the London Business School and the BDO Centre for Family Business pointed out that family businesses are a major force in every world economy, including the UK - accounting for around three quarters of all UK firms - and suggests that there is no sign that they are diminishing in number.

But, somewhat prophetically, it also warned that “family businesses risk their growth potential if they fail to recruit from outside, re-evaluate governance structures and face up to difficult issues - such as succession - before they become potential areas for family unrest."