Sky Shareholder Support for Chairman James Murdoch Drops Sharply

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James Murdoch

Nearly 30 percent and a slight majority of the independent shareholder vote was cast against his re-election to the Euro pay TV giant's board.

Shareholders of European pay TV giant Sky on Thursday voted in favor of all board members standing for re-election, including 21st Century Fox CEO James Murdoch, who serves as chairman, but Murdoch only got 71.55 percent of the shareholder vote in his support.

That includes support from largest shareholder Fox, which controls a stake of more than 39 percent in Sky, which operates in the U.K., Ireland, Germany, Austria and Italy.

Murdoch's shareholder support dropped sharply from recent years with 28.45 percent of the shareholder vote cast against his re-election on Thursday. At Sky's 2015 annual shareholder meeting, only 1.5 percent had opposed Murdoch's re-election when he was a regular board member, down from 4.35 percent in 2014. According to one expert, the Thursday results meant that 50.6 percent of independent Sky shareholders didn't support Murdoch in Thursday's vote.

Deputy chairman Martin Gilbert got the second-lowest percentage in terms of shareholder support on Thursday with 93.4 percent. All other Sky directors, including CEO Jeremy Darroch, got more than 95 percent of the shareholder vote in their favor. Fox executive vice chairman Chase Carey and CFO John Nallen also were among those board members re-elected on Thursday, each with 98.2 percent of the shareholder vote in their favor.

Early this year, Sky's board tapped Murdoch to become its chairman in the spring and said he had unanimous board support. He had previously been CEO of Sky's U.K.-only predecessor BSkyB between 2003 and 2007 and then chairman until April 2012 before becoming a non-executive director on the board. In late 2014, after BSkyB acquired Fox's Sky Italia and Sky Deutschland, the bigger company changed its name to Sky.

But the chairman appointment was criticized by some institutional shareholders that said it could pose a conflict of interest, given Murdoch is CEO of Sky's largest shareholder. One of them, Royal London Asset Management, which owns a 0.35 percent stake in Sky, on Thursday renewed its call for an independent chairman.

"Should Fox make a bid for [full control of] Sky, investors need a strong independent chairman to protect the interests of minority shareholders and negotiate the best possible deal," Reuters quoted Piers Hillier, chief investment officer of Royal London, as saying.

Some analysts have wondered if Fox could look to buy full control as Sky's stock has declined this year, and the Brexit vote has led to a weaker pound, making acquisitions by U.S. companies in Britain cheaper in dollar terms. But Fox management has repeatedly signaled that it wasn't planning to change its holding in Sky over the near-term.

"The board notes the significant vote against ... the re-election of James Murdoch as a non-executive director and is aware that some proxy advisory services recommended that shareholders vote against his election on the basis that he is not independent," Sky said in a statement. "The board decision to re-appoint James as chairman was unanimous and recognized that he is a highly experienced executive with extensive knowledge of the international media industry and has been a strong contributor to Sky since he joined the board in 2003."

It added: "The board is confident that with the appointment of Martin Gilbert as deputy chairman and Andrew Sukawaty as senior independent director, there are strong governance processes in place to protect the interests of independent shareholders. Nevertheless, we will engage with those shareholders who voted against the resolution."