Murdoch faces Sky dilemma over son

RUPERT Murdoch has been warned that he would have to stand down as chairman of BSkyB if he wants his son James Murdoch installed as chief executive.

The warning shot was delivered to two BSkyB non-executive directors, Lord St John and Allan Leighton, at a meeting with around a dozen institutional shareholders.

'It's a quid pro quo. If Rupert wants James as chief executive, he would have to stand down himself. Otherwise the Murdoch family would just have too much power,' said one investor.

Father and son in the two most important roles was tantamount to having a combined chairman and chief executive - which breaches boardroom rules, another investor said.

The warning means that even if James, who runs the Star TV venture in Hong Kong and is 30, is deemed the best candidate, he may still face shareholder resistance.

Although no formal position was set out at the meeting, two weeks ago - which was held under the auspices of the Association of British Insurers - at least one shareholder made plain that the father and son combination was totally unacceptable.

Former arts minister Lord St John and Post Office chairman Allan Leighton are among four non-executives leading the search for a successor to Tony Ball.

Outside headhunters have also been appointed.

Analysts says it is highly unlikely Murdoch Snr would be prepared to surrender his chairmanship unless he could install an unquestionably loyal ally.

BSkyB finance director Martin Stewart and chief operating officer Richard Freudenstein are seen as potential candidates for the chief executive position.

The Murdoch family controls about 35% of the company through News Corporation.