James Murdoch, BSkyB and an issue of honour

In Edinburgh in 2009, James Murdoch gave the MacTaggart Lecture. This is the media industry's big event of the year and all the top figures from the sector were there, including Jana Bennett, the president of BBC Worldwide, and Dawn Airey, the chief executive of Five.

In the audience was one Ed Richards, the chief executive of Ofcom. What Murdoch had to say about the media regulator would leave Richards gently steaming in his seat. Ofcom was, Murdoch said, an unaccountable institution which went about its business of nose-poking with relish. In five years, Murdoch continued, Ofcom had launched nearly 450 consultations and three Public Service Broadcasting annual reports. All in all, more than 18,000 pages had spewed forth from the offices of an organisation which the chairman of BSkyB described as a regulator armed with a set of prejudices and a spreadsheet.

Little did Murdoch know then, but Richards now holds the future of Murdoch's career as chairman of BSkyB in his hands. At the end of next month, the Culture, Media and Sport Select Committee will report its findings into phone hacking at News International, where Murdoch was formerly executive chairman. If the committee finds against Murdoch and suggests any wrong-doing, then Ofcom will ramp up its inquiry into whether he still passes fit and proper test for anyone running a company that holds a television licence. If these two events happen in that order, Murdoch is sunk.

At around the same time as the Parliamentary committee reports, Murdoch and his father, Rupert, will appear before the Leveson Inquiry into the behaviour of the media. Once again, Murdoch will be in the spotlight.

How should Murdoch and the board of BSkyB respond? Would it be better to go now as chairman, make your case to the public on the widely agreed consensus that his time at the broadcaster has been marked by great success and leave permanently for New York and other duties within News Corp?

Or should he battle on, fighting every accusation that comes out of the News International mess and suggestions from many that it would be better to clear the air and resign from BSkyB?

Murdoch is grappling with a response and, I believe, wavers between the two positions. Inside, he has a burning sense that his integrity has been wrongly questioned and that therefore he has no reason to go. To bow to his enemies would be tantamount to an admission of guilt and would leave other board members who have backed him horribly exposed.

On the other hand, as he divests himself of his other board duties at Sotheby's and GlaxoSmithKline, a strong case could be made that it would be better to exit BSkyB as well.

Close observers of the situation say that although the committee is unlikely to accuse Murdoch of deliberately misleading them, they will surely raise concerns about the fact that Murdoch did not appear to check the key email sent to him in 2008 by two senior executives at News International regarding phone hacking allegations.

Murdoch said he did not read the email because he was alone with his children and therefore too busy. This has the faint whiff of the dog ate my homework defence. Harry S Truman had a sign on his desk: The buck stops here. Murdoch should consider where ultimately the buck stopped at News International.

As he considers what to do, I think Murdoch is maybe confusing two things. One is the truth, or otherwise, of the allegations against him. The second is whether he should stay as chairman of BSkyB.

Excluding votes cast by News Corporation, only 55pc of the independent shareholders backed Murdoch as BSkyB chairman at the annual general meeting last November. As one of the shareholders that voted against, Legal & General, made clear in private, this wasn't about Murdoch's integrity, it was about whether someone so compromised by his links to News International could rightly continue at BSkyB. It was a question of governance, not honesty.

Mr Murdoch should see the issue through the same prism. The BSkyB board should also consider whether the constant scrutiny of their chairman over issues that are nothing to do with the broadcaster are helpful to the good operation of BSkyB. Would a non-executive representative of News Corp and an independent chairman be a more robust structure beyond criticism? In Nick Ferguson, presently the board senior independent non-executive director, they have a ready-made replacement, even if only temporary.

This week, both the BBC's Panorama and PSB in America (both publicly funded broadcasters with a scratchy attitude to BSkyB's private sector success) are planning to broadcast programmes making fresh allegations about the News Corp empire.
Murdoch will certainly spend much of April in the news.

If he does not decide to go himself - walking out of the front door rather than being pushed out - Murdoch will rely on the few big institutional investors in BSkyB that still back him. If that changes, then Murdoch will no longer have to make a decision. It will be made for him.