Early last Tuesday - 4am Eastern Standard Time, to be precise - James Murdoch was standing by the phone in New York waiting to be patched through to a conference call with the members of BSkyB's board.In London it was 9am and Nicholas Ferguson, the board's senior independent director, was on the line, along with Jeremy Darroch, chief executive of BSkyB, and other members of the pay-TV company's top table.Most knew what was coming. At the weekend, a report in The Sunday Telegraph revealed that Murdoch was "on the brink" of quitting as chairman of BSkyB. He had already spoken in the preceding weeks to key confidants including Darroch, Ferguson and Tom Mockridge, the chief executive of News International and close friend of Murdoch. Murdoch knew the ice was starting to crack beneath his feet.In a series of one-on-one calls on Monday, Murdoch advised board members in the starkest terms yet that he was minded to resign. From News Corporation's base on the Avenue of the Americas in mid-town New York, he explained that the contagion leaking from the investigation into alleged criminal activity at News International - where he was formerly executive chairman - could no longer be ignored. He was a "lightning rod", increasingly the focus of aggressive attacks over his integrity and the inherent conflict - according to critics - of being both chairman of BSkyB and also deputy chief operating officer of News Corp, a 39pc owner of the pay-TV company.The forthcoming report by the Culture, Media and Sport Select Committee into the allegations of phone hacking would only increase the pressure on him as chairman. Then there was his appearance, at around the same time and alongside his father, at the Leveson Inquiry into media standards and the relationship between the industry and politicians, up to and including the Prime Minister.Both could happen in the final week of April - a perfect storm Murdoch feared he would not survive.During the conference call on Tuesday morning, Murdoch explained to the board - which had long backed him in the face of mounting negative evidence - that however much he tried, it was not possible to put any clear blue water between him and the allegations swirling around News Corp. Just the week before, the media had been alive with claims that a set-top box security company called NDS had used its knowledge of the pay-TV market to undermine rivals to BSkyB, which was one of its major customers - claims NDS hotly denies. Why was it such a big story, allies of Murdoch asked? Because Murdoch sits on NDS's board.Murdoch had also been made aware - "a few months ago", according to senior BSkyB sources - of the fact that Sky News had admitted to the police that it had hacked into emails connected to the case of John Darwin, the infamous "canoe man" who had faked his own death. Even though Sky News argued that the illegal activity was justified as the evidence discovered played a key part in convicting Darwin's wife, Anne, of deception, Murdoch could sense the toxic nature of yet another hacking story.Senior sources at BSkyB insist there was "absolutely no connection" between the Sky News admission, revealed on Thursday, and Murdoch's decision to quit. But as one figure close to Murdoch chose to put it, "it still looks s**t".The Tuesday morning conference call lasted for 30 minutes. Board members took it in turns to thank Murdoch for his efforts at BSkyB, which has seen over pounds 3bn returned to investors, and to welcome the fact that he was staying on the board as a non-executive director. On the call it was announced that Ferguson was to become chairman and Mockridge, the former head of Sky Italia, was to be his deputy.That afternoon, Murdoch's resignation was announced to the market. In a letter to the board, Murdoch gave his reasons for leaving: "As attention continues to be paid to past events at News International, I am determined that the interests of BSkyB should not be undermined by matters outside the scope of this company," he wrote."I am aware that my role as chairman could become a lightning rod for BSkyB and I believe that my resignation will help to ensure that there is no false conflation with events at a separate organisation."Murdoch had first started formulating his plan for exit in December 2011. Despite a rocky AGM the month before at which only 55pc of the independent shareholders had voted for Murdoch to remain as chairman, Murdoch and his father, Rupert, the chairman and chief operating officer of News Corp, still believed the 39-year-old could continue.The MPs' select committee had failed to land a punch at his second appearance before it that autumn, resorting to a rather lame "you run your company like the Mafia" accusation that Murdoch brushed aside.But on December 12, Murdoch's mood changed. It was revealed that he had been sent an email in 2008 alleging that phone hacking at the News of the World was more widespread than one rogue reporter, as had been previously claimed. Murdoch had to admit that despite being executive chairman of News International at the time - and a man who was apparently taking the issue tremendously seriously - he had not bothered to read it because, it later transpired, he was "busy looking after my children".Suddenly, this was a story not about integrity but about competence. The revelation of the email also "unsettled the board", according to those close to the process. Then came the evidence of Sue Akers to the Leveson Inquiry in February this year. The deputy Assistant Commissioner of the Metropolitan Police alleged The Sun maintained a "network of corrupted officials" paid for giving information to the newspaper. Again, Murdoch appeared unsighted on the issue.Two days later, Murdoch quit News International, spooking investors further by seeming to follow events rather than be ahead of them. Murdoch realised that he could lose everything if the select committee inquiry was brutal and he was forced out. If he went early, he could hang on to the non-executive position. After spending much of March speaking to those close to him, particularly Darroch who played a vital role throughout the decision-making, Murdoch decided enough was enough.The question now is where does the move leave him? Some see it as a master stroke, immediately reducing the toxicity of the situation and closing off one of the committee's key routes of attack."It is a wonderful solution [for the Murdochs] as it keeps the family visible to other directors, and keeps James involved in the company," said Claire Enders, of Enders Analysis. "Some have called it a transitional arrangement - but Murdoch well stay as a NED [non-executive director] for a long time."Enders believes it also helps to shield Murdoch to an extent from the "fit and proper" test which is applied by regulator Ofcom to any "controlling directors and shareholders" of a licence-holding broadcast business such as BSkyB."He's moved the dial on that one," she said. "James has taken the flak for the culture his father created. He's [begun] the process of rehab-ilitation. It's a remarkably intelligent move, one of the first the company has made."Tom is a very close friend and acolyte of James's. It's a perfectly reasonable fix and quite choreographed. If Ferguson stands down next year, Mockridge is clearly there because the Murdochs would like their own chairman - they don't want an independent chairman."Those within News Corp know that Ofcom is still a danger. As the regulator made clear when it referred BSkyB's 17.9pc stake in ITV to the Competition Commission, a shareholding in a television company significantly lower than News Corp's holding in BSkyB can be considered "controlling". BSkyB was forced to sell down its stake in ITV to 7.5pc. Even though Murdoch is now a "non-executive", it appears that Ofcom considers any director sitting on the board is encompassed by the test. Mockridge's elevation to deputy chairman also maintains News Corp's influence, and some have questioned whether Ferguson, a significant backer of Murdoch since he joined the board in 2004, can be considered truly independent.Murdoch himself will now spend nearly all his time in America and his father must be considering whether his son needs another big job in the US to supplement his present role overseeing the international television businesses. With Mockridge and Murdoch on the BSkyB board, close observers of the situation also say that another attempt by News Corp to buy the 60pc of BSkyB it does not already own cannot be ruled out - particularly if News Corp spins out the UK newspaper business.Indeed, for many of News Corp's shareholders across the Atlantic, the biggest financial casualty of the scandal so far was that it had to ditch the bid for the rest of BSkyB. The deal fitted squarely into the strategy of Chase Carey, News Corp's chief operating officer and the executive many on Wall Street would like to succeed Rupert Murdoch. New York-based stockbroker Miller Tabak estimates that owning the whole of BSkyB would generate about $800m (pounds 503m) a year in free cash flow for News Corp.For Murdoch junior, this is still unfinished business. If he is eventually made chief operating officer of News Corp he has not given up returning as BSkyB chairman once the phone hacking investigations concerning him have been completed. To do that, and pilot a successful bid for BSkyB, would see Murdoch complete a project he still wholeheartedly believes in. 

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