Regulator rules Sky as fit and proper to hold UK broadcast licences

Joseph O'Halloran | 20-09-2012

Even though it regards the behaviour of former chairman James Murdoch in the phone hacking scandal engulfing News Corp as falling short of acceptable for a person in his position, UK broadcast regulator Ofcom has ruled that Sky is indeed fit to hold a broadcast licence.

Ofcom found that to date, there is no evidence that Sky was directly or indirectly involved in any of the wrongdoing either admitted or alleged to have taken place at News Corp publishing subsidiary NGN’s newspapers News of the World or The Sun. Sky admitted to some instances of email hacking in two cases unrelated to the cases alleged to have taken place at NGN. Ofcom is currently considering these issues under the Broadcasting Code.

In judging the relevance of events at News Corp publishing subsidiary NGN to Sky’s fitness and properness, Ofcom considered the wrongdoing of the kind alleged to have taken place at the newspapers owned by NGN was in principle capable of being relevant to the fitness and propriety of a broadcaster, notwithstanding the fact that such wrongdoing was not related to the performance of broadcasting functions.

It said: “If a broadcaster’s fitness and propriety were measured only by reference to its performance or conduct as a broadcaster, this would mean that very serious wrongdoing by the licensee or those who controlled or influenced it, whatever its nature or gravity, was no impediment to the grant or retention of a licence, as long as the wrongdoing was unrelated to the licensee’s broadcasting activities. We do not consider that this can be right. Ofcom is responsible for protecting public confidence in broadcasting and the public interest in there being an appropriately rigorous regulatory regime, through its powers and duties under the statutory scheme established by Parliament.”

In the ruling, James Murdoch’s conduct and character were seen to be relevant because he is a director of a company that exercises complete control over Sky, he is a director of News Corp and the Murdoch family trust owns approximately 38% of the Class B stock of News Corp, which owns around 40% of the issued shares of Sky plc. Similar observations were made regarding chief executive Rupert Murdoch,

In May 2012, the UK House of Commons Culture, Media and Sport Committee investigation into News International and phone hacking concluded with the statement that “If at all relevant times Rupert Murdoch did not take steps to become fully informed about phone hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications.”

The committee said that such a culture permeated from the top throughout Murdoch’s organisation and “speaks volumes about the lack of effective corporate governance at News Corp and News International.” The conclusion was that “that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company.” The role of James Murdoch in the affair was also similarly criticised, and other senior News Corp executives were accused on misleading the committee. In what was seen as a pre-emptive move to protect the firm's reputation before the publication of the report, James Murdoch resigned as chairman of BSkyB.Even though Ofcom considers that, on the evidence currently available and having taken into account all the relevant factors, Sky is fit and proper to hold its broadcast licences, it noted that James Murdoch’s conduct in relation to events at NGN repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman. However, it added that the evidence available to date did not provide a reasonable basis to conclude that James Murdoch deliberately engaged in any wrongdoing.

Furthermore, Ofcom did not find that James Murdoch’s retention as a non-executive director of Sky meant that Sky was not fit and proper to hold broadcast licences. It recognised that whether it is appropriate for James Murdoch to be a director in light of the events is a matter for the Board and shareholders of Sky.

Yet Ofcom reiterated that its duty to be satisfied that a licensee is fit and proper was on-going. It cautioned that if further relevant evidence became available in the future, in particular if the findings of the Leveson Inquiry and the results of pending criminal proceedings were relevant to its performance of its duty under section, it would be obliged to review the judgement.

For its part, Sky expressed satisfaction with the ruling. Commenting on the announcement, a Sky spokesperson said: “As a company, we are committed to high standards of governance and we take our regulatory obligations extremely seriously…We are proud of our contribution as a broadcaster, the investments we make to increase choice for UK audiences and the wider benefits we create for the economy. After a lengthy review process, we are pleased that Ofcom has now reached its conclusion and we look forward to continuing to develop our business for the benefit of customers and shareholders alike.”