Pressure is growing on James Murdoch to step down as chairman of BSkyB in the wake of the collapse of News Corporation's bid.
The Co-operative Asset Management, which holds shares in Sky and News Corp, yesterday followed Pirc, the corporate governance adviser, in calling for the appointment of a chairman with no ties to the failed bidder.
Niall O'Shea, the head of responsible investing at the Co-op's fund management arm, was forthright yesterday: "We believe radical reform is needed at both companies."
While none of the major shareholders is yet to break ranks, one warned yesterday that Murdoch's role at the company was "a watching brief."
The investor added: "We are not at the stage of raising our concerns with the independent directors, but this is a fast moving situation."
Another institutional investor added: "There are clearly issues around the long-term governance of BSkyB," adding many were waiting for developments before publicly opposing Murdoch.
The Co-op has long been a vocal critic of the make-up of Sky's board "due to corporate governance concerns," O'Shea said. As a result it has not supported management over issues involving the board at annual meetings since 1999. The Co-op has also opposed Murdoch's role as chairman of Sky "because of our concerns over an independent selection process; an opposition we maintain today."
His involvement in the recent scandals surrounding News Corp has only increased investor unease over his role at Sky. Yesterday, Pirc said the collapse of News Corp's offer was a chance to refresh the board. The body has expressed concerns over corporate governance since the company listed.
Alan MacDougall, the managing director of Pirc, said: "In light of current events it is time for the board to review whether BSkyB and its shareholders would benefit from a new, independent chair. And if shareholders agree it is time for reform, they should say so."
Last year, Pirc questioned the independence of seven of the 16 directors on Sky's board. It added yesterday that News Corp also faced "considerable governance questions" and rated it in the worst 5 per cent of S&P 500 companies.
In the US, corporate governance campaigners are stepping up the pressure for reform of the News Corp board, which the Corporate Library, an activist group, grades at an F for corporate governance risk because too many directors are in thrall to Murdoch.
A critical shareholder motion at last year's annual meeting pointed out that seven board members had spent more than 14 years in their posts, five were former News Corp employees and three more had relationships with the company that could compromise their independence.
As a result of critical reports from governance advisers, a majority of the board typically receive protest votes against their election from about a quarter of shareholders.
Last May, several small shareholders also launched a lawsuit against News Corp and its board members, alleging widespread nepotism at the company.
- IndependentBy Stephen Foley, Nick Clark