David Prosser: Time for the Murdochs to improve governance

Outlook Do not assume that News Corp's decision to pull its bid for BSkyB means an end to the corporate element of this furore. The events of yesterday only underline how overdue we are for a shake-up of the governance standards at the companies to which the Murdochs are linked.

At News Corp itself, shareholders' dissatisfaction is palpable. Even before this latest business, the company was facing legal action from investors over the price News Corp paid for Shine, the television production company founded by Elisabeth Murdoch, Rupert's daughter. "Nepotism" is how their legal suit describes the deal.

The withdrawal of the Sky offer now requires shareholders to incur further costs – the charges News Corp will already have paid investment banks and other advisers, as well as the £38.5m break fee now payable to Sky under the terms of its original offer. As Terry Smith, the accountant-turned-fund manager said yesterday, the way to assuage News Corp shareholders is not to buy them off with a share buyback, but to give all of them the full voting rights that the Murdochs enjoy with their stock.

At Sky, meanwhile, James Murdoch's position as non-executive chairman looks untenable. In truth, it always has done – News Corp's 39 per cent shareholding in Sky completely undermines Mr Murdoch's independence, however hard he may try personally to assert it – but this episode has brought the matter into focus. Large shareholders are entitled to board representation, but the chairmanship is a bridge too far.