James Murdoch a 'dead man walking' following shareholder vote

Forty-eight months ago, James Murdoch's eventual assumption of the top job at his father's News Corporation seemed only a year or two away. But even his close allies now concede that he is unlikely to take over when Rupert Murdoch, 80, steps aside, after it emerged that a majority of the company's non-family shareholders voted against his re-election to the board on Monday evening.

Chase Carey, the firm's president who runs its Fox television and cable channels, and who won the support of 78% of independent investors and is now described as being "lined up" to take over eventually, as James Murdoch contends with the personal fall out from the phone-hacking crisis that closed the News of the World and shareholder vote that saw him win the backing of only 42% of non-family investors.

The disparity in voting demonstrates the popularity of Carey, who is well known among the firm's Wall Street investors, while those close to the younger Murdoch say he will now have to spend "five years or whatever it takes" proving himself in the US before he can hope to run the business that his father built up when he inherited an Adelaide newspaper in the early 1950s.

Despite the vote result, Rupert Murdoch's 38-year-old son is determined to hang on at the company, and is in the process of relocating to New York. He was re-elected to the board with the help of the Murdoch family's 40% bloc vote, but now has to endure further questioning by MPs on 10 November and another vote at the end of that month, this time to re-elect him as director of BSkyB, where he is chairman.

The News Corp shareholder vote was also a rebuff to Murdoch's elder brother, Lachlan. Of non-family shareholders 64.5% voted against his reappointment, although unlike the former, Lachlan Murdoch is no longer an executive at News Corp, and is instead acting-chief executive of Australian broadcaster Channel 10.

Their sister Elisabeth Murdoch, who runs News Corp's UK TV production arm Shine, chose not to stand, a decision that at least means that she was spared a protest vote, although she remains a family outsider, having already fallen out with her father and siblings over the handling of the hacking crisis.

Friends say James Murdoch will need to appear before parliament as both contrite and in control of current events, in contrast to Les Hinton, his predecessor as chairman of News Corp's UK subsidiary News International, who when recalled on Monday repeatedly told MPs he "didn't remember" what had happened at the NoW when he was in charge and when phone hacking was alleged to have taken place in the period running up to 2006.

MPs want Murdoch to explain why his recollection of the circumstances surrounding the ￡725,000 settlement paid to Gordon Taylor, chief executive of the Professional Footballers' Association, differ from Colin Myler, the final editor of the NoW, and Tom Crone, the paper's chief lawyer.

Murdoch says he cannot recall being shown the critical "for Neville email", which implied that phone hacking at the paper was not restricted to a single "rogue" reporter. Some insiders argue that he is now a "dead man walking" because he has to contend with a drip-drip of revelations about the scale of hacking in the period prior to the arrest of Clive Goodman, the former royal editor who was later jailed. Murdoch's position as a family member means that he is under no immediate pressure to leave, but the issues that News Corp has to face, including several potential criminal trials of former NoW staff, means he is at risk of slow-motion damage – what one insider described as a "tragic choreography".

The allegations stem from the period before he joined News Corp from BSkyB in December 2007. But the pressure on him has mounted because News International failed to launch a thorough internal investigation – and because the company did not begin turning over large volumes of information to the police until last winter, more than a year after the first allegations that phone hacking went wider than Goodman first surfaced in the Guardian in July 2009.

What frustrates News Corp is that for all the problems stemming from phone hacking, the firm has been performing well financially, with operating profits up 13% to $4.9bn (￡3bn) last year. But the strongest performing units, the Fox broadcast network and the Fox cable channels, are run by Carey, while Murdoch's units in Europe and Asia have either been the source of problems such as hacking, slower profit growth for Sky Italy or heavy investment, where €1.15bn has been spent buying a 49% stake in Sky Germany.

Murdoch also has to win the support of City investors to remain as a director of BSkyB. A year ago, he won 98% of the votes, and at the height of the phone hacking crisis won the backing of the satellite broadcaster's board after the abortive bid for BSkyB.

But some City investors are preparing to vote against him, such as Aviva, which opposed his appointment last year and is expected to do so again.

Some believe that News Corp's problems stem, in part, from its shareholder structure, which is designed to entrench the Murdoch family's control at a company that had a $29bn turnover last year.

The company has voting and a larger amount of non-voting shares, which means Rupert Murdoch controls 40% of the votes but a total economic interest of about 12%.

Prof Charles Elson at the University of Delaware, who specialises in corporate governance, said: "What you are saying is that you – the management – are brighter than the shareholders. That's the problem with dual-class shareholder structures; these kind of things are going to happen."

But James Murdoch still has some influential supporters. Rich Greenfield, a Wall Street analyst with BTIG, said: "If you don't like the Murdochs, you shouldn't invest in News Corp." He added that it was pointless to discuss whether James Murdoch should take over the company until such time as his father has signalled he intends to step down.