News Corp awarded Rupert Murdoch and his son James big compensation increases, though James declined his bonus, citing controversy over a phone hacking scandal at the UK newspaper unit that he oversees.

The annual bonus, announced Friday, would have bumped James Murdoch's compensation by 73 percent. His father got a 47 percent increase, bringing his compensation to $33.3 million. The awards came on the same day that two longtime directors said they could quit the media company's board.

James Murdoch was set to get a payout of $17.9 million, boosted by a $6 million bonus and $8.3 million in stock awards. He will now receive $11.9 million. His father's pay was boosted by a $12.5 million bonus and $8.5 million in stock awards.

As head of international operations, James Murdoch has been under media and government scrutiny since the hacking scandal erupted at the London tabloid News of the World on July 4.

There has been speculation that he would have to step down, especially after former News Corp executives challenged the accuracy of his testimony to a UK Parliamentary committee on the phone hacking case.

While the financial and operating performance metrics on which the bonus decision was based are not associated with this matter, I feel that declining the bonus is the right thing to do, Murdoch said in a statement.

Compensation for Deputy Chairman Chase Carey, News Corp's highest-paid executive last year, rose 16 percent to $30.2 million.

News of the raises may prompt new questions about the board's oversight in light of the hacking scandal.

James Murdoch said he will consult with the board's committee about whether a bonus may be appropriate later.

The compensation committee's members are independent directors. One is Viet Dinh, a former Justice Department assistant attorney general, also is one of the leaders of an internal company probe into the hacking scandal.

Another is Silicon Valley venture capitalist Thomas Perkins, who is leaving the board.

TWO DIRECTORS LEAVE, ONE TO JOIN

Perkins said on Friday that said he is not leaving the board because of the hacking scandal, and said he supports Rupert Murdoch and the board.

Perkins, a director since 1996, said in an interview that he told Murdoch earlier in the year he did not want to stand for reelection this October.

I said I don't think the board should have two 80-year olds unless one of them owns the company, said Perkins, who turns 80 later this year. Murdoch turned 80 earlier this year.

Perkins said he offered to stay for a year if needed, but then helped recruit fellow Silicon Valley venture capitalist Jim Breyer, 50, of Accel Partners, to stand for election.

Perkins' decision not to stand appeared controversial in light of the scandal at News Corp, especially when cast against another spying episode. In 2006, he quit the board of Hewlett Packard in protest after the company spied on directors and journalists to find information leaks.

Another long-time News Corp director, Kenneth Cowley, 76, is quitting after 32 years.

The board shuffle comes after corporate governance experts slammed the board for a lack of independence and weak influence in light of the scandal at the News of the World. News Corp closed the paper in July, but the fallout reverberates.

British police arrested a 15th person on Friday in connection with the scandal.

A fresh face on the board may help the company improve its corporate governance image.

Breyer, a partner at Accel Partners, is best known as one of the early investors in Facebook, and also sits on the boards of Wal-Mart Stores and Dell Inc. Breyer comes a few months after News Corp rid itself of social networking site MySpace, whose collapse is widely believed to have been prompted by the success of Facebook.

If Breyer is elected as a director, the board would shrink by one seat to 15 directors. Perkins confirmed that the board is still seeking one more director to boost the ratio of independent to non-independent directors.

There are now eight independent directors and seven News Corp insiders on the board.

Earlier this year, the board was expected to expand to 17 when Murdoch's daughter Elisabeth was set to become the fourth Murdoch family member to join the board. Following the furor over the hacking scandal, Elisabeth Murdoch and the board decided not to pursue the nomination.

(Editing by Derek Caney, Robert MacMillan and Phil Berlowitz)

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