Murdoch Unfit To Run Company: U.K. Lawmakers

(Reuters) - Rupert Murdoch is unfit to run a major international company, British lawmakers said on Tuesday, finding him responsible for a culture of illegal phone hacking that has convulsed his News Corporation media empire.

Pulling few punches, the lawmakers listed failings of the 81-year-old News Corp chief, his son James and a company they said had showed willful blindness about the scale of hacking that existed at the British News of the World tabloid.

The cross-party parliamentary committee, which approved the report by a majority of six to four, also scolded News Corp's British newspaper arm for misleading the British parliament during its five year investigation into the hacking of the phones of celebrities, murder victims, politicians and soldiers.

But it split along party lines, with members from Prime Minister David Cameron's Conservative Party voting against the report, saying they did not agree with its view that the Australian-born Murdoch was not fit to run a major company.

Cameron, who has acknowledged that Britain's political elite had been in thrall to the Murdochs for years, is facing criticism ahead of local elections this week that he was too close to the media tycoon.

The report said there had been huge failures in corporate governance which raised questions about the competence of Rupert's 39-year-old son, James.

News International and its parent News Corporation exhibited willful blindness, for which the companies' directors -including Rupert Murdoch and James Murdoch - should ultimately take responsibility, it said.

Their instinct throughout, until it was too late, was to cover up rather than seek out wrongdoing and discipline the perpetrators, the lawmakers said in an 85 page report.

We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company, it wrote.

The hacking scandal has not affected most of Murdoch's global media empire, which includes the Wall Street Journal, 20th Century Fox and pay-TV operations around the world.

But it could persuade shareholders of News Corp that Australian-born Rupert Murdoch should step back from the helm of his $50 billion media empire.

It has already forced James Murdoch to sever almost all his ties with Britain, although he still holds a directorship of Britain's biggest satellite TV firm BSkyB, which News Corp had sought to take over before the scandal.

British media regulator Ofcom is investigating whether BSkyB, which is 39 percent owned by News Corp, is a fit and proper owner of a broadcast license, which entails an examination of the company's officers and shareholders.

James Murdoch recently stepped down as chairman of BSkyB in response to the scrutiny the broadcaster is facing as a result of the hacking scandal. The regulator said on Tuesday it was reading the parliamentary report with interest.

Traders said the committee had few teeth so there had been little movement in BSkyB shares, which were up 0.8 percent in London at 1114 GMT, slightly outperforming a 0.4 percent rise on the broad FTSE 100 index.

NOT FIT TO RULE?

The impact of the report may also be diminished by the fact it was split largely along party political lines.

None of us were able to support the report and we all voted against it, Conservative lawmaker Louise Mensch said, referring to her party members. It will be correctly seen as a partisan report and we've lost a very great deal of its credibility, which is an enormous shame.

Mensch said she would have supported the report if the reference to Rupert Murdoch being unfit to run a major international company had been removed.

Murdoch, who took London by storm in the 1960s before moving to New York on his quest to become the world's most powerful media tycoon, has apologized for the scandal.

He told a judicial inquiry into press ethics last week that senior staff at his British newspaper publisher had hidden the hacking scandal, saying he had been betrayed by minions.

News Corp said in a statement it was carefully reviewing the report, adding that it fully acknowledges significant wrongdoing at News of the World and apologizes to everyone whose privacy was invaded.

CONTEMPT FOR BRITAIN?

The report said News Corp executives had shown a contempt for the parliamentary system, singling out ex-News International chief Les Hinton, the News of the World's former top lawyer Tom Crone and the tabloid's last editor Colin Myler for having misled them.

Crone and Myler have contradicted evidence given by James Murdoch about a crucial document pointing to widespread phone-hacking at the company, which they say they showed to him to secure his support for a large pay-off to a hacking victim.

James has also apologized for failing to get to the bottom of the scandal but said he was kept in the dark by staff at the paper.

The committee said it did not have sufficient evidence to judge that matter, but said Murdoch should have asked more questions both then and later.

Surprising as it may seem that James Murdoch did not ask to see this crucial piece of evidence... his lack of curiosity - but willful ignorance even - subsequently is more astonishing, it said.

Even if there were a 'don't ask, don't tell' culture at News International, the whole affair demonstrates huge failings of corporate governance at the company and its parent, News Corporation.

The committee has been investigating the allegations on and off since a single reporter went to jail for the crime in 2007, believing that the practice went far beyond the one rogue staffer and questioning a string of executives over what they knew and when.

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