James Murdoch, News Corp.’s deputy chief operating officer, will leave the board of Sotheby’s auction house, following demands he resign over his role in a U.K. phone-hacking scandal.

Murdoch, 39, this year already resigned from the board of GlaxoSmithKline Plc and as executive chairman of News Corp.’s U.K. publishing unit News International. Murdoch also faces calls from investors to step down from the board of News Corp. and as chairman of pay-TV company British Sky Broadcasting Group Plc.

Murdoch will “focus on his core responsibilities at News Corp.,” according to a filing yesterday by Sotheby’s.

U.K. lawmakers are preparing a report about Murdoch’s role in the scandal following testimony he gave that has been contradicted by former subordinates. The committee began its inquiry in July after Murdoch said lawmakers had been misled about the extent of phone hacking during a previous probe in 2009. It has questioned him twice for the new report, once alongside his father Rupert, News Corp.’s chief executive officer.

A News Corp. spokeswoman, Julie Henderson, declined to comment on the Sotheby’s departure, which takes effect May 8. Robert Fraser, a spokesman for London-based BSkyB, in which News Corp. owns a 39 percent stake, declined to comment as well.

CtW Group, an adviser to union-sponsored pension funds with more than $200 billion in assets, sought the dismissal of James Murdoch because of his handling of the phone-hacking scandal that erupted while he oversaw News Corp.’s U.K.-based publishing unit. The scandal makes Murdoch “ill-suited for service” on the boards of Glaxo, Sotheby’s and BSkyB, CtW said in January.

Murdered Schoolgirl

The scandal, which saw News Corp. journalists hack into the phones of politicians, celebrities and a murdered schoolgirl, has also drawn attention from regulators, who are examining the company’s fitness to hold a broadcasting license through its stake in BSkyB. U.K. watchdog Ofcom, which has the ability to revoke a broadcaster’s license, will determine whether the scandal has compromised News Corp.’s ability to manage the U.K.’s biggest pay-TV company.

On March 14, Murdoch told U.K. lawmakers he should have dug deeper to uncover the phone hacking at the company’s U.K. unit.

“I could have asked more questions, requested more documents and taken a more challenging and skeptical view of what I was told,” Murdoch said. “In this case, the approach fell short. But it is important to note that I did not turn a blind eye.”

Lawmaker Report

The U.K. lawmakers are behind schedule with their report, as they debate how critical they can be of Murdoch, two people with knowledge of the panel’s discussions said in February. Chairman John Whittingdale said in November he hoped to issue the report before Christmas 2011.

There is no question of Murdoch escaping criticism completely, the people said at the time. They said panel members are unimpressed by his statements that he was ignorant about what was going on at the News International unit which he ran from the end of 2007.

The scandal has led to dozens of arrests. Rebekah Brooks, the former chief executive officer of News International, was this week arrested a second time by London police as the year old phone-hacking probe turned to a possible cover up, according to a person familiar with the situation.

More than 20 people have been arrested as part of Operation Weeting, the phone-hacking investigation, and at least 10 have been questioned since the beginning of the year in a bribery probe.

Digital Media

Murdoch was a Sotheby’s director for two years. Sotheby’s, based in New York, said it benefited from Murdoch’s “broad- based marketing and brand management experience, his guidance regarding the company’s strategic initiatives in Asia and his insight into digital media,” according to the filing.

Murdoch remains News Corp.’s deputy chief operating officer and chairman and chief executive, international, focused on television businesses outside the U.S.

News Corp. shareholders in October lodged a protest vote against Rupert Murdoch and his sons, following an annual meeting at which investors called for governance changes and an end to voting practices that cement the family’s control. James received the highest percentage of votes against his election to the board, at 35 percent.

Protest Vote

In November, one third of BSkyB’s independent shareholders voted against James Murdoch’s re-election as chairman of the U.K.’s biggest pay-TV operator.

Lawmaker Tom Watson, a member of the U.K.’s Labour party and Parliament’s Culture Committee, said in July that Murdoch should face criminal charges and was unsuitable to be a director of BSkyB.

Murdoch “must be the first mafia boss in history who didn’t know he was running a criminal enterprise,” Watson said last year.

Murdoch told lawmakers in November that News of the World editor Colin Myler failed to tell him in 2008 that phone hacking at the now-defunct tabloid was common. Myler and the newspaper’s lawyer Tom Crone have repeatedly insisted that they discussed evidence with Murdoch.

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--With assistance from Jeremy R. Cooke in New York, Anthony Palazzo in Los Angeles and Jonathan Browning in London. Editors: Anthony Palazzo, Simon Thiel, Keith Campbell.

To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Philip Boroff in New York at pboroff@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net