US shareholders worry testimony raises new questions and poses threats to other areas of company's media empire

Advisers to News Corporation shareholders say they are "deeply troubled" by the performances of Rupert and James Murdoch at the Leveson inquiry into media ethics.

US shareholders are said to be worried that the Murdochs' testimony this week has raised new questions about the management of the company and posed potential threats to other areas of its media empire.

Michael Pryce-Jones, senior policy analyst with Change To Win (CtW), a US advisory group that works with pension funds with over $200bn in assets, said the Murdochs' testimony raised two immediate concerns for shareholders: the future of the firm's control of broadcaster BSkyB and the ethics of top management.

"The big question is what does this mean for BSkyB," he said. "Sky is one of their best assets."

News Corp owns about 40% of the broadcaster and the phone-hacking scandal at the News of The World derailed Rupert Murdoch's plans for a full takeover.

Broadcast watchdog Ofcom is currently conducting an investigation into whether News Corp leadership meets it criteria of "fit and proper" owners of a UK broadcaster. If the company fails the test it may have to sell all or part of its shareholding.

"Ofcom is going to be looking very carefully at what happened this week," said Pryce-Jones. "It has to increase the risk for shareholders."

Nonetheless News Corp shares rose during the three days of testimony, rising 0.7% to $19.76 on Thursday.

A spokesman for Pirc, a research and governance specialist which advises pension funds, was particularly concerned about the on-going investigation by Ofcom.

"It demonstrates that shareholders have to take a view on the governance and ethics of News Corp and its board. It is having a knock on effect on BSkyB, a major FTSE 100 company".

James Murdoch was chairman of Sky but stood down earlier this month. He is still a non-executive director.

Pirc believes Ofcom's own reputation is on the line if it doesn't take at least some action in respect of News Corp. "Otherwise, critics will ask, how badly does a company have to behave in order to fall foul of the regulator?"

Pryce-Jones said the testimony had also further damaged the Murdochs' reputation in the eyes of shareholders. A majority of independent shareholders voted for the removal of James Murdoch at the company's last annual general meeting, but Rupert Murdoch easily saw off a vote to have him replaced by an independent chairman.

"More and more the focus of this inquiry is on Rupert," he said. "He pleaded ignorant on so many issues. Shareholders need to know if he is being honest with them."

He said the big fear in the US would be that revelations of the companies overly close ties with UK politicians would spark similar investigations into News Corp's ties with America's political elite.

"Fox News is one of their best assets. They've got their partisan stance. It's got to have credibility," he said.

Father Seamus Finn, of the Interfaith Center on Corporate Governance, who represented dissident shareholders at last year's News Corp annual meeting, said he had been "deeply troubled" by the testimony.

"They are constantly pulling back layer after layer of really damning information," he said. "I can't believe that as more and more of this comes out that it won't impact what shareholders in the US are going to do. Especially those who have strong opinions on corporate governance and ethics.

"This testimony goes to the heart of the issues I raised with Mr Murdoch at the AGM. What keeps coming up is the culture that was allowed to develop within News Corp and was adopted by so many employees and led them down this path."

Finn said in his conversations with the company he had been given assurances that changes were going to be made at the board level ahead of this year's shareholder vote on re-electing executives.