- BSkyB found to be "fit and proper," UK's broadcasting regulator ruled Thursday
- This was despite its former chairman's conduct at sister company, Ofcom said
- James Murdoch stepped down as chairman of News International in February
- He remains a non-executive director on the BSkyB board
James Murdoch's conduct at News International has been heavily criticised by Ofcom, but the broadcasting regulator has ruled that his shortcomings in dealing with the phone-hacking scandal did not warrant stripping its sister company, BSkyB, of its broadcast licence.
The UK's media watchdog on Thursday found that "James Murdoch's conduct in relation to events at News Group Newspapers [an NI subsidiary] repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman".
But it added: "Ofcom considers that the evidence available to date does not provide a reasonable basis to conclude that James Murdoch deliberately engaged in any wrongdoing."
The regulator was acting under the Broadcasting Act to rule whether BSkyB was still a "fit and proper person" to hold a licence to transmit television programmes.
Mr Murdoch served as executive chairman of NI from January 2008 until February this year.
In April, he also stepped down as chairman of BSkyB, saying that he did so to prevent phone hacking and other scandals at NI tainting the UK satellite broadcaster. He stayed on as a non-executive director on the BSkyB board.
Ofcom said that in his current role, Mr Murdoch could not influence the company because there were 12 other directors. But it was clear that its view would have been different had he not stood down.
In the investigation Ofcom examined links between the UK broadcaster and NI, owner of the Times and Sunday Times, The Sun and the now defunct News of the World and controlled by Rupert Murdoch's News Corp media empire, which also owns 39.1 per cent of BSkyB.
News Corp, which shelved an attempt to buy the remainder of BSkyB it does not already own because of the phone hacking scandal, welcomed the Ofcom finding.
"We are pleased that Ofcom recognises BSkyB as a fit and proper holder of a broadcast licence," the company said.
However, it added that the criticism of James Murdoch was "not at all substantiated" by evidence.
The News of the World was closed down by NI last year after evidence of systematic phone hacking by the Sunday tabloid. Rebekah Brooks, former chief executive of News International, is facing criminal charges.
Thursday's finding that BSkyB was a "fit and proper" holder of a licence was handed down in spite of Sky News, the UK news channel run by BSkyB, previously admitting that it had hacked emails of individuals suspected of criminal activity, while claiming it did so in the public interest.
Ofcom said on Thursday there was no evidence that Sky News was directly or indirectly involved in any of the wrongdoing either admitted or alleged to have taken place at News of the World or The Sun, but it added that it was considering a separate case on the email hacking under its broadcasting code.
In May, a UK parliamentary committee declared Rupert Murdoch "not fit" to lead an international media company, in a damning report that criticised News Corp's handling of the phone-hacking scandal. However, the committee split six to four on party lines.
Tom Watson, a member of that parliamentary committee, on Thursday told the BBC that he was disappointed by the Ofcom ruling and criticised its methodology.
"They can't do deep investigations in the way that other organisations can and they also do hedge their bets," he said.
BSkyB shares rose 1 per cent to 735p in afternoon London trading.