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James Murdoch, the younger son of Rupert, will relinquish his position as executive chairman of News International, following a phone-hacking scandal that shut down the News Of The World newspaper and led to the arrest of several company executives and journalists.
The younger Murdoch, once seen as an heir apparent for the parent company News Corp. (NWSA-Q) has been under pressure since the scandal erupted last summer. His resignation is the latest in a flurry of senior executive resignations from News International since the scandal came to light.
On Murdoch's watch, thousands of celebrities and everyday citizens had their voice mails hacked by journalists at his unit's newspaper and the company has had to pay out millions of dollars in settlement fees to date with more expected to come.
He will remain deputy chief operating officer of News Corp and will focus on its international TV business, the company said in a statement.
The move also further fueled speculation that it would become increasingly difficult for James Murdoch to take over the chief executive role at News Corp from his 80-year old father. It also strengthened the position of News Corp President Chase Carey, who is now favored to take over from Murdoch by investors.
Tom Mockridge, chief executive of News International, will continue in his post and report to Carey.
"It clarifies the management hierarchy and clarifies Chase Carey as the person who's both No. 2 and No. 3 behind Rupert Murdoch," said Collins Stewart analyst Thomas Eagan. "That's a good thing. I think the operations are going well."
News Corp Chairman Rupert Murdoch said in a statement his son would still play a key role at the company.
"James will continue to assume a variety of essential corporate leadership mandates, with particular focus on important pay-TV businesses and broader international operations," he said.
James Murdock's resignation comes after a new spate of embarrassing revelations in London at the judge-led Leveson Inquiry into press standards, which was ordered by British Prime Minister David Cameron in the wake of the phone-hacking scandal.
A police officer heading three criminal inquiries into reporting practices at News International testified on Monday that there was a "culture of illegal payments" to corrupt public officials at the company's flagship Sun newspaper.
The Inquiry also brought to light an email from a top in-house lawyer at News International that showed senior managers had been told as far back as 2006 that illegal phone-hacking was not confined to one "rogue reporter", as the company maintained for years afterwards, but was likely to have been far more widespread, as later proved to be the case.