British Sky Broadcasting, Europe's leading pay-TV company, is facing a potential shareholder backlash after naming Mr James Murdoch, 30-year-old son of group chairman Mr Rupert Murdoch as its new chief executive.

Institutional investors in Britain's 19th-largest company are demanding assurances that the appointment of Mr Murdoch's youngest son - currently chairman of Star TV in Asia - will not compromise corporate governance guidelines.

Rupert Murdoch is also chairman of News Corp, the US media group that controls 35.4 per cent of BSkyB. James, also a News Corp board member, had been widely tipped to succeed Mr Tony Ball as BSkyB chief executive.

His promotion creates a high-profile vacancy at Star TV, which claims 300 million viewers across Asia. Mr Kim Williams, chief executive of News Corp's Foxtel subsidiary, has been named as a possible candidate to succeed him.

The BSkyB board was last night expected to name Lord Rothschild, the influential City of London banker and member of the Rothschild banking dynasty, as a new independent deputy chairman to help assuage shareholder opposition. Mr Allan Leighton, the BSkyB non-executive director, will also take over as head of the company's audit committee.

Some investors, however, demanded further assurances from the company about the selection process.

Mr Peter Montagnon, head of investment affairs at the Association of British Insurers, said Mr Murdoch's appointment would need "a really compelling explanation".

He said it would be very difficult to claim the BSkyB board was working "clearly and demonstrably" for the entirety of the shareholder base with Rupert Murdoch as chairman and James Murdoch as chief executive.

Mr Montagnon said James Murdoch was "undoubtedly a talented individual" but it stretched credibility that a 30-year-old had the life experience to be parachuted into run a business of this size.

"Shareholders could not tell whether it has been a robust and impartial selection process."