When Steve Burch resigned from Virgin Media yesterday for “personal reasons”, he was not being disingenuous. The reasons were entirely personal: Mr Burch, the chief executive, was fed up with Jim Mooney, the chairman. For that matter, Mr Mooney had long ago run out of patience with Mr Burch. The management at Britain’s largest cable operator has, over the years, distinguished itself in two regards: extraordinary internal dysfunction and undeserved personal payouts. While subscribers have complained of poor service and investors have fretted about huge debts, a handful of executives seem to have squabbled over everything except how they should be handsomely rewarded.

Until recently, Mr Burch had looked to be in the right place at the right time to profit from the sale of the company. The roiling credit markets, however, have delayed the auction. Private equity looks to be struggling to raise the debt to fund the $23 billion purchase. The implication of Mr Burch’s departure is that the sale will not be resuscitated soon. (Inside the company, executives estimate that the auction may not now happen until the summer of 2008.) Mr Burch understandably has no interest in continuing to fight Mr Mooney on the promise of a possible big payout more than a year from now.

Mr Burch, who joined the company just 18 months ago, made a decent start, knitting together NTL, Telewest and Virgin Mobile to offer up a genuine “quad play”: TV, fixed-line telephony, mobile and broadband internet.

But recent results raised concerns about the operation of the business. They demonstrated how the arm-wrestling between the board and the management, how the problems in customer service and how the very public dispute with British Sky Broadcasting – whose largest shareholder is News Corporation, parent company of The Times – have all taken their toll: the company lost 70,000 cable customers in the three months to the end of June; broadband customers grew at only half the rate of new subscriber growth at rivals such as BT, Carphone Warehouse and Sky; revenue increased, but the amount that Virgin makes off each subscriber fell. It was not Mr Burch’s management that caused these problems as much as the fact that he was not allowed to manage. Virgin Media is paying the price for a breakdown in corporate governance.

The company is, in fact, run by Mr Mooney, the chairman, and its long-standing investor Bill Huff. Mr Burch, nominally the chief executive, found that he was No 3 in the pecking order. Senior figures at Virgin say that the ITV bid and the legal wrangling with BSkyB were driven by Mr Huff and the chairman he controls, Mr Mooney. These men – one in New Jersey, the other in New York – put Mr Burch behind the wheel in the UK, but then sought to retain day-to-day control from the US. They have behaved not only like backseat drivers, but, worse, backseat drivers operating by remote control.

It would be tempting, therefore, to believe that Mr Burch’s departure marks a potential turning point in the management of Virgin Media. It is not. The underlying problem of Mr Huff and his man Mr Mooney remain. Virgin Media’s shareholders should seize upon the message that Mr Burch sent them yesterday: the fundamental management problem is not on the executive floor in London, but at the board level in New York.

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