The Local Authority Pension Fund Forum, whose members have combined assets of 100 billion pounds ($154 billion), also said the roles of chief executive and chairman held by Rupert Murdoch should be separated and an independent chair installed to improve accountability.
"News Corp and its shareholders desperately want to draw a line under this scandal, but that will only be possible if the board accepts the need to demonstrate real accountability," said forum chairman Ian Greenwood.
"Whilst these are difficult issues for the company to address, we believe that to secure News Corp's long-term future such reform is necessary."
Murdoch's News Corp has been rocked by the admission of phone hacking at its British tabloid News of The World, culminating in it closing the 168-year-old paper and withdrawing a prized $12 billion bid for pay-TV group BSkyB in July.
James Murdoch, Rupert's son, oversees News Corp's operations in Europe, including the British newspaper arm News International. ($1 = 0.648 British Pounds)
(Reporting by Paul Sandle)