The panel said the House of Commons would decide on the punishment meted out to the three executives: New York Daily News editor Colin Myler, a former News of The World editor; the British tabloid's longtime lawyer Tom Crone and Les Hinton, the former executive chairman of News International, former publisher of The Wall Street Journal and former board member of The Associated Press.
Members of the panel said Rupert Murdoch, 81, had insisted he was unaware that hacking was widespread at the News of The World, blaming his staff for keeping him in the dark. That explanation was not accepted.
The legislators said if that was true, "he turned a blind eye and exhibited willful blindness to what was going on in his companies."
In a ruling opposed by 4 Conservative Party members of the 11-member committee, the panel cast serious doubt on Murdoch's credentials as an executive.
"We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company," the report said.
The judgment on Murdoch implies that News Corp., which he heads, is also not fit to control British Sky Broadcasting, in which the company has a controlling stake of 39 percent.
Ofcom, the broadcast regulator, said it is reading the report with interest.
"Ofcom has a duty ... to be satisfied that any person holding a broadcasting license is, and remains, fit and proper to do so," the statement read. "Ofcom is continuing to assess the evidence."
Louise Mensch, a Conservative Party member of the panel, told reporters the committee had been divided over the harsh criticism of Murdoch. Four Conservative members opposed the suggestion that Murdoch was unfit to lead a global company, but that stance was endorsed by four Labour Party members and one Liberal Democrat. The panel's chairman, a Conservative, did not vote, in line with convention.
Conservative panel member Philip Davies said the conclusion was "not only over the top, but ludicrous."
Legislators agreed, however, that Murdoch's 39-year-old son James, a former News International executive chairman, was also badly at fault in the scandal. They said phone hacking at the tabloid dated back to at least 2001, and insisted that James Murdoch could have halted the practice as early as 2008.
"As the head of a journalistic enterprise, we are astonished that James Murdoch did not seek more information," legislators wrote.
But they stopped short of accusing the younger Murdoch of misleading lawmakers when he claimed not to have fully read a 2008 email which he had received and outlined that hacking was widespread.
The committee also criticized Hinton, who worked as a top Murdoch aide on both sides of the Atlantic for decades and resigned as the publisher of The Wall Street Journal last year amid the hacking scandal. The report said he misled them over his repeated claim that hacking was not rife at the News of The World.
Myler and Crone had also failed to present factual accounts of what they knew, the report said.
In a statement, Myler said he stood by his evidence and believed ongoing U.K. police inquiries would "establish the truth" of his account. "I have always sought to be accurate and consistent in what I have said to the committee," Myler said.
Committee chairman James Whittingdale said "it is for the House [of Commons] to decide what consequences follow" from misleading Parliament.
News Corp. said it was "carefully reviewing the select committee's report and will respond shortly."
"The company fully acknowledges significant wrongdoing at News of the World and apologizes to everyone whose privacy was invaded," it said in a statement.
News Corp. has been buffeted by the scandal, which has claimed the jobs of a string of his senior executives and several top British police officers amid allegations that Scotland Yard failed properly to investigate tabloid wrongdoing for years.
Murdoch closed down the 168-year-old News of The World tabloid last July amid public revulsion at the hacking of voice mail messages of celebrities and victims of crime, including murdered schoolgirl Milly Dowler.
A total of 43 people, including at least 25 past and present employees of News International have been arrested by police investigating phone hacking, bribery and computer hacking. Murdoch has paid out millions to settle lawsuits from about 60 celebrities, sports stars, politicians and other public figures whose voice mails were hacked. Dozens more lawsuits have been filed.
It was not clear what impact Tuesday's report would have on Murdoch's key U.S. properties, which include The Wall Street Journal and Fox News. A look at Rupert Murdoch and associates
The 81-year-old billionaire is chief executive of News Corp., a global media company that controls properties from Britain's Sun newspaper to America's Fox News Channel.
Murdoch began building his power in Britain in the 1980s by adding The Times and The Sunday Times to his stable of media properties, including The Sun and the News of the World, the tabloid at the center of the illegal phone hacking scandal. Murdoch shuttered the News of the World in July.
Murdoch, a naturalized U.S. citizen with extensive media properties in Australia as well, has contributed politically to both U.S. Republicans and Democrats but is associated with a conservative political slant. In the U.S., he controls the New York Post and Dow Jones, publisher of The Wall Street Journal, along with book publishing and movie companies.
U.K. lawmakers on Tuesday said he was unfit to lead a global media empire because he has turned a blind eye to phone hacking.
The fourth of Rupert Murdoch's six children, the 39-year-old James was once considered heir-apparent to his father's media empire before the phone-hacking scandal tainted his reputation.
A Harvard dropout who briefly ran a record label, James joined News Corp. in 1996 as executive vice president responsible for some digital media ventures. He has led News Corp.'s Asian television group and also served as CEO of British Sky Broadcasting, in which News Corp. holds a 39 percent stake, from 2003 to 2007.
He led News Corp.'s U.K. newspapers subsidiary, News International, the unit at the center of the hacking scandal until he resigned earlier this year. In April, he also stepped down as the chairman of BSkyB. He is currently News Corp.'s deputy chief operating officer.
An associate of Rupert Murdoch's for more than half a century, Hinton resigned in July as CEO of Dow Jones & Co. and publisher of its flagship newspaper, The Wall Street Journal. Previously, he had been head of Murdoch's News International unit when phone hacking was going on.
A U.K. parliamentary committee said Tuesday that Hinton, 68, did not tell the truth in 2009 about his role in authorizing the settlement of a legal case that threatened to reveal the extent of phone hacking or about his own knowledge of the illegal activity.
The legal affairs manager for Murdoch's News of the World tabloid until it was closed last summer, Crone has clashed repeatedly with James Murdoch over phone hacking.
Crone says he gave the younger Murdoch a document that proved that phone hacking was widespread at the newspaper, contrary to the tabloid's claim the illegal activity involved "one rogue reporter" and a detective. James Murdoch denies that Crone had made the position clear.
The committee said Crone gave false answers about his knowledge of phone hacking at the newspaper and misled it about the significance of confidentiality in settling the lawsuit.
Currently editor-in-chief of the New York Daily News and formerly editor of Murdoch's New York Post, Myler became editor of News of the World in 2007 after the paper's royal reporter went to jail for phone hacking. Myler, 59, supported Crone's claim that James Murdoch had been told about the extent of phone hacking.
The U.K. committee said Myler lied about his knowledge of phone hacking at U.K. tabloid, a charge he denies.