Subscribers to Crikey get AGM updates by email as they happen and this is what was sent around last Friday just two hours after the Southern Cross Broadcasting AGM.

Chairman John Dahlsen is the former Corrs Chambers Westgarth partner turned consultant who founded and still arguably controls Southern Cross and sat back and watched Pricey spend $170,000 dragging Crikey into court 15 times in 15 months.

Dahlsen has finally ascended to the chair of Southern Cross and put on a good show this morning. Afterall, he was the commercial adviser to the old Herald & Weekly Times for 20 years and the chairman when Rupert Murdoch took it over in 1987, so he knows plenty about the media.

The ten year stats he put up were impressive. Shares have gone from 70c to $9, the market capitalisation from $7 million to $500 million, profits are up from $1 million to $33 million and assets have surged from $88 million to $830 million.

The main reason for this is CEO Tony “slasher” Bell who currently employs about 1000 people but there was no disputing when I said he’d also sacked about 1000. No one has put more Australian journalists out of work than Slasher Bell and this observation sparked a spirited defence from Dahlsen who reckons the media industry is very inefficient.

Southern Cross simply buys up television and radio licences and then slashes the bejeezers out of programming costs. Ask the residents of Townsville, Cairns, Canberra, Alice Springs and Darwin who had their regional television news services closed last year after the “highly successful” Telecasters Australia takeover by Southern Cross.

However, there is some suggestion that Slasher is getting soft in his old age. Why did he need to put Steve Price on $1 million a year to replace Alan Jones and why on earth would you pay Stan Zemaniac more than Neil Mitchell.

Dahslen denied Slasher is going soft and all the general managers sitting in the front row shook their heads vigorously when this was suggested.

Dahslen was smart to make me ask all of my question up front so rather than lobbing the planned dozen, I settled on the following 5 issues.

1. Having paid $80 million and $100 million respectively for 2UE and Channel Nine Adelaide, are we going to write them down in the books given their weak ratings and profit performance at the moment?

DAHLSEN: No write downs necessary as media assets fluctuate in value. Other assets are in the books at cheaper levels set in 1996.

2. Given that Dahlsen is a consultant to Southern Cross’s main legal adviser Corrs and a director of its main banker in ANZ, why aren’t these related party transactions disclosed in the annual report like they were two years earlier (ie before they started chucking cash at Corrs to chase Crikey).

DAHLSEN: We took advise from two separate lawyers who both said they were not related party transactions.

3. You were blocked by the major shareholders from increasing your director retirement payouts from 3 years pay to 5 years pay last year, why not abolish the scheme altogether like WA News, ComBank and BHP-Billiton are doing so that NEDs are not on good behaviour bonds where they get rewarded based on years of service.

DAHSLEN: There are lots of fads on director pay that come and go and this is just the latest example. There was also a time when everyone said directors should get options. We’ll wait and see and it is a little insulting to suggest directors won’t do the right thing just to get a bigger retirement payout.

4. Stan Zemaniac is a buffoon who is completely out of place on 3AW and whose ratings are falling. Can’t believe he’s getting paid more than Mitchell. Please get rid of him now before he does any more damage.

DAHLSEN: Some like him and some don’t but at the moment his ratings are “reasonable”.

5. Telecasters Australia was a great deal last year and people forget the huge profits it produces as they overly focus on things like 2UE which are just a small part of the business. Well done and please pat yourselves on the back (so that the ABA will be reminded how much you’re making by closing regional news services and sacking journalists).

DAHLSEN: Yes it was a terrific deal which we are very happy with but we’ve had other great buys over the years such as the $17 million we paid for 3AW and the Capital acquisition.

When it came to appointing Bruce Meehan as the new auditor from Ernst and Young, I got up and asked him why he signed the accounts without the related party transaction disclosures and whether he was comfortable with the valuations of 2UE and Channel 9 Adelaide.

In one of the most pathetic examples of a weak auditor, Bruce simply said that he had nothing further to add to what chairman Dahlsen said. So here you have a chairman pushing the case that his own related party transactions not be disclosed and a so-called independent auditor not even prepared to get up and justify the decision. Maybe it is time to write to the ASX and ASIC over this one.

The only issue which sparked debate from other shareholders was the resolution to issue Slasher Bell with another 400,000 options.

Dahslen claimed Bell was Australia’s finest media executive and it is hard to argue with the claim that he’s the most ruthless. He’s just signed up for another 5 years but the board is still haggling with him over his short term incentive.

There was no response when I got up and pointed out he’d showed impeccable timing to dump 30,000 shares at $13 a pop last year.

However, with a base salary of just $550,000 and total pay of only $897,000 last year, Slasher is not very well paid relative to what he’s delivered.

Dahlsen delivered the best line of the meeting when he said:

“In my opinion Tony Bell rates very lowly on the greed-ego index.”

The options had reasonable performance hurdles and are slightly out of the money so they sailed through with only one objection from the floor and only 4 per cent of the proxies against.

After the meeting Dahlsen even popped across for a chat and I even met his wife. Other shareholders thought he was on weak ground in failing to disclose the related party dealings but he argued that you had to have a financial interest (ie be a partner not just a consultant) for the Corrs deal to be disclosed and if big banks disclosed all the dealings of all the directors it would go on for pages.

Pretty weak stuff I reckon.

After 5 quick pastries it was a walk across Albert Park back to the office but I got in trouble for not snuffling any pastries for Mrs Crikey and had to buy her lunch (hence this edition is late).

Peter Fray

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