Ron Walker is joining the Fairfax board but recent sealed sections demonstrate the anger and many problems this move has created.
Sealed section: November 4
Mark Westfield had an interesting story in this morning’s Australian suggesting that the Fairfax board is considering appointing Ron Walker as its new deputy chairman so The Age can develop closer links to the movers and shakers of Melbourne.
This would be an absolutely stupid decision. Fairfax has to remain neutral on political matters and appointing the longest serving Liberal Party bagman to its board would send the wrong message.
Ron has a record of suing Age journalists and other critics. He has quite rightly been subjected to countless negative stories by The Age due to the huge personal profits and equally large public sector losses than have come his way thanks to state government decisions under the former Kennett government.
It is bad enough that Fairfax has Mark Burrows and David Gonski on its board – two of the preferred investment bankers for Rupert Murdoch and Kerry Packer respectively.
It is equally bad that Fairfax and highly controversial shopping centre developer Westfield Holdings has three common directors.
Westfield has a brutal approach in believing that money can buy them anything and “honest Fred Hilmer” finds himself running the two man Westfield audit committee with fellow Fairfax director David Gonski. They must approve some interesting payments indeed.
If Fairfax does appoint Walker, Crikey will be leading the charge to call a special meeting to have the board recast. You can only handle so many controversial and conflicted directors when dealing with the most important and credible newspaper company in Australia.
CRIKEY AT THE FAIRFAX AGM
Second sealed section: November 6
The John Fairfax AGM in Melbourne today provided three hours of interesting debate but the most contentious issue was clearly the composition of the board.
Chairman Brian Powers announced that he was retiring back to California and would be replaced by 69-year old former Coca Cola Amatil CEO Dean Wills. Twilight Dean has bowed out as chairman of CCA and National Mutual but has just been re-elected for three years as chairman of Fairfax.
This was an about-face on earlier plans to install long-term Packer and Westfield adviser David Gonski as chairman.
Wills and Fairfax CEO Fred Hilmer are friends and long-time colleagues on the Westfield Holdings board so it will make for a cosy duo at the top of Australia’s most important publishing house.
I raised concerns about the so-called Westfield faction – Gonski, Wills and Hilmer – on the Fairfax board but Powers rejected the idea that it was a problem and Wills said that being friends with Fred would not stop him acting in the best interests of Fairfax shareholders.
The problem with this scenario is that Hilmer should arguably have been fired at the end of his five-year contract, given the recent poor performance. But the Westfield faction, which was instrumental in giving him the gig in the first place, rallied around their man and kept him on with a rolling 12-month contract.
The biggest issue of concern for shareholders this morning was the identity of the three new independent directors who will join the board in February next year.
This is how Chairman Powers introduced them to shareholders although none bothered to show up at the meeting:
“We have invited three eminent Australians to join the Board early next year and they have accepted.”
“They are Roger Corbett, Margaret Jackson and Ron Walker. As most of you would know, Roger Corbett is the highly regarded Managing Director and Chief Executive Officer of Woolworths. Margaret Jackson is Chairman of Qantas. Ron Walker, a former Lord Mayor of Melbourne, is currently Chairman of the 2006 Commonwealth Games Committee and of the Australian Grand Prix.”
“We could not be more pleased that they have agreed to serve as Directors. They will join the Board early next year.”
“In order to keep the Board at a manageable size, Jonathan Pinshaw and I will be leaving the Board. Jonathan will retire in February, when the new members join the Board. He has been an active and productive Deputy Chairman for the past 4 % years and I would like to record our gratitude for his service.”
“I will leave the Board following today’s meeting, and I am delighted to report that I will be succeeded as Chairman by Dean Wills. Dean, who as Chief Executive and then Chairman of Coca Cola Amatil for 15 years, was one of Australia’s most successful executives.”
All three new appointments were criticised by shareholders at the meeting. But there was quite a round of applause after I gave the Ron Walker appointment both barrels.
The attack went along these lines:
“Fairfax is our most credible and respected publishing house that needs to be independent as it reports on matters in the public interest. It is the last place that a controversial property developer, party political fund raiser and man in charge of controversial public issues such as the Grand Prix and the Commonwealth Games should be. Ron is also conflicted from his roles with the Grand Prix and the Commonwealth Games. Is Fairfax hoping to win these print contracts? Ron has publicly sledged The Age many times with his great mate Jeff Kennett and has even sued the paper. This is completely inappropriate and have you run this past your six largest institutional shareholders who own more than 50 per cent of the company. Besides, why weren’t these three new appointments put to shareholders for a vote?”
Powers defended Walker strongly, but the issue also got quite a run in the post-AGM press conference. He said that the board has processes for the handling of editorial complaints although I countered by citing specific examples of when Walker put the heavies on the management at the Herald Sun over stories I’d written. Powers stressed that Walker has stopped being a Liberal party bagman (after raising a record $170 million) and was well plugged into Melbourne society.
Importantly, Powers said that institutions had not been sounded out on the new appointments so the likes of Colonial, UBS, Permanent Trustee, Perpetual and the Commonwealth Bank might yet be able to ark up and block the move. They certainly should do this and we should also hear from the Communications Law Centre, the MEAA and the minor political parties on this issue.
On the question of appointing rather than electing directors, Powers said failing to show up at the meeting was just a timing issue where they hadn’t nailed down the new slate of directors in time.
The problem with the Roger Corbett appointment is that he is the full-time CEO of Woolworths. Maybe this move suggests that Corbett will be standing aside for Bill Wavish next February but until that becomes clear it remains problematic to have him on the Fairfax board. For once Solly Lew is right to attack Coles Myer CEO John Fletcher for staying on the Telstra board whilst wrestling with all the issues at the retailing giant.
The Margaret Jackson appointment was opposed by Crikey and one other shareholder on account of her disastrous performance on the boards (and chairing the audit committees) of Pacific Dunlop and BHP over an eight year period. She’s now doing fine as chairman of Qantas. But it seems inappropriate that a director can just ditch two huge skeletons and join other boards as if nothing happened.
Jackson’s close personal friendship with Fairfax business publication boss Michael Gill is another issue for Crikey as many argue that Gilly should be moved on.
The Fairfax audit committee will have to be recast because it currently comprises Packer mate David Gonski, Murdoch mate Mark Burrows and the departing chair and deputy chair in Powers and Jonathon Pinshaw.
Powers would not reveal who will join the audit committee but Crikey put the argument that the Murdoch connection should see Burrows leave the board altogether, especially as he continues to live in London. Burrows came up for a chat after the meeting and said he is spending about 5 months a year in Australia through involvement with the likes of Burns Philp and the Sydney Theatre Company.
Crikey has previously given Ron Walker’s great mate Sir Rod Carnegie plenty of stick at Fairfax AGMs but whilst voting against his re-election I didn’t sledge him this year, which prompted a friendly chat after the meeting. So much for the mooted retirement of Sir Rod which the Fin Review reported a few months ago.
Powers argued that independent, available directors with newspaper experience just do not exist but it remains of major concern that the departure of Powers will leave Fairfax with only one director, LVMH executive Julia King, with any media experience. King is recently back from a stint running LVMH in India but still refuses to reveal how old she is.
This was the only good point that Crazy Jack Tilburn made in several wild raves today in which he even tore shreds off Gold Walkley winner Andrew Rule for supposedly being “anti-Black”.
Crikey defended Rule and, after giving him a gentle prod for not producing enough recently, has been delighted to see The Age use him off the front page for their Melbourne Cup Coverage over the past two days. This is what you call putting your best foot forward and there should be more of it.
The rest of the meeting was fairly standard. Shareholders were upset with falling profits and share prices but Powers predicted EBIT would be up 15 per cent in the first half so it looks like Fairfax is bouncing off the bottom. EBITDA went from $390 million to $290 million and then $190 million over the past three years whilst revenue also dropped by about $100 million each year.
Powers admitted they made mistakes in F2 by branching too far away from the core products and also said they should have sold the City Search business a year earlier. However, F2 losses are expected to be only $10 million this year so the worst appears to be over.
RON WALKER BOARDS FAIRFAX
Sealed section: November 7
It’s always amusing to see how the media covers stories about itself.
John Fairfax has appointed a highly controversial figure to their board and the Fin Review has failed to mention any investor concern about the Ron Walker move. That’s very poor.
ABC radio’s PM program ran a couple of minutes of exchanges at the AGM about the issue. Whilst I was the only person who spoke out against Walker’s appointment at the meeting, the level of applause captured on PM confirms that these were sentiments shared by the majority. Check out Kate Tozer’s report here: click
The Age was more balanced in its coverage with this report:
And a cut down version was also carried in the SMH:
The Australian and the Herald Sun also mentioned the concerns about Ron Walker in their reports.
This is an example of the feedback coming in from Fairfax journalists:
“I am a Fairfax shareholder, and would like to join any move to call a special meeting to oust Ron Walker from the board. It’s like Kroger on the ABC board, or Paul Keating on the Fairfax board. NOT ON.”
The pressure is now on those 6 institutional investors who own more than 50 per cent of Fairfax. All they need to do is let Dean Wills know that they oppose the move and Walker will come up with some excuse and not join the board in February as planned.
Crikey will be writing to all of these institutions spelling out our concerns and we trust others will do likewise.
Shareholders appoint directors and the Fairfax board have added Walker to their ranks without any consultation with the people who own the company.
FAIRFAX CAPTURED BY CARTELS
Second sealed section: November 7
A devotee of competition writes:
“While understandably concentrating on Ron Walker’s Fairfax gig, don’t overlook the conflicts down the line from Woolworths’ Roger rabbit.”
“While he’s done great things for Woolies’ bottom line, he’s also still in the ACCC’s firing line over trade practices.”
Woolworths spent some $9 million defending the Safeways bread case, which the ACCC is appealing, never mind the pending Victorian liquor stores actions. Wait for the Wrath of Wroger the Wrighteous to descend on any journalists questioning Woolworths’ treatment of suppliers and trade practices performance in general.
CRIKEY: Fairfax chairman Brian Powers defended the presence of a 3-man Westfield faction on the board because Fairfax had limited dealings with the shopping centre giant. I countered by asking how this argument washed with the Corbett appointment given that Woolies is one of Fairfax’s largest advertisers and even distributes their own magazine in Australian Good Taste. Powers simply played down this relationship but when you consider that Woolies is also a major distributor of newspapers, the presence of Corbett on the board does raise some substantial issues if he plans to stick around in the top job at the retailer for a couple of years.
The background of Fairfax directors is an absolutely vital issue for the philosophy of the company’s papers. It is now being stacked with heavy hitters from companies with dominant market positions. The appointment of Graeme Samuel to the ACCC is the classic sort of issue where Fairfax papers should set themselves apart from the conflicted News Ltd hacks (witness the Mark Day attack on Fels this morning over the Optus-Foxtel merger) and argue against the Samuel appointment. But the Fairfax board will soon be dominated by monopolists who beat up on Allan Fels as a matter of course. The Westfield faction must be thanking their lucky stars that Fels hasn’t thrown the book at their ruthless operation which sales close to the wind on trade practices as a matter of course. Margaret Jackson is no Fels fan given her business class monopoly profits with Qantas in Australia and Corbett’s Woolies is getting out of hand. Just ask the liquor suppliers. Crikey had drinks with a multinational supplier recently who explained that the Woolies team knocked back their pricing proposal, saying: “We’re 45 per cent of the market, what are you going to do about it.”
ANGER IN THE FAIRFAX RANKS
This is an example of the reaction coming down the line from Fairfax hacks after the latest board changes:
“There is cynical shock within the ranks of Fairfax at the new board. Just looks like a save Freddo’s job scheme to us. No media experience, a guy like Ron Walker and then Corbett from Woolworths who spent part of this year on the telephone bullying and berating editorial staff over a great series in the SMH on Woolworth’s stranglehold on suppliers. Corbett then encouraged suppliers to write letters complaining. Qantas and the SMH have had their blues and Dean Wills is a man who loves to interfere.”
“Walker is a horror show but the main point is the growing relationship with Westfield and the total lack of media people on the board. It shows Freddo has no understanding of the company he runs and has not spent time immersing himself in media so has not exposed himself to media people who would be suitable for the board.”
“A real board would have shown Freddo the door. His main claim to fame is to increase share price but it is now back to where it was when he joined. His love of tabloidism shows once again he doesn’t understand the great papers in the Fairfax stable. He is uncomfortable in the collegiate intellectually atmosphere of his papers.”
“He doesn’t like getting belted round the ears whenever he goes on editorial floor to hear what the journos think. So he gets gulled into things like free newspapers (a disaster) and the curious Central Coast strategy. Meanwhile the core business needs more money but it is being p*ssed up against the wall on these ventures and the great Fred black hole in F2.”