The Fairfax Board did not realise for two years that one of its members, David Evans, was in breach of the law by being a director of both Fairfax Media and Village Roadshow.
The chairman of Fairfax, Roger Corbett, made the startling admission while under questioning from shareholders at the Fairfax Media AGM this morning, which is still underway as Crikey goes out.
Corbett acknowledged that Fairfax had been in breach of the law, because Fairfax and Southern Broadcasting own radio stations in the same market. “We didn’t realise … perhaps we should have realised but we didn’t … when it came to our knowledge we, or rather David Evans, acted.”
He said that he understood that ACMA did not intend to take further action against the company or Evans.
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Evans announced his resignation from the Fairfax Board yesterday after the Australian Communications and Media Authority called the foul.
ACMA was described by one Fairfax shareholder, former Labor frontbencher Chris Schacht, as being “pretty sleepy” and a “laughing stock” for letting the situation persist for so long, but to some applause, he described the incident as one of several examples of “appalling governance” at Fairfax Media.
Corbett and managing director Brian McCarthy attempted to keep the meeting focussed on the future, while the majority of shareholder questions in the early part of the meeting were about what Schacht described as the “killing fields” or recent board warfare, high debt levels, fast changes of direction from what shareholders were led to expect at the previous AGM, and whether or not JB Fairfax had told his fellow board members that his shares in the company were subject to a margin loan.
Corbett and McCarthy defended their record, saying that while some things might have been done differently with the benefits of hindsight, they were proud of the way in which the company had been diversified away from reliance on the two city based mastheads of the Sydney Morning Herald and The Age.
The company was in a better position than it would have been had the diversification not taken place, they said.
On the issue of the loss taken on the sale of Southern Star, Corbett said: “With the benefit of hindsight we might have done some things differently…Did we get it 100 per cent right? Perhaps we didn’t, but we got it mostly right.” McCarthy asserted that the company was now in a good position to take advantage of economic recovery.
But in answers to questions the Board acknowledged that over 20 percent of a $513 million write down had been in goodwill, and that this was now value lost to the company.
Corbett declined to go into the detail of which assets’ goodwill had been written down. He said that directors were bound to account for goodwill under a formula that was influenced by the economic conditions.
The auditor confirmed that a $500 million write down in the value of assets included the two broadsheet newspapers.
Corbett batted away questions about the shareholding and conduct of the Fairfax family company Marinya, saying “this is not the AGM of Marinya”. On former CEO David Kirk’s $4.1 million payout, he repeated his previous assurances that it had been inline with contractual obligations, but acknowledged that neither Kirk nor the board had anticipated him leaving as early as he had.
Meanwhile McCarthy hinted at more changes to come, saying that a review of the strategic direction of Fairfax was underway.
McCarthy also took the opportunity to comment on the issue of putting content behind pay walls, and the arrival of the National Broadband network. He said the company was looking at the opportunities offered, but did not itemise any new projects other than the fact that all of the companies 430 mastheads had websites.
On the issue of making users pay for content online, McCarthy said the matter was under review, but gave no hints.
Meanwhile Corbett asserted that from now on, the Board would “speak with one voice” and that the factional battles were a thing of the past.