Tourism Victoria chief Greg Hywood has quit his plum post to take up a board position at Fairfax, increasing pressure on CEO Brian McCarthy to justify his position at the media company’s helm.

Crikey can reveal that Hywood, who was appointed this morning as a director to the Fairfax board from October 4, will depart Tourism Victoria three days earlier, on October 1, due to strict state government conflict of interest legislation that prohibits public servants from drawing substantial income from outside sources.

As a Fairfax director, Hywood will be signing off on advertising budgets that directly impact on state government coffers. The Victorian government is the biggest corporate advertiser in The Age, sending around $30 million of taxpayer money to the company each year.

Hywood is a highly-regarded former editor-in-chief of three key Fairfax mastheads — The Age, the Sydney Morning Herald and the Australian Financial Review and has a forensic knowledge of the Australian business and media scene. In a clear sign the company is re-embracing its media roots after years of atrophy, it also appointed former Austereo CEO Michael Anderson to the board.

The duo was hired to fill a gap caused by the departure of company patriarch John B Fairfax in July and cover off the company’s two major foci in radio and print.

A source familiar with the situation told Crikey this morning there was a “massive shakeup” looming of the company’s executive ranks: “They’ll be carnage in there within a month, the bloodletting will be absolutely enormous.”

Staff that could be closely examined include McCarthy, Age boss Don Churchill and business and operations director David Skelton. During Hywood’s reign at The Age, the paper drew in $100 million in annual profit, but that has since dropped to well under $50 million.

Speculation is now swirling in media circles that Hywood will be gunning to eventually replace McCarthy, a position that he could hold concurrently with his directorship.

Hywood refused to comment on his Fairfax appointment when contacted by Crikey, saying he had not yet been engaged by the company. He said he would pursue other non-specified commercial interests in addition to his role at Fairfax. As a non-executive director, Hywood will be paid around $120,000 a year.

The former Geelong Football Club board member said he was pleased with his four-year tenure as Tourism Victoria CEO, claiming the booming sector comprised 20% of the state’s exports.

“Over the last four years, tourism in Victoria has been regarded as our great success story. We’ve seen a boom in international and interstate tourists, and lead the country in major events, food and wine and regional experiences,” he said. As part of his burgeoning state government profile, Hywood also serves on the board of the powerful Victorian Major Events Company.

Insiders reminisced fondly on Hywood’s previous tenure at Fairfax this morning. In the early years of the decade he successfully extended The Age‘s lead over the Herald Sun in the well-off AB demographic and protected the paper’s rivers of gold through a controversial ‘marketing alliance’ with leading real estate agents.

“It’s a real win for journalism, Greg’s a journo through and through. He has extraordinary business acumen and also understands what readers want which is a rare combination,” the source said.

Hywood left The Age in 2003 after famously falling foul of then CEO Fred Hilmer. Hilmer is reported to have summoned Hywood to his office with the bad news, uttering the immortal words: “Greg, you and I don’t get along and I’m not going anywhere.”

He was reportedly paid around $2.2 million in severance, before popping up in 2004 as a strategy chief for then-Victorian premier Steve Bracks — an unusual progression into the upper echelons of the public service for a former journalist.

Anderson’s appointment has also been lauded, with Austereo’s ascension to the head of the Australian radio ratings tree considered one of his proudest achievements during a six-year term as chief executive that ended in January. But he will confront a different environment at Fairfax, with the company’s AM talk focus chafing with the more cut-throat world of FM ratings stunts.

Following heavy losses in 2009, Fairfax showed signs of turning its performance around in the last financial year, posting a net profit of $282.1 million compared to a loss of $380.1 million a year earlier. McCarthy cited a reduction in interest payments and a rebound in the advertising market as the result’s main driver.