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Jun 19, 2012

Beecher: Corbett, the functionary, sees Fairfax die on his watch

Eight years ago, then-Fairfax chairman Dean Wills invited me to his home to ask me to think about the future of his company’s broadsheet newspapers. They didn't listen then, and they're not listening now.

Eight years ago, then-Fairfax chairman Dean Wills invited me to his sprawling Sydney home to ask me to think about the future of his company’s broadsheet newspapers. Spend a month or two, he proposed, write a report and present it to the board.

These were the first words I wrote in that 33-page report:

“Almost every time a company fails or stumbles, industry experts saw the fall coming before the board. The board is often the last to know that its company has serious problems.”

The Fairfax board of 2004 took that prediction (from Back to The Drawing Board by Colin Carter and Jay Lorsch) to heart. After listening to my prognosis that the company faced a potential collapse of its traditional business model — I sketched out what I described as a “catastrophe scenario” under which The Sydney Morning Herald and The Age would lose much of their classified advertising in coming years — the Fairfax board studiously ignored my plea to implement overlapping strategies as “insurance” against that possibility.

One director, in particular, became quite agitated about what I was saying. “I don’t ever want anyone coming into this boardroom again,” he told his colleagues as he held up a copy of one of Fairfax’s hefty Saturday papers, “and telling us that people will buy houses or cars, or look for jobs, without this“. He then dropped the lump of newsprint onto the boardroom table with a thud.

That board member was Roger Corbett, now the chairman of Fairfax. He spent 40 years as a retailer, never worked in media or journalism, holds a handful of shares in Fairfax, and was paid $412,000 last year by the company. On the day he was appointed Fairfax chairman in 2009, Corbett presented a glowing picture of the way his company was handling its task. “The decisions taken in the last few years by management and the board have, I believe, put Fairfax in a position which is envied by media companies around the world,” he said.

I describe Fairfax as “his” company because, in the absence of a proprietor or dominant shareholder, the chairman of Fairfax is, in effect, its Rupert Murdoch. Without any substantial shareholders who understand the company’s industry, the Fairfax chairman has the sweeping powers of a Lord Beaverbrook or William Randolph Hearst.

But unlike a Beaverbrook, Hearst or Murdoch, Roger Corbett is a functionary. He has no skin in the game, no background in the industry, and no financial or apparent legal accountability for his incompetence.

When Corbett leaves the board – which will almost certainly be sooner than he had anticipated – how much culpability will he hold for ruining two of the most valuable institutions in Australian democracy? What restitution is available to shareholders who were buying Fairfax stock at $1.73 on the day Corbett became chairman?

And even more poignantly, what restitution is available to the consumers of quality journalism when they realise that the person chiefly responsible for its demise deliberately ignored years of advice from many experts who understood the industry he knew nothing about?

Three years ago, just as Roger Corbett was proudly taking the helm of an organisation “envied by media companies around the world”, a new book was published. Written by Jim Collins, well known for his deep studies of how companies work, How The Mighty Fall describes the five stages of the decline of once-successful companies:

  • Stage 1: Hubris born of success
  • Stage 2: Undisciplined pursuit of more
  • Stage 3: Denial of risk and peril
  • Stage 4: Grasping for salvation
  • Stage 5: Capitulation to irrelevance or death.

Under its current chairman, Fairfax Media took less than three years to move briskly from Stage 3 to Stage 4. And if there’s one certainty about the future of the company, it is that the current chairman and board won’t be hanging around to preside over Stage 5.

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42 comments

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42 thoughts on “Beecher: Corbett, the functionary, sees Fairfax die on his watch

  1. John

    Corbett was a grocer. They use newspaper to wrap rubbish rather than to read rubbish.
    Stage 4 (Salvation) is an interesting topic which should be explored in the light of Corbett’s strong Christian faith.
    I told Roger some years ago that at least Mussolini could get the trains to run on time whereas Corbett couldn’t even get his presses to run on time. The SMH was too often late to arrive. Now, it looks like it may be D.O.A.

  2. Benny123

    Eric, lets see the voting records for Corbett’s ascendancy.

    The fool is not to blame, those who elevate him are.

  3. Mark Duffett

    If anyone ever tries to tell me again that stratospheric management payments are justified because there is a ‘shortage of executive talent’, I will refer them to this excoriation. Supposedly Corbett was one of the best going around – yet any mug could have done what he has, and probably better.

    It is time the whole cult of managerialism was done away with.

  4. drovers cat

    I think Corbett has achieved what he set out to do.
    A triumph of ideology over management.

  5. Gavin Moodie

    I thank Beecher for this informative piece. I had believed that Hilmer warranted most blame for not changing Fairfax when it was already overdue during his time as ceo, but from this and from comments by former Age editors it seems that management and senior staff had less say in Fairfax’s strategy than the board.

  6. View Balanced

    What an interesting article, thank you Eric Beecher. Roger Corbett has a lot to answer for.

  7. Schoo M

    I’m still not sure how cutting editorial staff will not lead to a reduction in story quality. I dropped my subscription to the Age a couple of years ago when it started to resemble New Idea. I’m happy to pay for quality journalism and analysis (Crikey, New Matilda etc) but not to read masterchef recaps and 11,000 articles gushing about cafes, footballers girlfriends and regurgitated stories from overseas. Add Gina’s alleged editorial agenda into the mix and I will simply avoid Fairfax once teh paywall coems up (as most people now do with News Lts) and stick to the ABC.

    Has anyone commented on the significant capital expenditure Farifax have undertaken in the last 10 years – the new print plant in Tullarmarine and the fancy pants building at Docklands seem rather wasteful now dont they?

  8. Stephen

    The Woolies ‘T Rex’ business model is based on strong-arming everyone – suppliers, staff, customers, councils, regulators, governments, and so forth.

    Doesn’t play so well in the media, Roger. Or maybe it does, if your name is Gina?

  9. IC-1101

    A fascinating and shockingly honest article. Thank you.

    This paragraph affects me the most:

    “When Corbett leaves the board – which will almost certainly be sooner than he had anticipated – how much culpability will he hold for ruining two of the most valuable institutions in Australian democracy?”

    I’ve been asking that question in my head over and over again.

  10. Nightingale John

    I’m not surprised at Eric’s comments and judgements. I recall Roger as a young man, accountancy student and church youth guru. His career has been a confirmation of his obvious self-confidence and self-belief. One of his fellow Grace Bros cadets in the part time accountancy major at UNSW was Mick Grace. So much for our joking about his future with such a contemporary! One has to admire his career and life choices, despite his Christian principles doubtless being troubled by his overseeing Woolworths becoming the biggest gambling and alcohol retailer in the country, not to mention smokes.

    As an academic economist with some interest in business managements’ abilities, I’ve always been intrigued by the inability of boards to make rational decisions. Herbert Simon’s seminal work on business decisionmaking (never consider more than 3 options, always choose the first feasible option, keep the others in reserve for next time so as to avoid having to search again) does seem characteristic.

    What could businesses achieve if the best minds went into business (er…, and got their way)?

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