After just two and a half hours sleep, at one level Lachlan Murdoch put in a sterling effort at the Ten Network Holdings AGM yesterday as he athletically roamed the stage in front of the directors for a little over two a half hours. At another level it was a singularly unimpressive performance as he ummed and ahhed his way through the meeting, struggling with the detail and refusing to engage on key issues.
I left the meeting more convinced than ever that he is simply not up to the job and should be moved on.
While Ten is facing the same structural challenges as Seven and Nine, the execution during Lachlan’s two years on the board has been dreadful. Having paid $1.43 a share to buy half of James Packer’s 18% stake, Lachlan continues to be propped up by his silent and invisible partner through their joint vehicle Cavalane.
There were many elements of yesterday’s AGM which were completely missed by today’s papers and one of them was the Packer-Murdoch relationship at Ten.
Having received a $US150 million payout in shares and cash when Wendi Deng’s two daughters were cut into the Murdoch inheritance, there remain obvious questions about Lachlan’s personal ability to sustain losses of more than $100 million at Ten. When asked about this yesterday, Lachlan insisted he was receiving absolutely no financial support from his friend James Packer.
Given the AGM wasn’t webcast -- and journalists were forbidden from even recording proceedings for their own purposes -- we’ll have to wait for Ten to provide a copy of the transcript to look at the detail of his various claims about where the power lies within the joint venture vehicle.
For instance, former McKinsey management consultant Siobhan McKenna has been Lachlan's personal chief executive for the past few years after he quit News Corp in 2005. She came in through Lachlan’s investment vehicle Illyria and was a well-paid consultant at Ten in 2011 when Lachlan was acting CEO ahead of James Warburton's commencement.
McKenna was comfortably elected to the board as Packer's personal representative yesterday, although she gave me a big lecture about factual accuracy claiming she was only his "nominee" and there was a big difference. When asked why Packer couldn't represent himself on the Ten board, both McKenna, his board nominee, and Murdoch, his financial partner, refused to explain.
"You'll have to ask Mr Packer," Lachlan said. "He won't return my calls, so I'm asking you instead," came the reply.
Lachlan was similarly protective of his other great supporter on the board, Gina Rinehart. When I suggested the billionaire’s $90,000 annual fee should be docked because she only made it to eight out of 14 board meetings and couldn't even get to the AGM on time, Lachlan instead blamed himself saying he kept calling board meetings at short notice.
This goes to one of the problems of effectively putting Lachlan in charge of Network Ten for the past two years: he simply doesn't have the skills or time to make a good fist of it.
The issues within the News Corp board, the Murdoch family and Lachlan's personal investments such as DMG have clearly been very distracting over the past two years. Given the disaster that has unfolded, it is surprising all these billionaires haven't yet called time on Lachlan's tenure. If he wasn't a Murdoch, he'd be long gone.
Now that Packer has pocketed his $1 billion from News Corp from the sale of Consolidated Media Holdings, you would think he too would be fed up with losing $100 million on Ten.
Bermudan-based former billionaire Bruce Gordon has now dropped more than $300 million on his Ten investment and he sat sullenly in the front row during yesterday’s AGM. Ten’s former executive chairman Nick Falloon quite rightly argued Gordon couldn't join the board after he bought Channel Nine in both Adelaide and Perth.
As Packer never understood during his campaign against Echo Entertainment Group, you never invite a competitor to sit on the board unless they pay an appropriate control premium to all shareholders. But once it was agreed that both Packer and Murdoch could join the Ten board -- despite the obvious conflicts of interest -- the entire board had to yield to Gordon's request and he duly nominated lawyer Paul Mallam.
Interestingly, because Gordon himself isn't on the board, he appeared to vote his 186.6 million shares in favour of the remuneration report yesterday, which surprisingly passed with more than 90% in favour.
Gina, Lachlan and Packer were all unable to vote. At least that's one good thing that flows from being denied a board seat.
If Rinehart refuses to stump up the cash by today’s deadline in Ten’s four-for-five entitlement offer at 20 cents, her 143.7 million shares will be diluted from 10% to just 6%, which would raise serious questions about her entitlement to remain a director.
Frankly, it would have been better to see a repeat of Fairfax yesterday, with Gina off the board throwing rocks and triggering a "first strike" against the remuneration report. This would then have sparked fears of a board spill next year -- which is precisely what the Ten directors need after delivering a slow moving train crash for the past two years.