Shareholders in Southern Cross Media have not had a happy experience since the then-Macquarie Bank put together a media fund, which was floated in late 2005 at $5 a share, albeit paid in instalments.

Nine years later, the bankers behind the old Macquarie Media clearly overpaid for the original radio assets, plus the regional television business it bought with the 2007 takeover of Southern Cross Broadcasting.

The Taiwan pay-TV investment was OK, but shareholders lost plenty when exposed to an American newspaper business, which eventually went broke.

Another full price of $714 million was paid to acquire the Austereo radio business in 2011, and that was looking OK until rainmakers Kyle Sandilands and Jackie Henderson defected to APN’s Sydney rival KIIS FM last year, triggering a collapse in 2Day FM’s ratings and revenue.

When combined with the excessive fees extracted by Macquarie along the way, investors have much to complain about.

And complain they have in recent director elections, if these proxy results are any guide:

2013 AGM

25% voted against Chris de Boer
23.3% voted against Peter Harvie
23% voted against Tony bell

2012 AGM

43.4% voted against chairman Max Moore-Wilton
39.2% voted against Leon Pasternak
28.8% voted against Michael Carapiet

2011 AGM

32% voted against Chris de Boer: 32%
15.5% voted against Tony Bell

2010 AGM

33% voted against Max Moore-Wilton
22% voted against Leon Pasternak
35% voted against Michael Carapiet

No other ASX200 has attracted so many protest votes against directors. One of the key sticking points has been those excessive fees paid to Macquarie, which remains the largest shareholder with just under 25%.

The most egregious example was a capital raising shortly before management was internalised in 2009.

The expanded capital base increased the $40.5 million divorce payment pocketed by Macquarie. Independent directors are not supposed to support such outcomes, hence the subsequent protests.

While $100 million plus in management and advisory fees have been sweet for Macquarie, the group has also shared in the losses suffered by independent shareholders.

The original $5 share price was down to 94c on the close yesterday. Investors, led by Macquarie, who took up the $294 million offer at $1.55 in 2009, as well as the $471 million offer at $1.45 in 2011, have lost even more.

While the dividends have flowed over the past decade, the capital losses now exceed $600 million, and Macquarie Group CEO Nicholas Moore has personally dropped more than $10 million on this play, as he owns more than 10 million shares, or about 1.7% of the company. To his credit, he has never sold a share.

On the operations, Southern Cross has suffered the misfortune of being affiliated with the underperforming Ten Network. It is burdened with excessive debt — something that briefly appointed CFO Peter Lewis was reportedly keen to address before he bailed after just a few weeks earlier this year. Last week his consolation prize was a spot on the ABC board.

There was also much media comment last year about a mooted merger with Nine Entertainment Group, although the regulatory changes needed to facilitate such a deal never made it through federal Parliament.

All of these issues will no doubt come to a head at the upcoming Southern Cross Media AGM in Sydney on October 21. Last year’s AGM was dominated by chairman Max Moore-Wilton’s ill-considered “shit happens” comment, plus the first strike against the remuneration report.

The Australian Financial Review published a piece yesterday that quoted Moore-Wilton saying that none of his board colleagues had put their hand up to be chairman, so he was staying on. After nine years in the chair and huge losses, this represents a gross failure of leadership by the 71-year-old.

More than ever these days, public companies in Australia seem to be chaired by ageing blokes who have stayed too long and failed to groom successors, and then fail engineer smooth and timely handovers.

Whether it be founders such as Rupert Murdoch, Frank Lowy, Gerry Harvey and Kerry Stokes or independents such as Roger Corbett at Fairfax and John Prescott at Aurizon Holdings, these old guys just keep hanging on.

Prescott and Corbett will almost certainly face big protest votes when seeking re-election in the coming weeks, but Max Moore-Wilton could potentially face a different path to the exit.

Southern Cross Media is on a second strike, so the fastest way to remove Moore-Wilton is for shareholders to trigger the spill meeting and then vote him off.

Alas, Macquarie will no doubt continue using its 24.6% stake to protect Moore-Wilton, despite the losses that he has presided over.

Peter Fray

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