Hamish McLennan, the Murdoch-appointed non-executive chairman of REA Group, has opted not to put himself up for re-election in his other key role as the executive chairman of Ten Network Holdings.
In a move that emulates what Rupert Murdoch did for decades unnoticed in Australia, the Ten board has used the loophole that allows CEOs to avoid election even though McLennan replaced Lachlan Murdoch as Ten’s chairman in March this year.
There is nothing strictly illegal about the practice, but most executive chairs of note seek a mandate from shareholders every three years. Prominent examples include:
- Gerry Harvey, Harvey Norman: up for election again this week;
- Kerry Stokes, Seven Group and Seven West: last re-elected at Seven West in 2011 with 91% in favour and received 99.5% support last week at Seven Group;
- James Packer, Crown Resorts: calls himself executive chairman without drawing a salary. Sailed through with 99% in favour last year;
- Chris Morris, Computershare: retired as executive chairman in early 2011 but was still comfortably re-elected with 97% in favour a few months before this in November 2010;
- David Clarke, Macquarie Group: the late founder of the Millionaire Factory stepped down from executive duties in March 2007 but was earlier re-elected as executive chairman in July 2004; and
- Frank Lowy, Westfield Group: stepped down as executive chairman in May 2011 but was comfortably re-elected in May 2010.
There is a much smaller and less well-regarded group that used the loophole, most notably Rupert Murdoch and former Gunns chairman John Gay.
Indeed, in 2007 when Rupert finally sought an AGM mandate after the move to Delaware, he wasn’t even able to recall if he had ever been elected as a director of News Corp between 1953 and 2004.
Even John Gay yielded and finally put himself up for re-election in 2006 in order to avoid annual contested elections.
As a candidate for the Ten board at the AGM in Sydney on December 17, I’ll be trying the same language that worked during the Gunns board tilt in 2005, namely: “I’ll run for your board every year until you put the executive chairman up for election.”
It wasn’t as if there was any danger of Gay being voted off the Gunns board. Indeed, he received a whopping 98% mandate in 2006.
If he ran the election gauntlet, Hamish McLennan would no doubt be supported by the four billionaires (Gina Rinehart, Lachlan Murdoch, Bruce Gordon and James Packer) who collectively control about 40% of Ten, but his lack of independence and associations with News Corp would bring a modest protest from independent shareholders.
The bigger issue at Ten is McLennan’s direct involvement in the sales process when his association with News Corp should prevent him from being involved.
If it is good enough for the independent directors of News Corp to have carriage of the Foxtel bid for Ten, the same thing should be happening at Ten.
Instead, we’ve had nothing more than this three-paragraph statement from Ten confirming recent press reports that Citi has been appointed to assist with a potential sale of the company.
Ten should be explaining that it has established an independent board committee led by deputy chairman Brian Long. The only problem with that is the lack of independent directors on what is an over-sized board.
Each of the four billionaires is represented by a non-independent non-executive nominee, and then you have long-serving directors like Jack Cowin and Paul Gleeson, who are no longer classified as independent, having been on the board since 1998.
There’s even a potential independence problem with Brian Long, who doubles as a director of the Commonwealth Bank, where he chairs the audit committee. It was CBA that last year provided a $200 million loan facility to Ten, which remains jointly guaranteed by Murdoch, Packer and Gordon.
Without support from his dad or James Packer, I reckon this guarantee would be placing financial pressure on Lachlan Murdoch given Ten continues to bleed.
And with Rupert keen to bring Lachlan back into the fold at News Corp and 21st Century Fox as co-chairman, it seems most likely that Lachlan and his mate James Packer are driving the sale.
In an intriguing and mystifying aside, Rupert told the recent News Corp AGM that Lachlan is not planning to sell his 9% stake in Ten into any bid.
Well, what’s the point of a sales process, then? I reckon it’s all about extinguishing that loan guarantee to the Commonwealth Bank, bringing Lachlan fully into dad’s orbit, and giving Foxtel an opportunity to manipulate the bidding contest for upcoming sports rights in AFL and rugby league.