One of the inherent self-preservation conflicts of interest facing chairs and CEOs of major organisations is their reluctance to recruit potential successors who could show them up or force an early change of leadership.
This partly explains why so many institutions are forced to look outside when replacing the two most important leadership and governance positions in their organisation, but the conflict doesn’t only apply at the very top.
The problem at the very top of an organisation is that a good chairman may well force the CEO to develop internal successors, but there is often no one to tell the chairman to nurture and recruit successors. Shareholders rarely do it at public companies.
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So when a long-serving chairman finally accepts it is time to go, there often isn’t a groomed and viable internal successor sitting in the boardroom as an incumbent independent director.
If an organisation is in crisis, and there is a genuine need for fresh leadership without the baggage of past errors, an external appointment of the chairman can be justified.
But often this is not the case. Take the case of Fairfax Media, which yesterday appointed Nick Falloon to the board and announced he would succeed Roger Corbett as chairman in just five months, at the end of August.
The doyen of directors, David Gonski, told an ASX conference in 2013 that it took a couple of years on a board before a director was really up to speed. This is absolutely right.
As the Crikey Tips and Rumours section reported on Monday, I emailed Roger Corbett way back in December 2010 suggesting that he appoint Nick Falloon to the Fairfax board after the Packer-Murdoch-Rinehart ruling faction forced him out of Network Ten.
Corbett had only recently succeeded James Packer’s mate Ron Walker as Fairfax chairman, but he managed to oversee the appointment of eight other directors — none of whom made the grade to succeed him — before finally letting Falloon into the tent as his successor yesterday? Why the delay?
Here is the chronology of major board, strategic, management and shareholder changes during Corbett’s six-year run as Fairfax chairman:
- September 2009: John B. Fairfax launches public attack on chairman Ron Walker;
- October 2009: Roger Corbett replaces Ron Walker as chairman;
- November 2009: Ron Walker, David Evans and Julia King retire as directors;
- February 2010: Linda Nicholls, Sandra McPhee and Sam Morgan appointed directors;
- September 2010: experienced media executives Greg Hywood and Michael Anderson appointed directors;
- November 2010: John B. Fairfax retires from board;
- December 2010: Corbett axes Brian McCarthy as CEO;
- February 2011: Greg Hywood appointed permanent CEO;
- November 2011: Fairfax family sells out and Nick Fairfax resigns as director;
- February 2012: Gina Rinehart becomes largest shareholder with 12% stake;
- May 2012: Bob Savage announces retirement and James Millar flagged as new director;
- June 2012: Gina Rinehart lifts hostile stake to almost 19% as Greg Hywood unveils sweeping company restructure;
- July 2012: Rinehart sympathiser Jack Cowin appointed a director;
- May 2014: Todd Sampson joins board;
- October 2014: Corbett confirms will seek AGM re-election but would retire before end of three-year term;
- February 2015: The Australian’s Darren Davidson breaks “Falloon for Fairfax chair” story; and
- March 2015: Falloon appointed a director with handover confirmed for end of August.
Falloon doesn’t need the money, and Fairfax has yet to respond to questions about how much he will be paid. Corbett pocketed just $357,903 last year after his fee was negotiated down at the 2012 AGM.
However, he is an excellent choice, if Fairfax is looking to merge with Nine Entertainment Company once the cross-media ownership laws are relaxed.
Nine’s existing chairman, David Haslingden, is supported by the company’s US-based private equity major shareholders but would not be appropriate to lead a combined Nine-Fairfax given his obvious conflicts of interest, as were outlined here.
And given that Falloon was also a successful executive chairman of Ten, Fairfax under his leadership could yet choose to enter the bidding for the teetering network now that the favoured Foxtel-Discovery consortium has fallen over.