If Seven West Media were a normal public company with no controlling shareholder, it would be very surprising if Tim Worner were still CEO after all that happened in the Amber Harrison affair. But billionaire chairman Kerry Stokes, 76, has run the show at Seven since mid-1995, making him the second longest serving chairman of an ASX 200 company after Gerry Harvey at Harvey Norman. According to The Australian’s Margin Call column today, Stokes is sitting in Beaver Creek, Colorado, waiting for his billionaire mate James Packer to join him for some Christmas skiing. However, Stokes has contributed to no fewer than four Seven West board meetings since former Seven employee Amber Harrison went nuclear last Sunday, and today the board gave ground, agreeing to an independent inquiry, albeit without specifying the details and scope. Seven’s first press release on Monday night was not lodged with the ASX, so today’s five-paragraph statement was the first time investors have been officially informed about anything at Seven. The independent inquiry is the right course of action and will provide a pathway for the board to recant their controversial support for Tim Worner remaining as CEO. It will also buy some time to line up a successor, with people like James Warburton, David Leckie and even Kerry’s son Ryan Stokes being mentioned in dispatches. Thus far, no one has been held to account for what happened and after four days of front-page news, the reputational damage has been enormous. [Ex-Seven PA investigated after affair with CEO Tim Worner] The Herald Sun had its third straight front-page story on the issue today and went with Amber Harrison offering to present her case directly to the board. From a PR point of view, she’s out-played Seven every day this week. From the board’s perspective, it is far better to have Harrison present her side of the story to the independent inquiry, which, if Seven West has learnt any lessons so far, will be run by a woman with experience in culture and gender issues, such as former sex discrimination commissioner Elizabeth Broderick. There are many precedents for boards commissioning independent inquiries. Former ASX and ABC chairman Maurice Newman was commissioned by Newcrest to examine its dubious market briefings, David Crawford produced a report for ANZ on Opes Prime, and Sirtex Medical commissioned a law firm to examine the CEO’s share trading just last week. Maurice Newman produced this 19-page report for Newcrest and David Crawford’s 30-page Opes Prime report was also released to the ASX, so the obvious first question is whether Seven West is intending to make the inquiry findings public? We don’t know at this point but based on its taciturn communication practices this week, don’t hold your breath. The AFR’s Chanticleer columnist Tony Boyd cut to the chase this morning when he opened with the following observation:
“It is fitting at the end of a year marked by the disintegration of community trust in a range of public and private institutions that Australia’s biggest business story is about a high-profile company aggressively pursuing a young woman whose mistake was to have a consensual affair with a senior executive.”
Boyd is absolutely right that far too much time, money and effort was put into seemingly covering up this exercise where the intent appeared to be to mitigate potential embarrassment for the CEO about his poor behaviour. Tony Boyd specifically blames the aggressive legal approach on Bruce McWilliam, the Prime Minister’s wealthy best mate, who has spent the past 13 years as Stokes’ main legal fixer at Channel Seven. In a strange governance set-up, McWilliam is a non-executive director of Seven West’s parent company Seven Group Holdings, but is merely an executive of Seven West, where he was paid about $1 million last year. He only owns 611,000 Seven West shares worth about $500,000 and can be fired with just three months’ notice. Kerry Stokes has churned through half a dozen Seven CEOs since 1995 -- Bob Campbell, Gary Rice, Julian Mounter, David Leckie, Don Voelte and Tim Worner -- so it would not surprise if he is onto No. 7 by the time Seven’s next AGM comes around in November 2017. From a governance point of view, it would be preferable if Seven West moved to a model where it had an independent chair, similar to what Scentre Group and Macquarie Group have done in recent years. [Beecher: the days of dirty secrets and blokey media culture are over] Kerry Stokes has chaired at least one ASX-listed Seven entity continuously for more than 20 years. He is now 76 and even since WA News bought the television and magazine assets for an excessive $4.1 billion in 2011, he has chaired the two Seven-related public companies involved. Both have performed poorly for investors in recent years. Stokes personally owns 73% of Seven Group Holdings, which certainly warrants him remaining as executive chairman of that company. Surprisingly, he has a 6-3 majority of independent directors on that board. However, Stokes’ personal ownership of Seven West Media is only 30% on a fully diluted basis given that Seven Group Holdings owns 41% of Seven West Media. Given that Frank Lowy has retired from the Scentre Group board in favour of an independent chairman, perhaps Stokes should follow suit and at least step back to allow an independent chair to provide new governance leadership for Seven West Media at this time. At the moment, the independent directors of Seven West have a 6-4 majority. Stokes could stay on the board with the independent chairman model as part of the reform program coming out of the Worner affair? Why not go with Jeff Kennett as the independent Seven West chair? He could then continue his 30-year rivalry with Peter Costello, who is chairman of Nine. When Costello took the top job at Nine, he quit his paid gig writing columns for News Corp’s tabloids. After the trouble caused by Kennett’s 60 Minutes ethics lecture in the Herald Sun, perhaps it is time for Kennett to do likewise.