By Stephen Mayne
December 6, 2015
Shareholder activist Kerry Stokes took control of WA News without ever making a full bid. It has been a disaster for those investors who remained. Here's how it happened.
First things first, check out this article arguing why Steve Harris should be the next chairman of West Australian Newspapers. These arguments by Crikey chairman Eric Beecher about the importance of editorial to a newspaper company are also something that the various head hunters, proxy advisers and institutions should take into account.
The incumbent board of West Australian Newspapers Holdings appeared under threat at the EGM on April 23, so shareholders had to decide which of the 11 external candidates, including yours truly and two representatives from Channel Seven, should be elected. We sent out this detailed update at 5.30pm on March 17 and this further subscriber-update before the meeting which is available here.
The saga has rolled out as follows:
February 25: Seven calls for EGM and launches vitriolic attack on WAN board, whilst WAN releases Seven's formal requistion.
February 26: WAN sends 3-page letter to shareholder explaining background and pointing to Seven's alleged conflicts of interest.
February 27: Seven releases exchange of letters with WAN with regards to the ridiculously tight deadline for nominations.
February 28: second largest shareholder Barclays reveals it has increased stake from 5.09% to 6.19%.
February 29: WAN confirms EGM date is April 23 and deadline for nominations is March 7.
March 7: deadline for nominations and WAN releases names of 9 new candidates, in addition to the four incumbents and the two Seven nominees.
March 13: Steve Harris, the best-credentialled outside candidate, gives this interview on 720 ABC Perth.
March 16: incumbents directors reveal bizarre suicide pact saying they will all resign if Stokes is elected, regardless of what the majority of shareholders support.
March 17: Stokes releases the arguments in favour of his candidacy and against the incumbents and board reveals 40-page notice of meeting spelling out in great detail why they should stay and Stokes should be rejected. Stokes then responds with the following.
April 2: Kerry Stokes makes his big pitch to 1200 at a business breakfast in Perth.
April 3: a variety of newsagents join the Stokes campaign criticising WAN's distribution.
April 7: WAN send this seven page letter to shareholders rebutting the latest arguments from Seven.
April 9: WAN releases strong first quarter profit as latest argument against Stokes, whilst Seven announces that executive recruiter Korn Ferry will independently interview all outside candidates and recommend two of them.
April 11: Seven sends this letter to shareholders along with another proxy form.
April 14: Seven announces Korn Ferry has recommended Peter Abery and Margaret Seares, so they will get the backing of the 19.4% stake controlled by Kerry Stokes.
Why Paul Armstrong should be sacked
The editor of The West Australian, Paul Armstrong, should be sacked for making too many blunders and relying on the wrong people for information. Crikey chairman Eric Beecher has summed it up very well in Crikey, but here are a few links to explain the background.
Armstrong is way too close to the notorious manipulator - listen to WA Premier Alan Carpenter.
August 9, 2004 - playing hatchet man by using an MP for parliamentary privilege
November 8, 2004 - Fighting with WA Government and churlish ban on The Perth Show
October 10, 2005 - Paul Armstrong threatens to sue Media Watch
September 24, 2007 - the hospital trolley fiasco
June 2005 - Inflammatory headlines on court stories
September 2007 - Hospital trolley fiasco. See The Australian's coverage on the subsequent dummy spit.
October 2007 - a largely unsuccessful complaint by Armstrong to the Press Council against this Mark Day column on his war with the WA Government.
March 2007 - Twisting Alan Carpenter's global warming claim
The no vacancy rort
One of the hottest issues goes to board size, which is explained here. The board has quite outrageously declared that it won't give shareholders the option to expand the size of the board, even though the constitution allows for 10 and we currently only have 5 directors, including CEO Ken Steinke. This means that if the four resolutions proposing to remove the non-executive directors fail, the other 11 resolutions for the outside candidates won't even be put because there won't be a formal vacancy.
Like with most disputes, the arguments run both ways. Stokes is a controversial figure who could indeed win control of the WAN board room with a 19.4% stake acquired without paying a proper control premium. Then again, the likes of Frank Lowy at Westfield and Rupert Murdoch at News Corp have smaller stakes in their companies but clearly control the boardroom, although they did build the companies from nothing.
The Stokes proposal to sack all the non-executive directors seemed excessive at the time, but the board was being overly precious, the share price was falling and the dividend was cut.
Any board needs continuity so it would have made more sense to simply call a meeting to remove obstinate chairman Peter Mansell and inject two of Seven's representatives onto the board.
The idea that WAN's non-Seven shareholders will come up with two of their own nominees is silly. Who would be chairman?
I reckon Mansell has to go because he has failed to take action against the universally loathed editor of The West Australian, Paul Armstrong, who seems to be a law unto himself.
Peter Mansell just too busy
Besides, Mansell is literally the busiest man in corporate Australia, chairing five companies and sitting on three other boards. He's got a new CEO, the Allegiance Mining takeover and the Oxiana merger to bed down at Zinifex so that chair needs more than one day a week of his time.
The current WAN board doesn't have any media experience, so I've decided to have a crack after polling a respectable 15.44% last year, as is explained in this detailed account sent to subscribers at the time.
An even better candidate would be someone like Steve Harris, the former editor-in-chief of the Herald Sun and both publisher and editor-in-chief of The Age, who has just departed as CEO of the Melbourne Football Club. I alerted Harris to the opportunity and am delighted that he decided to run.
Media coverage of WAN board fight
The media love a good bun-fight and have been all over this story. Apart from giving Stokes a front-page touch-up for ringing Alan Carpenter, The West Australian played things reasonably straight until Stokes came out and bagged the paper on April 2.
Our role in alerting Steve Harris to the opportunity meant we cracked a mention in this item in The Age and The Australian picked up on the point about the excessive workload carried by WA News chairman Peter Mansell.
Stokes probably made a mistake in letting his "courtesy call" to WA Premier Alan Carpenter be known to The Australian.
Radio National's Media Report explains much of the background about the hostility between The West Australian and the state government. The government makes it harder to sack Armstrong by going in so hard, but Armstrong's behaviour has been very ordinary, especially the way he has been captured by the Julian Grill and Brian Burke forces in recent years and has metaphorically given the two-fingered salute to various adverse Press Council rulings.
News Ltd's Terry McCrann has closely followed the saga with columns on April 1 and April 4.
Also, The Australian has led the national coverage with the following:
April 10 - West bosses pay for not giving a toss
April 10 - Stokes misplays the content card
April 10 - WAN lifts payout as key meeting looms
April 9 - Stokes to use search firm for WA News
April 9 - Journos query Stokes strategy
April 4 - Stokes must heed history's warning
April 17 - Stokes interview with The Australian's Media section
April 21 - AAP scene setter after proxy voting closed
April 21 - Stokes faces shootout in The West (SMH)
April 21 - Scene setter in The Age
Crikey hasn't gone over the top, but there was this piece on March 17 predicting that the incumbent board was stuffed.
It is good that WAN hasn't censored my platform and therefore won't be added to this list of platform censors. Anyway, this has been sent to shareholders:
"Stephen Mayne, age 38. Bcom (Melb). Stephen Mayne is a Walkley Award winning business journalist who has worked for a range of Australian newspapers including the Herald Sun, The Daily Telegraph, The Age and The Australian Financial Review as a reporter, columnist, business editor and chief of staff. He was the founder of www.crikey.com.au, Australia's best known independent ezine, and now publishes the corporate governance ezine www.maynereport.com. Mr Mayne is Australia's leading shareholder advocate and believes the WAN board needs more directors with journalistic and internet experience who are independent of The Seven Network and the incumbent directors. He also believes the company should replace The West Australian's editor, Paul Armstrong, to stabilise the newspaper after an erratic period of mixed performance.”
Korn Ferry requested a more detailed CV ahead of an interview on behalf of Seven to determine who the network will vote for, so we sent through a seven page monster and were formally interviewed at 5pm on April 10. Alas, former Greiner government Minister Robert Webster didn't give us the nod.
The audio from WA News
Listen to WA Premier Alan Carpenter respond after 2007 WA News AGM.
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