The John Fairfax AGM in Melbourne today provided three hours of interesting debate but the most contentious issue was clearly the composition of the board.
Chairman Brian Powers announced that he was retiring back to California and would be replaced by 69-year old former Coca Cola Amatil CEO Dean Wills. Twilight Dean has bowed out as chairman of CCA and National Mutual but has just been re-elected for three years as chairman of Fairfax.
This was an about-face on earlier plans to install long-term Packer and Westfield adviser David Gonski as chairman.
Wills and Fairfax CEO Fred Hilmer are friends and long-time colleagues on the Westfield Holdings board so it will make for a cosy duo at the top of Australia's most important publishing house.
I raised concerns about the so-called Westfield faction - Gonski, Wills and Hilmer - on the Fairfax board but Powers rejected the idea that it was a problem and Wills said that being friends with Fred would not stop him acting in the best interests of Fairfax shareholders.
The problem with this scenario is that Hilmer should arguably have been fired at the end of his five-year contract, given the recent poor performance. But the Westfield faction, which was instrumental in giving him the gig in the first place, rallied around their man and kept him on with a rolling 12-month contract.
The biggest issue of concern for shareholders this morning was the identity of the three new independent directors who will join the board in February next year.
This is how Chairman Powers introduced them to shareholders although none bothered to show up at the meeting:
"We have invited three eminent Australians to join the Board early next year and they have accepted.
They are Roger Corbett, Margaret Jackson and Ron Walker. As most of you would know, Roger Corbett is the highly regarded Managing Director and Chief Executive Officer of Woolworths. Margaret Jackson is Chairman of Qantas. Ron Walker, a former Lord Mayor of Melbourne, is currently Chairman of the 2006 Commonwealth Games Committee and of the Australian Grand Prix.
We could not be more pleased that they have agreed to serve as Directors. They will join the Board early next year.
"In order to keep the Board at a manageable size, Jonathan Pinshaw and I will be leaving the Board. Jonathan will retire in February, when the new members join the Board. He has been an active and productive Deputy Chairman for the past 4 % years and I would like to record our gratitude for his service.
I will leave the Board following today's meeting, and I am delighted to report that I will be succeeded as Chairman by Dean Wills. Dean, who as Chief Executive and then Chairman of Coca Cola Amatil for 15 years, was one of Australia's most successful executives."
All three new appointments were criticised by shareholders at the meeting. But there was quite a round of applause after I gave the Ron Walker appointment both barrels.
The attack went along these lines:
"Fairfax is our most credible and respected publishing house that needs to be independent as it reports on matters in the public interest. It is the last place that a controversial property developer, party political fund raiser and man in charge of controversial public issues such as the Grand Prix and the Commonwealth Games should be. Ron is also conflicted from his roles with the Grand Prix and the Commonwealth Games. Is Fairfax hoping to win these print contracts? Ron has publicly sledged The Age many times with his great mate Jeff Kennett and has even sued the paper. This is completely inappropriate and have you run this past your six largest institutional shareholders who own more than 50 per cent of the company. Besides, why weren't these three new appointments put to shareholders for a vote?"
Powers defended Walker strongly, but the issue also got quite a run in the post-AGM press conference. He said that the board has processes for the handling of editorial complaints although I countered by citing specific examples of when Walker put the heavies on the management at the Herald Sun over stories I'd written. Powers stressed that Walker has stopped being a Liberal party bagman (after raising a record $170 million) and was well plugged into Melbourne society.
Importantly, Powers said that institutions had not been sounded out on the new appointments so the likes of Colonial, UBS, Permanent Trustee, Perpetual and the Commonwealth Bank might yet be able to ark up and block the move. They certainly should do this and we should also hear from the Communications Law Centre, the MEAA and the minor political parties on this issue.
On the question of appointing rather than election directors, Powers said failing to show up at the meeting was just a timing issue where they hadn't nailed down the new slate of directors in time.
The problem with the Roger Corbett appointment is that he is the full-time CEO of Woolworths. Maybe this move suggests that Corbett will be standing aside for Bill Wavish next February but until that becomes clear it remains problematic to have him on the Fairfax board. For once Solly Lew is right to attack Coles Myer CEO John Fletcher for staying on the Telstra board whilst wrestling with all the issues at the retailing giant.
The Margaret Jackson appointment was opposed by Crikey and one other shareholder on account of her disastrous performance on the boards (and chairing the audit committees) of Pacific Dunlop and BHP over an eight year period. She's now doing fine as chairman of Qantas. But it seems inappropriate that a director can just ditch two huge skeletons and join other boards as if nothing happened.
Jackson's close personal friendship with Fairfax business publication boss Michael Gill is another issue for Crikey as many argue that Gilly should be moved on.
The Fairfax audit committee will have to be recast because it currently comprises Packer mate David Gonski, Murdoch mate Mark Burrows and the departing chair and deputy chair in Powers and Jonathon Pinshaw.
Powers would not reveal who will join the audit committee but Crikey put the argument that the Murdoch connection should see Burrows leave the board altogether, especially as he continues to live in London. Burrows came up for a chat after the meeting and said he is spending about 5 months a year in Australia through involvement with the likes of Burns Philp and the Sydney Theatre Company.
Crikey has previously given Ron Walker's great mate Sir Rod Carnegie plenty of stick at Fairfax AGMs but whilst voting against his re-election I didn't sledge him this year, which prompted a friendly chat after the meeting. So much for the mooted retirement of Sir Rod which The AFR reported a few months ago.
Powers argued that independent, available directors with newspaper experience just do not exist but it remains of major concern that the departure of Powers will leave Fairfax with only one director, LVMH executive Julia King, with any media experience. King is recently back from a stint running LVMH in India but still refuses to reveal how old she is.
This was the only good point that Crazy Jack Tilburn made in several wild raves today in which he even tore shreds off Gold Walkley winner Andrew Rule for supposedly being "anti-Black".
Crikey defended Rule and, after giving him a gentle prod for not producing enough recently, has been delighted to see The Age use him off the front page for their Melbourne Cup Coverage over the past two days. This is what you call putting your best foot forward and there should be more of it.
The rest of the meeting was fairly standard. Shareholders were upset with falling profits and share prices but Powers predicted EBIT would be up 15 per cent in the first half so it looks like Fairfax is bouncing off the bottom. EBITDA went from $390 million to $290 million and then $190 million over the past three years whilst revenue also dropped by about $100 million each year.
Powers admitted they made mistakes in F2 by branching too far away from the core products and also said they should have sold the City Search business a year earlier. However, F2 losses are expected to be only $10 million this year so the worst appears to be over.
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