RBA board, questioning Murdoch, Fairfax board tilt, defeated directors club

July 28, 2008

Here are Stephen Mayne's six stories from the Crikey edition on Monday, 21 November, 2005.

1. Liberal Party lapdogs only for the Reserve Bank board

By Stephen Mayne

The Age's Jason Koutsoukis got a fascinating leak from very senior sources in the Howard Government this morning declaring that Donald McGauchie would not be re-appointed to the Reserve Bank board because of his behaviour as Telstra chairman.

John Howard and Peter Costello have clearly decided they've had enough of McGauchie yet they don't have the guts to vote him off the Telstra board. Instead, he will be punished next March by not getting a second five year term on the Reserve Bank board, a fate that Solly Lew suffered in 1997 despite the best lobbying efforts of Michael Kroger.

The government actually attended the Telstra AGM and voted its controlling stake in favour of McGauchie getting another three years on the Telstra board just four weeks ago, as you can see from the election results on October 25.

The government seems to have forgotten that McGauchie has a responsibility to serve Telstra shareholders, not the Howard Government. If that means declaring war on regulation and Cossie's great mate at the ACCC, Graeme Samuel, then so be it.

If the government moved on McGauchie at Telstra, the rest of the board would also have walked, possibly along with Sol Trujillo's new management team. Therefore, taking away the RBA sinecure is a less damaging way of exacting revenge, which they clearly want to be known publicly through today's leak.

Koutsoukis also missed one of the biggest parts of the story when he reported the following: "Meanwhile, Ron Walker, chairman of Fairfax, which owns The Age, has emerged in Government circles as the frontrunner to take the RBA board vacancy to be created next month by the departure of Westfield boss Frank Lowy."

Hang on a minute, didn't Ron declare at Friday's Fairfax AGM that he has absolutely no ongoing public or private relationship with the Liberal Party? As the chairman of a major independent publishing house, he should not be accepting new Federal government gigs, especially at a time when media ownership laws are being reviewed. Given the fate that McGauchie is now suffering for speaking out, don't expect the Fairfax chairman to ever publicly criticise the Howard Government, no matter what they do with the media laws.

After all, Ron will want two five year terms on the RBA board, not just one.

If the government had any sense, it would at least wait a few months before appointing Walker because his timetable is already ridiculously busy. Chairing the Commonwealth Games will be like a full-time gig for the next few months, but he's also got a Grand Prix to run each March, a major media company to chair and a seat on the Primelife board.

There are already plenty of Liberal Party backers on the RBA board including major donor Rob Gerard and former WMC boss Hugh Morgan. McGauchie was also one of these Liberal types after his efforts during the 1998 waterfront dispute. His original appointment to the Telstra board later in 1998 was a reward for this but it was the board that then selected him to replace John Howard's mate Bob Mansfield as chairman last year.

That annoyed John Howard in particular, but both he and Costello have reportedly been infuriated by the recent antics at Telstra which have driven the share price lower and probably put back the timetable of T3.

3. Ron Walker's Jekyll and Hyde performance

By Stephen Mayne, twice defeated Fairfax board candidate

Never before in the history of Australian company AGMs has a chairman so grovelled to some shareholders while being downright belligerent to others.

So it was with Fairfax chairman Ron Walker on Friday in Sydney as he successfully neutralised Jack Tilburn by constantly sucking up to the nutter. Big Ron opened the meeting by patting himself on the back for his role alongside Frank Lowy on the Football Federation of Australia board and then referred to "my friend Jack Tilburn".

When Crazy Jack got to the microphone as the sixth speaker, Walker declared "Jack, welcome once again, it is nice to see you here."

Jack was typically incoherent but less abusive than usual and Walker peppered his exchanges with lines such as "thank you Jack, coming from you", "Jack, thank you for that epistle, that was very good for you" and "here, here and we do everything we can to achieve that for you, Jack."

Even former Keating Government minister Chris Schacht was praised by Walker with lines such as "your oratory skills are legendary" and "you are talking great sense." But when it came to Crikey, Walker was very rude, such that The Australian referred to him as being "clearly exasperated" when dealing with my questions about his Liberal Party connections and long-standing association with the Packers.

After one early question Walker demanded that I sit down and then he shut me down after just three general questions because he wasn't going to tolerate any "self-aggrandisement" that might affect the contested board election.

There were constant interruptions while I was speaking, and when it came to the last item of business, David Kirk's incentive package, Walker attempted to ban me from speaking altogether, only relenting when other shareholders yelled out "let him speak." This was the first time in more than 200 AGMs that a chairman has attempted to shut me down before uttering a single word on an item of business.

There were plenty of laughs when I said I wanted to speak in favour of Kirk's incentive package because, whilst the disclosure wasn't great, the quantum of his pay packet is modest when compared with other media companies.

All up, it was a very ordinary performance from Fairfax's new chairman, who couldn't even get the basics rights. Burns Philp was Burns Phillip and Ernst & Young was Earnest & Young.

As for the conduct of the elections, on some resolutions Ron had already said "all those in favour, against, carried," before some shareholders had a chance to raise their yellow card to lodge a protest. And while no-one actually called for the meeting to be adjourned during the 30-minute power blackout, Ron soldiered on in the dark such that it was very hard to hear the candidate speeches which all had to be delivered without notes. It was a complete farce.

17. Shock, horror: Murdoch executive questions Sun King in public

By Stephen Mayne

News Corporation has been good enough to post a full replay of last week's Adelaide shareholder information meeting on its website, so you can go to specific parts of the meeting and listen.

For instance, if you go to the 90 minute mark you'll find the Crikey exchanges and after 97 minutes there is the unprecedented situation of a News Corp executive, Newstext boss Alan Farrelly, who actually dares to get up and ask a question. The exchange went as follows:

Executive: Hello, Alan Farrelly, shareholder and a very junior executive of this company ("oh yeah," said Rupert ironically) and editor of a number of your newspapers in the past. Just one on the (earlier) question about buying News Ltd shares for dividends. I bought News Ltd shares 20-odd years ago, the dividends have been absolutely minuscule, but the $5000 I spent then is probably worth about a quarter of a million. But I'd like the company, or Mr Murdoch, to consider returning back to offering new shares instead of cash for dividends. Since the move to America I've noticed I get a cheque for a few hundred dollars. I much prefer to get the shares that we used to get in the past, thank you.

Rupert: We'll certainly continue to look at that. I'm very glad you've made money on your shares. Most people who have been prepared to take a long term view on this company have done brilliantly, and more than any other company in Australia, I think. However, we do recognise the fact that the share price at the moment is rotten. There is some disconnect between our constant growth and the share price. If you look at all the share prices of the major media companies in the world, there is a bit of an investment strike. People are worried about the impact of new technologies. As people realise that as the world goes on and gets more complicated and more advanced, then media is going to be a bigger and more central industry than ever before and that companies that are run well and produce every increasing profits per share, I think you'll find the market will come back quite strongly, but when, I can't tell you.

Is Farrelly trying to get the sack? No executive has ever before dared to ask an unscripted question of Rupert in public. Then again, Farrelly is now 65 and approaching the end of a stellar 30-year career with News Ltd that has included two stints editing The Australian, plus time in charge of The Sunday Herald, The South China Morning Post and the Sydney News. These days he's digitising the groups vast archives and getting them online.

We understand it was Farrelly's first News Corp AGM and he was in Adelaide as one of the judges of the News Awards. What next, Terry McCrann asking a question at one of Rupert's press conferences?

As for Farrelly's numbers, we very much doubt the returns have been that good but we will crunch the numbers for tomorrow. Rupert's claim that News Corp has outperformed every other company in history is also hard to sustain when you consider the performance of Westfield since 1961.

As Deutsche Bank's former News Corp analyst Mike Mangan pointed out on Eureka Report, News Corp has not delivered any shareholder return over the past seven years and earnings per share remain at the same level as 1987.

25. How 100% of the vote would have failed at Fairfax

By Stephen Mayne

There was one major triumph for Crikey at the John Fairfax AGM in Sydney last week that we didn't mention in Friday's edition and has only been referred to in passing by The Australian's Margin Call columnist Michael West.

Whilst 7.85% on the proxies was disappointing, for the first time in any contested corporate election, I received a clear majority of the vote in the show of hands on the floor of the meeting. This was after the four candidates all gave their speeches and my five minutes in the dark without a microphone focused on four key points:

  • Ron Walker is utterly inappropriate as chairman given his Liberal Party and Packer connections
  • Unlike the rest of the board, I have direct newspaper experience and have made money out of internet journalism
  • The board have rorted the election through the old "no vacancy" trick which makes it statistically impossible to get elected
  • Send a message on these three points, safe in the knowledge that I won't be elected
Most boards want to avoid the potential PR embarrassment of a show of hands, so they instead go straight to a poll. Rupert Murdoch taught everyone about the dangers of this in 2002 when he completely censored my platform and then left open the door for a protest on the floor of the meeting which he duly got in a line-ball vote.

Ron Walker has now done it again, but Fairfax has also been very sneaky. On seeing the clear majority from the floor against the board's advice, chairman Ron didn't declare the resolution passed but instead simply declared that a poll would be held. At this point I said this was not necessary because the proxies were so clear cut and offered to withdraw "provided it is noted that I received a majority from the floor of the meeting who had listed to the debate."

Fairfax agreed but then broke their word as this is how they explained why the poll was "withdrawn" in their ASX announcement on Friday: "A poll was called on this resolution. After the calling of the poll, but before voting, My Mayne announced to the meeting that he did not wish to proceed with the poll as the outcome was clear."

When on earth is the AEC or some other independent body going to get involved in corporate elections because the rorting is just extraordinary? Former Hawke Government Minister Chris Schacht pointed out that the Fairfax ballot paper would be turfed out straight away in any political election, because it said the incumbents were being "re-elected," while I was only being "elected."

However, the far bigger rort was the "no vacancy" trick, because even with 100% of the directed proxies in favour, I still would have lost once Ron Walker used the open proxies. The three incumbent directors received more than 606 million proxies in favour and between 1.18 million and 4.5 million votes against, but chairman Ron had 5.8 million undirected proxies waiting in reserve to use against me. Had I got all 600 million directed proxies in favour, Ron would have declared a poll, cast the open proxies against me and concluded that my 99.05% was not good enough because the three incumbents had all got more than this.

The fact that Fairfax only has 7 directors when its constitution allows for up to 12 completes the circles of what is clearly a disgraceful situation. There were 5 vacancies for new directors yet ASIC, the ASX and the Federal law tolerates the situation I've just outlined where a challenger can literally get 100% of the directed proxies and still lose.

As we've said countless times before, if the owners of a company want to inject a new director onto the board, who are the incumbents to declare there is no vacancy when the total number will remain below the upper limit prescribed in the company's constitution?

26. How Stephen Mayne's Fairfax tilt compared with 20 others

By Stephen Mayne, Australia's most unsuccessful board candidate

Crikey's batting average in corporate elections continues to fall after tilts for Gunns and John Fairfax this AGM season. As you can see from the accompanying table, the 7.85% primary vote (excluding undirected proxies and abstained votes) on Friday at Fairfax ranked 17th out of 21 tilts since this all began with a run for the AMP board in May 2000.

The top five results all happened in 2000 before institutions worked out what was going on. It's been downhill ever since, and the Fairfax vote of 47.05 million in favour and a whopping 552.58 million votes against was disappointing. The contrast with the 2001 tilt at Fairfax was quite stark as back then I received 64.18 million votes in favour and only 247.73 million against.

Dropping from 20.58% to 7.85% in four years is not what you call progress, but I suspect Fairfax did quite a ring around of institutions requesting a big no vote against Crikey to provide support for new chairman Ron Walker.

The fact that Crikey was built and sold as a profitable ezine since the last tilt, and Fairfax desperately needs a coherent internet strategy, clearly didn't rate with the institutions, only one of which actually made contact before voting. Then again, I didn't try to contact a single institution either, which was partly because Fairfax only provided an accurate list of their largest beneficial owners last Monday which was way too late because everyone had already voted.

There was also clearly no support from the two powerful proxy advisory firms, Corporate Governance International and Institutional Shareholder Services. It's a shame these outfits don't have AGMs as neither of them made contact to ask about the Fairfax platform before directing a vote against Crikey.

Best to worst: Stephen Mayne's 21 failed listed company board tilts













WA News



John Fairfax















News Corp



David Jones















John Fairfax






Southern Cross



Axa Asia Pacific



Westfield Holdings






27. Peter Kerr joins the tiny defeated directors club

By Stephen Mayne, small Tattersall's shareholder

Tattersall's director Peter Kerr, one of four former trustees claiming an outrageous $100 million from shareholders in the Victorian Supreme Court, has today become the first endorsed director of a top 50 company to be rolled by his own shareholders. However, Kerr has taken the typically gutless corporate path and pulled out the day before the AGM rather than face the ignominy of certain defeat.

The Age has the story today and quotes Kerr claiming that 85% of shareholders supported his re-election. Err, yes, but corporate elections are about one vote one share, not one shareholder per vote. Crikey would be on several boards by now if it was only about getting lots of support from small shareholders.

Institutions and major shareholders decide corporate elections and Kerr was always in trouble when faced with quality opposition from people who, quite rightly, object to the notion of directors suing their own company for $100 million.

The only other endorsed director to be rolled in recent history was Peter Cassidy from Hills Motorway and he also resigned the day before last year's AGM once he knew the proxies were against him. Here is a list of the biggest votes against incumbent directors, including the two disendorsed candidates who were rolled, Aristocrat's John Ducker and Coles Myer's Solly Lew, and the two who withdrew the day before.

John Ducker: Aristocrat, 2004, 2.42%
Peter Kerr: Tattersall's, 2005, resigned day before AGM
Peter Cassidy: Hills Motorway, 2004, resigned day before AGM
Solly Lew: Coles Myer, 2002, 44.83%
Mark Leibler: Coles Myer, 2002, 49.74% (survived after chair used open proxies in support)
Maurice James: Patrick Corp, 2005, 64.55%
David Asimus: BHP, 1998, 70.9%
Dick Warburton: David Jones, 2002, 75%
Richard Grellman and Lord Killearn: AMP, 2003, 81%
Rod Eddington: News Corp, 2005, 84.64%

The vast majority of directors are re-elected with more than 98% of the vote, as occurred with the Fairfax incumbents in Sydney on Friday.

The Tatt's AGM started at 12.30pm this afternoon in Melbourne at the Carlton Crest, the same hotel where rival Tabcorp holds its Melbourne-based AGMs. Crikey will be there for the duration and certainly plans to fire in a few questions. We'll have a full report tomorrow and please email smayne@crikey.com.au if we've missed any names on that list of unpopular directors.