The board of Fairfax Media, publisher of The Age, The Sydney Morning Herald and The Australian Financial Review, has been plunged into turmoil after directors John B Fairfax and his son Nicholas Fairfax called for chairman Ron Walker to leave the board.
John B, who owns 9.7% of Fairfax Media through his investment vehicle Marinya Media, released a statement yesterday calling for renewal of the board and heavily criticising Walker for poor corporate governance and introducing an unacceptable level of risk into the company.
For a man who has shunned the limelight since joining the Fairfax Media board in late 2006, the public statement released yesterday by John B publically calling for Walker’s head was extraordinary and, as he said in his statement, “uncharacteristic”.
“Marinya Media (John B’s investment vehicle) can see no sound case to support the continuance of Mr Walker’s directorship or chairmanship for another year, particularly in the context of rapid industry change,” the statement reads. “Renewal must start today. Mr Walker and the rest of the board of Fairfax Media will not be surprised with our views.”
John B Fairfax is a descendent of the family which controlled Fairfax for the best part of a century. He returned to the company as a director and investor in 2006 when Fairfax Media merged with Rural Press, in which John B was the major shareholder.
But the destruction of John B’s fortune since he agreed to allow Fairfax Media to merge with Rural Press has been nothing short of spectacular.
When the companies formally completed the merger in May 2007, Fairfax Media’s share price was sitting at just over $5 and the stake held by Marinya Media was worth $1.2 billion.
In just over two years, the value of that stake has fallen to just $390 million. Not surprisingly, John B has had enough and is demanding changes.
One interesting question that John B is probably asking himself is: Would his fortune faired any better had he not taken the fateful decision to merge Fairfax and Rural Press? It’s impossible to say, and certainly Rural Press would not have been able to avoid the general market sell-off caused by the global financial crisis and the specific sell-off of the media sector.
But it is worth noting that the rural and regional publications have actually been performing much better than Fairfax’s metropolitan dailies, The Age and The Sydney Morning Herald.
Revenue at the regional and community papers fell 8.8% to $669.7 million in 2008-09, while profit dropped 16% to $175 million. By comparison, revenue at the metros fell 14.3% to $689 million, while profit fell 46% to $96.9 million.
Shares in Rural Press would have fell, but probably not as hard as shares in Fairfax have.
John B’s sudden preparedness to take a very public stance on Fairfax Media’s future has commentators asking whether he may even lead the renewal of the board himself by becoming chairman.
Perhaps it’s worth referring to an interview he gave in late 2006 to the Sydney Morning Hearld, where John B attempted to paint himself as an old-fashioned media mogul.
“A businessman, crudely, is a money-hungry animal, whereas I think I see myself still in the old-fashioned terms of a media proprietor,” he said.
“I think media organisations benefit from having, if you like, the old individual proprietor.”
In the case of Fairfax Media, many commentators would agree that he’s right – and some would even say he’s the man for the job.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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