Fairfax Media's largest shareholder Gina Rinehart has fired back after being refused board representation, demanding milestones be set for chairman Roger Corbett's performance.
In an open letter to Corbett and the Fairfax board, Rinehart rebutted claims she and the board differed over the editorial charter, arguing their disagreements related to “how to save a business that is reportedly in danger of dying.”
The mining magnate wrote: “I don't recall you even sending me that [editorial] charter, and very little time or correspondence was spent on discussing it.”
She claimed Corbett “overrode” the charter himself when he fired the editor of The Age, following a decline in the paper's circulation. Rinehart also alleged Corbett was not “satisfied that [the editor] was sufficiently addressing your editorial direction.”
Rinehart said it was in the best interests of Fairfax shareholders that Corbett have “clear performance milestones” set which he must achieve by the next annual general meeting (AGM) in November. If these milestones are not met, she said “we ask that you tender your resignation at that meeting.”
The main milestone proposed is the raising of the share price from its current low – Fairfax shares closed at 55.5 cents on Friday – to 87 cents a share by the next AGM.
“[This price] would represent only a 50% loss from the commencement of [Corbett's] chairmanship in October,” Rinehart wrote. “To limit the loss under your chairmanship to 50% is not an unreasonable expectation, although perhaps shareholders would prefer a higher target?”
Meanwhile, the board must follow the Fairfax Media Board Governing Principles, which do not allow directors to seek professional advice or discuss business matters with Fairfax executives.
Rinehart wrote that these conditions prevent directors from “obtaining relevant information” when making decisions about the company, including the closure of printing plants at Tullamarine and Chullora, the 1,900 staff retrenchments over the next three years and the selling-down of “the very profitable” New Zealand auction website TradeMe.
Fairfax has countered the letter, arguing the refusal to give Rinehart board representation is not about the editorial charter but about Rinehart “obtaining control” of Fairfax without “paying a premium.”
Fairfax refused Rinehart board representation on Wednesday, claiming concerns over her refusal to adhere to the editorial charter. She was reportedly seeking three board seats, including the deputy chairmanship for herself.
The media company said “tens of thousands” of readers of its mastheads had written to express their support of Fairfax's decision to not grant Rinehart the three board seats she was reportedly seeking. “Our readers are telling us ... they will abandon us,” Fairfax said. “Contrary to Mrs Rinehart's repeated assertions that this isn't about editorial control – it is.”
Fairfax said its sharemarket performance was suffering due to cyclical forces which have seen Ten Network Holding's share price drop 63.4 cents since Rinehart joined their board. In the same timeframe, Fairfax claimed Seven West Media's share price dropped 73.3% and APN News and Media dropped 64.7%, compared to Fairfax's own drop of 60.6%.
“Mrs Rinehart's letter today has once and for all unmasked her motives for her continual attacks on the company and its board,” Fairfax said. “If Mrs Rinehart wants control of Fairfax Media she must make a bid.”
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