Peace, albeit probably an uneasy one, has finally broken out within the Fairfax Media boardroom, but new chairman Roger Corbett faces a tough task to both heal the deep wounds created by the ousting of former chairman Ron Walker from the board by John B Fairfax and his son Nicholas, and devise a strategy to arrest the decline of key Fairfax mastheads.
Fairfax Media said today that the board had unanimously resolved to elect Corbett, the former Woolworths chief executive, as Walker’s successor. That follows a series of meetings between Corbett and the two Fairfaxes.
The Fairfaxes were known to favour a search for an external appointment but would have recognised that they wouldn’t have the institutional support to impose their will on a board, given the risk of a wholesale walk-out of the other five non-executive directors if Corbett, a director since 2003 and recently appointed deputy chairman, wasn’t elevated.
The immediate challenge for Corbett will be to create a workable board. The Fairfaxes, with 9.7% of the company, worth just under $400 million, aren’t going anywhere and in the near term the quite bitter public hostilities and slagging matches between them and the rest of the board will generate considerable tension.
An important factor in the Fairfaxes’ decision to go public with their opposition to Walker’s planned extension of his tenure, initially until after next year’s full-year results, was their objection to an out-going chairman, with whom they had significant differences, over-seeing the anointment of his successor and a process of boardroom renewal.
With the support of key institutional shareholders, the Fairfaxes were able to force Walker to accept the reality that there was a very real risk he wouldn’t be re-elected and that his tenure as chairman – a tenure he is very proud of – would end in embarrassment.
However, he has been able to hand the chair to his preferred successor and it is Corbett who will now be responsible for restocking the board and dealing with the fracture within a dysfunctional board.
He will have to do that quite quickly because Fairfax can’t afford continuing recriminations and disunity, given the scale and complexity of the challenges it faces.
Walker and Corbett are right in crediting Walker with the diversification program that reduced the importance of the group’s metropolitan mastheads. Fairfax may have overpaid during the flurry of acquisitions it made in the pre-financial crisis period but the broader spread of operations has enabled it to survive an implosion in those mastheads’ revenues and profitability.
The challenge for Corbett will be to devise a strategy for reviving those mastheads, which are critical in supporting and generating content for the group’s online media presence.
Their classified advertising volumes appear to be stabilising, but are at very low levels and there is considerable skepticism that they can ever return to their former levels given the extent to which specialist online classified advertising models like Seek and Carsales have carved into their former dominance.
The financial crisis appears to have accelerated what was already a structural decline and, while there might be a cyclical rebound in advertising revenues if the economy continues to grow, there are some very significant strategic issues to deal with if the group’s traditional core is to be stabilised at levels of profitability that ensure the mastheads’ longer-term survival.
Corbett is a good strategist, although as a long time Fairfax director he has been part of a board that hasn’t been able to craft a strategy for the metros other than cost-cutting and diversification away from them.
Where Walker brought an entrepreneurial flavour to Fairfax’s affairs, Corbett is probably somewhat more hard-nosed on detail and very focused on costs. At Woolworths he also demonstrated the ability to develop disciplined strategies that were executed ruthlessly. He is almost obsessively competitive, as Coles could testify.
The difficulty for Fairfax is that there is no developed strategy, anywhere in the globe, for reversing the trends towards declining classified revenues and fracturing audiences for the traditional print media and the revenues and margins currently available in the online environment wouldn’t go close to sustaining the cost structures of Fairfax’s mastheads in their current forms or providing an obvious path towards migrating the mastheads’ profitably online.
Corbett referred to the significance of the group’s mastheads to the country’s culture and its democracy and the challenges that lay ahead. He also said that decisions taken in the last few years by Fairfax’s management and board had put the group in a position envied by media companies around the world. These things are, of course, relative.
This article first appeared on Business Spectator.
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