ELIZABETH KNIGHT June 28, 2012
AFTER weeks of negotiations the Fairfax board and the company's 18.7 per cent shareholder, Gina Rinehart, are no closer to agreeing on whether she would be offered seats on the board. In fact, they appear to be further apart than ever.
It was a bizarre diplomatic state of affairs yesterday. As the eight Fairfax directors sat around the table at the company's level 5, Pyrmont bunker discussing Rinehart's quest to be admitted into the Fairfax board tent her camp was on the other side of the country issuing a statement criticising the company's record on editorial independence and questioning whether two seats would be sufficient.
So where is the peace pact?
Rinehart appears to have drawn on a Herald Sun column yesterday that questioned some Fairfax commercial/editorial intervention in the coverage of Earth Hour a few years ago to assert the company doesn't play by its own rules.
Rinehart says she is happy to stick by the Fairfax board editorial charter while at the same time suggesting that the company has not been abiding by it.
Her aggressive stance put the board in a difficult position. To have offered Rinehart or her people representation on the board after a declaration of war would have made the Fairfax board look weak.
Under normal circumstances a near 19 per cent shareholder would have some entitlement to board seat(s) but this situation has turned into a battle of wills.
It has been made all the more toxic by Rinehart's references to chairman Roger Corbett's small shareholding in the company and by inference her significant stake.
Corbett and his team take the view that she won't play ball on the charter of editorial independence. He has surveyed other large shareholders and come away with the view that he has their support. ''In coming to this view the board has gauged the opinion of other shareholders and noted some of their recent public comments on these matters, noting in particular they share the company's view on maintaining editorial independence and their desire that board members act in the interests of all shareholders.''
The real commercial agenda for the remaining institutional shareholders is that they want to see Fairfax in play. If Rinehart gets board control she will have no need to make a full bid. She has a sufficient stake in Fairfax to block another party from making an offer but appears unwilling to make one of her own.
This impasse has been dragging on. Each day there is a suggestion some announcement will resolve the situation. But nothing so far.
Corbett said yesterday: ''I regret that agreement has not been reached for Mrs Rinehart to join the Fairfax Media board of directors. I hope that this might be possible in the future. However, key elements yet to be agreed include acceptance of the charter of editorial independence as it stands and the Fairfax board governance principles as agreed by all existing directors.''
While Rinehart sits at less than 19 per cent the board doesn't feel compelled to give ground; neither does she feel the need to offer any concessions.