Corporate Governance

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FXJ 10Yr Comp 2012This is a letter that I wrote to my supporters after I challenged the Chairman and board of Fairfax Media by standing against sitting members for a board position.

I think it expresses many of my feelings about the shortcomings of some boards and their failure to achieve adequate returns for shareholders.

Dear Supporters

I wanted to write and tell you about the Fairfax AGM and to thank everyone for their support for my campaign for a board seat on Fairfax Media.

As I said from the outset we never had any chance of succeeding but the process was very rewarding.

Over the six week campaign we developed:

  • A 500 word platform included in the notice of meeting to the 35,000 shareholders
  • A list of Cox’s Top Ten Deadly Sins of Fairfax that demonstrated how the board of Fairfax had reduced the share price by 90% over ten years from $5 to 38 cents wiping out over $5 billion in shareholder value
  • A 20 page plan for the steps that needed to be taken to increase shareholder value and Save Fairfax that was provided to the top twenty major shareholders

I have to thank the brains trust that included some of Australia’s leading media analysts contributing great ideas that were denied by an intransigent Chairman, a management in denial and a board with little media expertise or relevant skills.

The 2012 Fairfax AGM was held in Melbourne, a wise decision by the company preventing nearly all the institutional shareholders and media analysts who are based in Sydney from attending with no questions allowed from interstate by webcast.

I had attended the 2009 Fairfax AGM in Sydney, the first meeting at which Roger Corbett was chairman and I had watched him parlay hours of questioning with steely but calm resolve. In that period he made numerous statements that I, and a group of fellow media analysts, found to be ignorant, naïve or false. It was as a result of this experience that first got me to write to Corbett offering my media experience and expertise to the board.

As in 2009 the Chairman controlled his obvious irritability with over 3 hours of questioning and personal criticism from shareholders of himself, the board and management knowing that he already had the overwhelming proxies in his pocket, that shareholders could not move motions from the floor and that he only had to outlast the questions which he restricted to three per person per resolution.

Corbett would not allow directors, who he had praised for their incredible capabilities and contributions, to answer questions and even refused requests for them to speak to why they should be elected. The main exception was the CEO to whom he directed my questions astounding me with what I considered to be unsubstantiated beliefs and strategies for the radio stations, digital expansion and future growth from mature low growth business with few synergies. Corbett was particularly opposed to sale of assets to reduce debt which the major investors would prefer.

In conclusion I pointed out to the Chairman the history of wealth destroying decisions from the board over the years and their annual mantra that they “have a strategy… we are implementing it” concluding that the board are misleading or incompetent.

When it came to my nomination I was allowed five minutes in which to speak but as the meeting had already run for three hours, and I had got to ask questions I kept my speech very brief.

The meeting ran for a very lengthy 3 hours and 35 minutes.

If you would like to hear my brief speech or more importantly the following statements from shareholders on my nomination and rejection by Corbett then go to exactly the three hour point on the attached webcast.

The speeches from five separate shareholders including by Stephen Mayne representing the Australian Shareholders Association and from ex South Australian Senator Chris Schacht are amazingly moving and nearly had myself and my sister in tears. My apologies if these comments are a bit of an ego trip, but I am not friends with any of the speakers.

As the Chairman had over 75% of the total votes as proxies we knew we were doomed however I believe we may have set some sort of record for opposing sitting directors.

I received 388.7 million votes which was 22.6% of the votes cast.

When Stephen Mayne stood in opposition to sitting directors of Fairfax in 2009 he received 42 million votes or 2.8%.

In this regard I must thank Gina Rinehart and her representative John Klepec for supporting my nomination.

I also am grateful for the small institutional support I did get but it has been shown on many occasions that it is nearly impossible to get the institutions to vote against a board no matter how badly the company has been run and the loss of over 90% of shareholder value. Whether this is because most are nominee companies with no power to vote differently, or institutions that want to keep a low profile on the poor investment decisions they have made on behalf of investors or superannuants or for other reasons it is unsure. In this case there was at least one major shareholder with a personal agenda with different objectives. Again will write more on this but would like input from analysts.

I then stayed on in Melbourne to attend Cox Plate with my family which is named after my great great grandfather. It was the first time in many years that I have attended with my 86 year old mother who has attended the last 70 Cox Plates, my younger sister who is a race horse trainer, Jennifer and John and a number of Cox family cousins.

Ironically this week I had to fly back to Melbourne to do a luncheon presentation for the Chartered Secretaries Australia on Corporate Governance.

I must also thank Mark Day for so publicly supporting me in two columns in The Australian “Fairfax rebel gets my vote” and “Fairfax board just doesn’t have a clue.” Much appreciated.

In conclusion it was a great experience and despite not being successful I am very pleased I tried. People keep asking why would I take on such an impossible venture and even if I won why would I want to be on the Fairfax board. It just seemed to me to be the time to stand up and be counted.

I certainly did not do it for the publicity as in the month before I did 30 interviews including for the Wall St Journal, many radio interviews mostly on the ABC, AdNews and B&T, London radio, ABC TV News, Crikey, SBSTV, Sky Business, Financial Review, Sunrise, Nine News and Ten News. Mostly these were about Alan Jones, Nine funding, Ten results and the Future of the Media. Only a few were about Fairfax.

In the end it is like politics I was annoyed with how some boards so incompetently destroy shareholder investments and I wanted to try and make a difference. I should have done it years ago.

My appreciation for your indulgence and support.

Kind regards

Peter Cox

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