Walker's exit strategy
There was a sense of inevitably about Ron Walker’s reluctant decision to flag his retirement as chairman of Fairfax Media in this morning’s Fairfax newspapers.
After Walker’s advisers and at least one of his friends in the Melbourne business community had taken soundings among Fairfax’s institutional shareholders, it would have been obvious that there was a real risk, indeed a probability, that Walker’s attempt to extend his term into next year would fail and that he would have been voted out by shareholders at November’s annual meeting.
That would be a most inglorious end to his term as Fairfax chairman, his most prestigious public company role. Better to go out gracefully while still defending his legacy.
From the moment the two Fairfax family members of the Fairfax board, John B and his son Nicholas, went public with a very aggressive attack on Walker and stated their intention, with institutional support, to vote their 9.7 per cent stake against his re-election at the meeting, Walker was doomed.
He wanted to stay on, initially until after next year’s full-year results, to oversee the 'renewal' of the Fairfax board and a managed hand-over to his appointed successor, Fairfax deputy chairman Roger Corbett. Subsequently he let it be known that he might be prepared to go earlier, perhaps in March or April next year.
That hint at a change of tack didn’t help his cause. What was the point of extending his term by a few months, other than to protect his own dignity? If anything that strengthened an institutional resolve that had already hardened on the governance principle that, if there were to be a new chairman, they should be responsible for the changes to the boardroom, which has been widely described as dysfunctional.
The other factor that would have been nagging at Walker would be that the longer and more strongly he fought for a temporary reprieve, the greater the risk that he would take Corbett down with him.
Corbett is also up for re-election at the meeting and there have been some mutterings among the institutions about the suitability of a grocer, albeit a brilliant one, becoming chairman of a media company at such a challenging time for old media.
Corbett has so far played his cards carefully, expressing support for Walker’s performance as chairman but not committing himself to supporting his re-election.
The Fairfaxes have said nice things about Corbett, but have said his re-election – and therefore his prospects of becoming chairman – was a matter for shareholders. It is understood neither the Fairfaxes nor the core institutions that were supporting their assault on Walker have come to any definitive position on Corbett’s re-election.
There is an obvious path to a negotiated compromise if Walker confirms his retirement. The Fairfaxes could support Corbett’s re-election and elevation to the chair in return for undertakings that he would conduct an exhaustive search for new directors with the appropriate media experience to introduce new blood and different dynamics to the boardroom.
Corbett would be aware that while there might be some institutional scepticism about his suitability for the role there is unlikely to be the same cohesiveness among the institutions towards him as there was towards Walker. If he plays his cards carefully, he can defuse or at least minimise the extent of any threat to his succession.
That same recognition and concern about fracturing the institutional support for their cause would also explain why the Fairfaxes have been careful not to widen their attack beyond Walker.
The post-Walker boardroom politics will inevitably have been affected by the stoush, given that Corbett and the other four independent directors all publicly defended Walker’s performance against the Fairfax charges, some more aggressively than others. New blood might help defuse the tensions.
Walker, if he does decide to go quietly when his term expires at the annual meeting, will leave a mixed legacy. During his term, Fairfax expanded aggressively through a series of acquisitions, diversifying itself away from a reliance on its major metropolitan mastheads that could have made it extraordinarily vulnerable to the financial crisis and accompanying advertising recession.
That diversification, however, did create a much bigger and broader exposure to old media and stretched the group’s balance sheet heading into the crisis.
It also sowed the seeds for much of the tension within the boardroom that flared so spectacularly this month. It was the $480 million acquisition of Southern Cross’s radio and film production businesses, presented to the Fairfaxes at their first board meeting after Fairfax merged with their Rural Press group, that appears to have been at the core of their discontent.
Walker’s successor will have to grapple with the challenges facing traditional media. Walker’s expansion spree did diversify Fairfax and dampen its cyclicality but it also dramatically bulked up the scale of the portfolio of old media assets for which Fairfax now has to devise a new media future.
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