Shareholders greeted with scepticism the plans for a bright future laid out at yesterday's AGM of Fairfax Media.
There was a full house at the meeting, but the mood was subdued, even despairing, as speaker after speaker challenged the record of Fairfax chairman, Roger Corbett, and the performance of the board.
However, in an extraordinary moment towards the end of the meeting, Corbett agreed to drop his salary as chairman to below $400,000 in order to secure the 2.2 million proxy votes in support of the remuneration report held by the Australian Shareholders' Association by policy officer, Stephen Mayne.
The remarkable concession reflects the sustained pressure on Corbett throughout the meeting, although shareholders complained afterwards that the board had gotten off too lightly.
In particular, Corbett was repeatedly grilled over the dramatic $2.8 billion asset writedown announced with the company's financial results in August, which contributed to a disastrous $2.7 billion loss in 2011-12.
The writedown took the market by surprise and saw the company's share price fall sharply to 38 cents.
Five years ago, in 2007, the Fairfax share price was $3.48 and its market capitalisation was in the billions. Today, its market capitalisation is $935 million.
It's been a watershed year at Fairfax in which 1900 jobs – or 20% of the company's workforce – have been made redundant in a program intended to slash $235 million a year from the cost of running the company.
The future is digital
CEO Greg Hywood (pictured) gave an upbeat assessment of the company's future – a digital future in which the company is ready to ditch its print assets the minute they become unprofitable. There will be no cross-subsidy of the print business from any other part of the operations, Hywood emphasised.
Hywood reminded shareholders of the company's plans to shut its massive printeries, built at a cost of $300 million, and to cut down the papers to broadsheet size.
Limp applause followed both Corbett's and Hywood's presentations, but the audience burst into loud applause when Chris Schacht, a former minister in the Keating Labor government, reminded Corbett of the "elephant in the room": Fairfax's largest shareholder and Australia's richest person, Gina Rinehart.
"I think it is incumbent on you to tell us how you are handling Gina Rinehart," Schacht said. "It cannot help the share price to have the biggest shareholder at war with the board."
Corbett responded that the board had tried to find a way to accommodate Rinehart, but would only do so in the interests of all shareholders.
Other shareholders who raised questions from the floor included former editor of The Age, Ranald Macdonald; and repeat questioners from former AGMs, Stephen Matthews and John Fielding; and the media commentator and contender for a board position, Peter Cox.
Cox was the most vehement in his criticism of the board, challenging the statements and assumptions made by Corbett as "incorrect or misleading".
Cox said that the $2.8 billion writedown, which is based on an assessment of the company's future earning, suggested that Fairfax expected to lose $400 million to $500 million in revenue, working back through the figures.
Corbett responded that this was not what was expected.
Cox challenged Corbett's assertion that the whole media industry was facing challenges. "Fairfax has had a 70% share price fall, but Murdoch's News Corporation share price is up by 40%," Cox said. "Look at Foxtel, Seek, Carsales.com – they have all gone up. It is not correct to say that they have all gone down."
Cox was among several shareholders who questioned why the $2.8 billion asset writedown was not announced to the market earlier. (Corbett responded that the board was required to value assets at the end of the financial year.)
Not the right time to break up the company
Corbett was also challenged over the board's decision not to break up the company and sell its assets. Observers have estimated the value of the company at 90 cents a share if broken up. But Corbett said such estimates were not based on the detailed information available to the board.
Hywood went into detail about the "synergies" between the various media operations, which include radio and IPTV as well as over 200 newspaper and magazine mastheads.
Some of the mastheads – in the 10s – have been given no value, but they are still making money, Fairfax's chief financial officer explained to the meeting.
The Fairfax share price increased 4% after the AGM to 40 cents.
This article first appeared on Leading Company.