Rinehart stalks Fairfax board as Corbett digs in

He decides it's time to offer a history lesson.

It's to the point and littered, as is Singo's style, with plenty of colourful language.

And it leaves little doubt what he believes is the thinking behind Rinehart, recently annointed the richest woman in the world with a fortune of about $29 billion, and her plans for Fairfax Media.

In the months since she has amassed a 13 per cent stake in the publishing company, Rinehart has been pushing for board representation but has been rebuffed by another powerful figure in the Australian business landscape, Roger Corbett.

"Go through the history," Singleton begins. "I met Gina when she was a little girl when she was with her dad [the mining magnate Lang Hancock]. She's making her dad's dreams come true."

Hancock felt he struggled to have his voice heard in the corridors of power, Singleton argues, particularly with the West Australian government.

"They had a running battle with [Liberal premier] Charlie Court. They opened their own paper in Perth called The Independent.

"They hired Maxwell Newton the foundation editor of The Australian and editor of The [Australian] Financial Review.

"They started The Independent to get their view across so they could bag Charlie Court, they lost a fortune - but they got their view across.

"I think Gina's thinking 'will I start a paper?' because there's so much shit being written in the papers, in her opinion."

Over the past three months, Rinehart has begun mounting an increasingly public campaign to win board seats.

Her bid has pitted her against Corbett, a highly respected former retailing executive and boss of Australia's biggest retailer Woolworths, and no shrinking violet himself.

For Corbett, the Fairfax chairmanship was the crowning achievement of a long and successful executive career. Following his retirement from Woolworths, he joined the boards of the Reserve Bank of Australia and Fairfax Media.

He helped broker peace during an earlier period of instability, rising to chairman when the board fractured between then major shareholders the Fairfax family and the then chairman Ron Walker.

But, since his ascent to the chair in October 2009, the company's fortunes have been pummelled by unprecedented levels of change in the media industry.

Despite its expansion into new online businesses and the evolution of its mastheads into online, mobile and tablet forms, Fairfax, with its suite of legacy print assets, has suffered as Australia's $13 billion advertising market switches to online.

By the end of this year, more money will be spent advertising online than in newspapers, according to industry forecasts. As a result, under Corbett, the share price has fallen from $1.73 to a recent low of 62.5? and, for those former Rural Press shareholders who joined the register during the merger, the value of their holdings has fallen more than 80 per cent.

So, once again, the Fairfax boardroom - and Corbett in particular - is under pressure as its largest shareholder begins to vocalise her discontent.

After two months of duchessing fellow large shareholders and the board in private meetings in order to win two board seats, the appointment 10 days ago of the former Ernst & Young boss James Millar to the board instead of Rinehart appears to have prompted direct and public criticism of the board and management by Rinehart in the form of two statements sent exclusively to this newspaper.

And subsequently Rinehart's friends Singleton and the would-be Fairfax director Jack Cowin (who sits on Ten Network with Rinehart) have come out in support of her board tilt and placed the blowtorch to a board apparently determined to deny her a position.

In her first email, Rinehart warned: "There are questions to be raised concerning the current chairmanship that has presided over both an approx 60 per cent loss in sharemarket value and continuous loss of circulation of all its major mastheads, which in turn affects revenue. Answers need to be given as to how the chairman will address this in the interests of all shareholders, rather than merely hoping for improvements in circulation, revenue and share price or perhaps trying to blame ... industry conditions."

She also took the opportunity to confirm that she, through her privately owned Hancock Prospecting, had lifted her stake beyond the 12.6 per cent reached in February but warned the future of her holdings was unclear.

"It is too early to say if HPPL will hold its more than 13 per cent shares in Fairfax or sell them or find some other satisfactory resolution."

And just in case her dissatisfaction was not fully understood, Rinehart followed up with another statement the next day, which spread the blame for "poor performance" to management.

"The articulation of the strategy to revive the ailing Fairfax resides with the board and management of Fairfax and the chairman needs to urgently address this in the interests of all shareholders, rather than merely hoping for improvements in circulation, revenue and share price or perhaps trying to blame ... industry conditions.

"The market clearly does not support the current strategy with the chairman presiding over both an approx 60 per cent loss in sharemarket value and continuous loss of circulation of all its major mastheads. As a shareholder we would support a change in strategy that addresses the poor performance and regained market confidence."

Corbett has resolutely declined to respond to Rinehart's comments. He is believed to prefer to communicate directly with shareholders than make statements in the media and has been contacting institutional investors in Fairfax to shore up support, just as Rinehart's representatives continue to do.

A highly respected businessman close to both individuals says there can be a way forward that will satisfy both parties.

"She's got an investment of a couple of hundred million dollars in a troubled business. Does she deserve a board seat? Yes.

"The board has put up a number of issues that need to be resolved. The one about interference with editorial policy ... Gina knows she can't just ring [an editor]."

But she wants to know that she can be part of a broad discussion about editorial policy, even at board level. The businessman reveals that when Corbett gets back from an overseas trip, it is likely the pair will meet and try to resolve the impasse.

Asked if Rinehart should be offered a board seat, Singleton replies: "F---ing oath.

"Forget if it's Gina, if it's you or me or Bill Smith or Fred Snerk, if someone owns 13 per cent of the joint they're probably going to want to make money out of it."

Singleton says it is an "insult" that Fairfax has knocked back her request for a board seat.

Asked what expertise Rinehart would bring to the Fairfax board, Singleton says: "Making money. That's the idea of having public companies."

He doubts Corbett is opposed to Rinehart being represented on the board. "I'd be surprised if Roger wouldn't support Gina.

"I would think the Roger Corbett I know would think someone with 13 per cent should be on the board. That would be my bet. Roger's a Christian, Roger doesn't bet. I think the world of Roger, I would be staggered if he was against it."

But commentators have this week pointed out that when it comes to the seismic shift from print to digital publishing, arguably neither Rinehart nor Corbett bring direct expertise to the board table.

Rinehart's growing influence on the Australian landscape is visible not just through her startling wealth. Her victory on obtaining special visa dispensation for workers on her Roy Hill mining project shows her increasing clout in Canberra.

Use of that sway is believed to be one of several obstacles she would needs to overcome to be invited on the Fairfax board. She would also have to stay out of editorial matters, at least directly. (Rinehart is suing West Australian Newspapers over its coverage of her dispute with her children over control of the family trust. She has gone to court to try to force the company to reveal its sources for several news stories.)

If Rinehart lifts her stake to between 20 per cent and 25 per cent either directly or with the support of other investors, the board will have little choice but to give her a seat, Fairfax watchers say. But holding that many Fairfax shares could preclude her from keeping her 10 per cent stake in Ten Network.

On editorial independence, since the divisive reign of the controversial Canadian media baron Conrad Black in the early to mid-90s, the board has been asked to agree to avoid interfering in editorial decisions. A charter of editorial independence was signed by the then chairman Sir Zelman Cowen in 1992, and although Corbett's predecessor, Walker, refused only to sign the pledge, he gave a verbal agreement.

All would-be directors are advised of the critical importance of editorial independence at the group before joining the board and need to agree to it before joining. Some have questioned whether Rinehart would adhere to this.

But Rinehart could bypass the board and nominate herself and possibly Cowin directly. The corporate governance specialist and director of Ownership Matters Dean Paatsch says Rinehart could call an extraordinary meeting to decide the matter at any time.

"If she had the numbers, she would have called an EGM [extraordinary general meeting] by now," Paatsch said.

Allan Gray, a major shareholder headed by Simon Marais, has expressed some sympathy for the mining magnate's board tilt, although questions remain about whether its super fund clients would agree.

In earlier comments to BusinessDay after Millar's appointment, Marais expressed disappointment that the board had not consulted investors before the announcement and would not commit to voting for Millar at the time. "I share the sense of frustration that they have gone and appointed what appears to be a mate of theirs," he said at the time.

"We need a tough outsider who has a history of shaking things up. You can't argue that the company has been massively well managed over the last five years," he added.

A business associate also questioned whether Rinehart had made a strategic error by letting it be known that her media interests were sparked more by the influence they could wield, instead of focusing on them purely as an investment.

Nevertheless, when asked who is likely to win the battle for control, several leading business figures back Rinehart mainly "because she does not like to lose". However, Corbett's supporters say he is equally stubborn and point out that he has a fiduciary duty to defend the company's best interests.

Neither the board nor Rinehart have confirmed whether any of these issues are sticking points, with Rinehart focusing her attack on the financial performance of the company - an issue plaguing investors as Fairfax seeks to persuade the market about the effectiveness of its turnaround strategy.

Asked where he would put his money in a battle between Rinehart and Corbett, Singleton pauses.

"Roger's a friend of mine and I admire what he did with Woolworths," he says.

"If you had to run Woolworths, I'd have Roger as one, Gina nowhere.

"If I had to make money out of Fairfax? In business they're both really good business people - as far as Fairfax, I think Roger has [only a small number of shares], Gina has 13 per cent, I'd back Gina."