THE DISTILLERY: King Coles

One jotter sees a long stint in the top job for Wesfarmers' Goyder, while another eyes more power for David Gygnell.

Wesfarmers chief executive Richard Goyder and Nine Entertainment boss David Gyngell are at the height of their executive powers, something many would not have expected. Goyder pushed Wesfarmers to the brink with the enormous Coles acquisition and Gyngell, frustrated by overlapping management, walked away from Nine Entertainment only to be invited back years later. This morning two commentators look at the strong fortunes of these two Australian titans, while another contemplates that unexpected surprise for another, James Packer.

First, The Australian’s John Durie says Wesfarmers chief executive Richard Goyder is set to remain in the top job for another five years following a strategy briefing that included reassurances that the Coles turnaround is far from over and cost increases in the resources division are manageable.

"There are vocal critics among analysts who dispute these claims, with Merrill Lynch's David Errington pointing out the $6 billion in capital expenditure on the Curragh coalmine has produced only $50 million in earnings growth and Macquarie's Greg Dring arguing Coles has been a massive value destroyer because its returns are well below the cost of capital. The latter has long been a source of market criticism, as the $21.9 billion purchase price and $20.5 billion in capital expenditure since have pushed group returns on equity from 25 per cent-plus pre-acquisition to 11.7 per cent in the latest half-year results. The board's decision to back Goyder for another five years is in part driven by the desire to have him follow through on the Coles acquisition to ensure it delivers the promised benefits and shows the board is prepared to take a long-term view.”

The Australian’s Richard Gluyas points out that Nine Entertainment boss David Gyngell is in the unusual position of leading a company that’s debt-laden and about to be forced into a sale, and how power is if anything enhanced.

"It’s a delicious irony that the Nine Network chief executive who quit Seven years ago because he got jack of reporting to four interfering bosses is now looking like a kingmaker at the same network. David Gyngell's influence at Nine Entertainment is at an all-time high. It's like Logies night at Nine, as the company's warring debt and equity factions roll out the red carpet to the irrepressible Gyngell's office, knowing that there's a chronic shortage of industry talent to replace him even if they wanted to.”

And The Australian Financial Review’s Chanticleer columnist, Tony Boyd, writes that billionaire James Packer’s bid to unseat Echo Entertainment chairman John Story has received an unexpected boost from the company’s profit downgrade.

"The $30 million impairment caused by the liquidation of Chinese junket operator SilkStar will strengthen Packer’s claims that Echo has inferior casino management skills. Junket promoters are part of the bread and butter of casino management. They arrange customer transport and accommodation, and provide credit to gamblers on behalf of casinos in exchange for fees and commissions. When SilkStar went into liquidation, it owed Echo $7 million in prepaid fees and commissions. As well, its gambling clients had outstanding debts to Echo of $22.9 million. Echo’s strategy of trying to lift its market share among junket promoters has backfired. This is a significant failure in credit-risk management given it will increase provisions in the balance sheet by 52 per cent.”

Staying with the Packer-Story battle for a moment, The Australian’s Bryan Frith looks at the jostling for position at Echo Entertainment, specifically Crown’s vehement denial of the suggestion that it has continued to borrow stock in its target.

Turning to economics, The Australian’s economics correspondent, Adam Creighton, quantifies the extent to which western governments enhance the position of their banks by effectively guaranteeing their ongoing existence. His section editor David Uren argues that South Australia has delayed necessary cost cuts because it can’t weather the political consequences.

The Australian Financial Review’s David Bassanese tentatively argues in favour of a rate cut from the Reserve Bank next week help buffer the non-resources sectors of the Australian economy from European worries.

Meanwhile, The Australian’s Glenda Korporaal asks whether we’re job snobs given that there are such riches to be earned simply by moving to Western Australia. And finally, Giles Parkinson writes in the same pages about the revolution going on in the solar photovoltaic industry that most of us can’t see.

And just as one final note to readers, The Distillery has been a little shorter these past two days because Fairfax Media’s newsroom is on strike amid an industrial dispute. Things look like they’ll return more or less to normal on Monday.