Ten's billionaire board braces for anger
The latest Network Ten capital raising will give investors more rope with which to hang the embattled broadcaster's board at tomorrow's shareholder meeting, but the billionaire directors have one mitigating factor – they are sharing the pain. Really sharing it.
From a peak above $1.50 in November 2010 – soon after James Packer, Lachlan Murdoch, Gina Rinehart and Bruce Gordon finished their buying spree – to a low of the expected 20¢ price for the latest capital raising, the billionaire board members are down more than $560 million.
This does not include losses on the most recent $200 million capital raising at 50¢ a share.
Shareholder advocates and proxy advisors have already armed Ten shareholders with a scathing assessment of the company and recommendations to vote against the company's remuneration report.
The Australian Shareholders Association reported that, over the past two years, the company has fired an executive chairman, chief executive, chief operating officer, general manager sports, chief programming officer, group chief financial officer and general manager sales.
In recent weeks Ten has also cut its newsroom by 100 staff in a brutal and public exercise.
"So, is it working? Costs may be down but so are the ratings," the ASA reported.
"Obviously an overriding concern to the market and shareholders are the four billionaires sitting on more than 40 per cent of the stock. How much influence do they have? What is their plan? Are they getting on? What are their motivations?"
The ASA asked why a company of Ten's size has 10 non-executive directors and one executive director on its board.
It has recommended a cull starting with a vote against the appointment of Siobhan McKenna."With Ms McKenna it is an even worse situation as she will not be an independent director as she is both representing Cavalane Holdings (the joint investment vehicle of James Packer and Lachlan Murdoch) and is Managing Partner of Lachlan Murdoch's Illyria Nominees. In addition she was directly involved in the management of Network Ten in 2011," said the ASA report.
It also recommended a vote against the remuneration report, noting Ten does not have a short, or, long term, incentive plan for its employees.
'Conflicts' for directors
Proxy advisor CGI Glass Lewis supported the election of the two directors Ms McKenna and Brian Long, but had plenty to say about the billionaire board members who were not up for re-election.
CGI noted the $2.1 million paid by Ten to Mr Murdoch's private company Illyria – $800,000 of this payment related to professional services provided by Illyria in relation to Ten's strategic review.
"We view such relationships as potentially creating conflicts for directors, as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions," CGI said.
CGI recommended a vote against the remuneration report saying "the company has not adequately linked executive remuneration to company performance over the past two years".
The proxy advisor held another director, Jack Cowin, responsible for chairing the remuneration committee and took Mrs Rinehart to task for attending barely more than half of the board meetings in person.
Mrs Rinehart relied on alternate directors to attend the other board meetings in her place.
Another proxy advisor, ISS, recommended shareholders voted in favour of all resolutions, including the remuneration report.
In Ten's annual review released last month Mr Murdoch offered support for his chief executive James Warburton, but labelled Ten's performance as "unacceptable".
Mr Warburton's position is expected to be under considerable pressure after being forced into a second capital raising in six months. As recently as October Mr Warburton denied there was any need for a further capital raising after the impending sale of Ten's outdoor advertising unit – Eye Corp – collapsed.
The sale was later completed but at a substantially lower price.