Murdoch and Bransen climb charts, Eric Ellis v Singapore Inc, News Corp, Fred Hilmer, David Lowy

2. But Murdoch and Branson climb admiration charts


By Stephen Mayne

Global accounting giant PricewaterhouseCoopers conducts an annual survey of 1000 CEOs in 25 countries to gauge the world's most respected business leaders and companies. The Financial Times did a special lift out on the results on November 18 and this year's results are great news for both Rupert Murdoch and Richard Branson.

Branson may be pilloried by the likes of Chris Corrigan but he has risen from 12 to 7 in the global rankings, while Rupert's efforts with Fox in the US is what the FT says explains his rise from 38 to 13 in a year when News Corp's weak share price and dodgy corporate governance practices have been in the limelight.

Microsoft and Bill Gates again took out the corporate and individual top price with General Electric and Jack Welch coming in second in both categories.

Rod Eddington is moving back to Melbourne after recently retiring as British Airways CEO and he entered the charts at number 38, the second highest ranked Australian citizen after former Coke CEO Douglas Daft, who rose from 43 to 22.

The most puzzling entry was Brian Gilbertson, whose performance at BHP Billiton saw him enter the charts at 41. We emailed PwC pointing out that Gilbertson was sacked in January 2003 and they replied that it should have said "former CEO."

Surely it should be Chip Goodyear, unless Gilbertson has been kicking goals in life after BHP Billiton which doesn't appear to be the case when you Google him.

The highest ranking Pom was BP CEO John Browne whose brilliantly timed acquisitions of Amoco and Arco in the late 1990s and an early deal in Russia has seen it rise to be the second most valuable global oil giant after Exxon-Mobil. BP is now producing annualised operating profits of $30 billion, more than the combined profits of BHP Billiton, Telstra, and the Big Four banks.

Sadly, Australia hasn't produced a global oil player to speak of, just as we've failed to produce any company of note in IT, pharmaceuticals, shipping or hotels. Still, at least we're good at sport.





21. Eric Ellis v Singapore Inc



By Stephen Mayne

There isn't another Australian who has caused more angst for the Singapore Government than journalist Eric Ellis and he's done it again this morning with a powerful story in The Bulletin on the repressive regime that is about to hang Australian citizen Van Nguyen.

Ellis has lived and worked in Singapore off and on since 1999 and has shone a light on Sing Inc when others have pulled their punches. Today he has really stuck the boot in with lines like this:

Singapore proudly say it has “humanised” the hanging process – weighing the condemned and carefully calibrating bodyweight with a “drop” system so as to deliver a swift, clean kill when the platform gives way.

Ravi says Malaysian drug addict Vigmes Murthi wasn't so lucky. When he was hanged at Changi in September 2003, Ravi says, his head was nearly torn off by the force of the 500kg-plus drop, about seven times his bodyweight. “They got it horribly wrong,” Ravi says, “his mother was screaming, screaming ... there was so much blood in the coffin, it was overflowing.”

When Singapore Telecom CEO Lee Hsien Yang, the second son of Lee Kuan Yew, met with senior editorial executives from The Australian at the time of the Optus takeover, all he wanted to talk about was the anti-Singapore stories that Ellis was writing for the paper. The Murdoch executives gave his bile short shrift but it demonstrated just how sensitive the ruling Lee family is to western criticism.

The story is now really showing signs of taking off. ABC Victoria's Jon Faine devoted much of his first hour to the issue today and then 774 station manager Ian Mannix later commented that the next two weeks could really go crazy. The World Today is also leading with the story today and The 7.30 Report interviewed barrister Tim Robertson SC who repeated the Crikey line from yesterday when he said:

"The only pressure to which the Singaporean Government is susceptible is economic pressure because the one thing that matters in Singapore is the almighty dollar."

Indeed, when is the first senior Optus executive going to resign and publicly blast the regime? Why don't Graham Bradley and John Morschel, the two respected Australian businessmen on the SingTel board, quit in protest?

What do the new directors of SP Ausnet, led by chairman Nuno D'Aquino, think about putting their names to the Singapore Government raising $1.6 billion in a public float that closes on the same day Van Nguyen will be executed? Are Morgan Stanley and UBS comfortable about being paid up to $28 million for managing the float?

This intransigence by the Singapore Government will almost certainly reduce the value of Sing Inc by hundreds of millions of dollars, plus do enormous reputational damage. Their best relationship in the region will be severely damaged and there is now little prospect Singapore Airlines will be given a sweetheart deal to fly the Pacific by the Howard Government. And nor should they.




28. The truth about News Corp's share price performance



By Stephen Mayne

"Most people who have been prepared to take a long term view on this company have done brilliantly, and more than any other company in Australia, I think."

So said Rupert Murdoch at last week's shareholder information meeting in Adelaide.

When Sir Keith Murdoch died in October 1952, his estate was estimated to be worth about $9 million in today's dollars. The Murdoch family is today worth about $9 billion, so that's one hell of a return for those who were on the register of News Ltd when young Rupert took the reins. However, we should not ignore the fact that News Corp has been a chronic underperformer for most of the past two decades.

When former Deutsche Bank media analyst Mike Mangan did his swansong report in April, he calculated that you had to have bought News Corp before August 1992 to have outperformed the All Ords. But in April News Corp was $22.60 not the $21.18 of this morning. And the ASX 200 was 4120 not 4621 today. So even since April it's underperformed the ASX200 by another 17%!

Last month Mangan wrote in Eureka Report that a shareholder would have had to have bought News Corp before 1998 to have even seen absolute performance let alone relative performance.

Rupert was even slagging off at Fairfax during his current Australian visit, yet the much-maligned Fairfax has outperformed News Corp over every time period in at least the last decade. The largest outperformance is over five years where it's a massive 30%.

Therefore, just how far back do we have to go to make News Corp the best performing stock on the market? Frank Lowy's Westfield has clearly been the best performed stock since it floated because $1,000 invested in 1961 was by 30 June worth $167 million, assuming all dividends were reinvested. Before 1961, it would be interesting to compare BHP and the banks, especially when you consider the many more dividends they have paid than News Corp over the years. If anyone can crunch those numbers, please email smayne@crikey.com.au.

However, there have been great trading opportunities in News Corp over the last two decades. The lowest recent point came on January 19, 1991, when the stock hit $3.19 ($1.06 in today's terms adjusting for various share splits, bonus issues and consolidations over the years) which capitalised the company at just $850 million. Here are some key dates and events in News Corp's share trading history:

October 1987: crash from $20 to as low as $10 in the days after the crash as Rupert dumps more than $600 million worth of shares on Queensland Press at $16 a share
Jan 19, 1991: hit record low of $3.19
Feb 1, 1991: debt relief deal with bankers announced
Aug 1991: back through $10
February 1993: reach record $31.20 as four-for-one share split announced
October 1994: one-for-two non-voting bonus issue announced, stock falls 6% in 2 days to $8
November 3, 1994: Non-voting shares debut at 12% discount, ordinary shares fall from $8.14 to $5.85
March 3, 2000: ordinary shares surge $1.65 to a record closing high of $27.50 after touching $28
April 17, 2000: ordinaries plunge 14% to $17.75 after dotcom crash and Rupert's cancer scare
November 2004: one-for-two share consolidation as part of move to America

Now that's quite a complicated series of shares changes to contemplate but from bottom to top the performance was certainly staggering. If you had bought 1,000 shares for $3,190 on January 19, 1991, you would have owned $157,500 worth of shares by the time they peaked on March 3, 2000.

Adjusting for various share splits and bonus issues, your 1,000 shares would have become 4,000 voting shares and 2,000 non-voting shares which closed at $27.50 and $23.75 respectively at their peaks. However, the same shares today are back to the equivalent of $10.58 and $10.11 today and would be worth $62,540.




29. Has Fred Hilmer pushed the tax envelope?



By Stephen Mayne

Given that he only retired as CEO at 10am last Friday, it was disappointing that Fred Hilmer did not stick around to bid farewell to Fairfax shareholders at the ensuing annual meeting in Sydney. Former chairman Dean Wills happily sat in the front row and rose to acknowledge the applause when his replacement, Ron Walker, introduced him to the meeting.

Dean Wills has been an old mate of Fred's on the Westfield board for a decade, and now it looks like they've done a cute salary packaging exercise that may raise a few eye-brows at the ATO.

Fairfax announced on August 29 that Hilmer would go out with a juicy golden parachute, but Hilmer himself refused to be drawn beyond this one-paragraph statement from the board: "The board has determined a retirement allowance of $4.5 million for Mr Fred Hilmer, consistent with his employment arrangements and reflecting the timing and circumstances of the transition."

Suspicions arose when Hilmer referred all questions on the payment to the board and the 2004-05 Fairfax annual report revealed that he received no short term bonus in his final year, after he was paid a bonus of $1.06 million in 2003-04. This meant his overall salary fell from $2.48 million to $1.5 million in a year when profits were up and Fairfax shares rose about 50c or 14% over the year.

Ron Walker said last Friday that the full amount was provisioned in the 2004-05 accounts, although they won't appear next to Fred's name until the next annual report.

I asked Walker to provide a breakdown of the figure for shareholders, or if this wasn't possible, whether any further breakdown would be released in 2005-06 annual report. After all, this is normal practice for most companies, but Walker wouldn't give an inch, again raising suspicions.

This is how Jeni Porter reported the exchange in The SMH:

Mr Walker refused to disclose how the payment to Mr Hilmer was calculated but said the departed chief executive was paid less than his peers and had forgone a bonus. When Mr Mayne asked if the deal was structured to take advantage of retirement-related tax breaks, Mr Walker said it was all above board and sanctioned by Fairfax's in-house counsel, Gail Hambly. Mr Hilmer quit the board yesterday and did not attend the meeting.

Any retirement payments that Fred has been paid will only be taxed at the 15% rate and any termination payments will only pay 21.5% to the tax office. This means that Fred will have a lot more money in his pocket than if he'd just been given a big final bonus for performing so well over the past seven years.

I'm no tax expert, but all this secrecy and unusually limited disclosure is not a good sign for a company that itself runs daily scrutiny on society and business.




33. Will David Lowy replace his dad in charge of soccer?



By Stephen Mayne

While Frank Lowy has deservedly received enormous praise for the way he and John O'Neill have transformed soccer in Australia, it is worth considering who else has played a key role.

Only a few thousand people would have been listening, but Australian Sports Commission chairman Peter Bartels rang in to SEN on Sunday night and spent about 20 minutes explaining the process as to how Lowy came to be in charge.

It was Bartels who first approached Lowy asking him to rescue soccer in Australia and Lowy then said he wanted to be asked directly by the Prime Minister, so he knew there was complete support for the estimated $14 million of taxpayer funds that were being offered as part of the deal.

The PM duly obliged, so Lowy signed up for an initial two year term and was allowed to hand-pick a supportive board including Ron Walker, John Singleton, Suzie Williams, wife of Crown Casino founder Lloyd Williams, veteran Coalition staffer Ron Harvey, long-time Lowy mate, property developer and ongoing soccer player Phillip Wolanski and Brian Schwartz, the former CEO of Ernst &Young, the long-time auditors of Westfield.

Bartels deserves credit for his role, even though he has been largely shunned by corporate Australia since bowing out as Coles Myer CEO in 1996-97. Instead, the gold medal cyclist from the 1962 Commonwealth Games has thrown himself into his sporting duties and even had a public difference of opinion with Ron Walker recently over whether he should participate in the Queen's Baton Relay ahead of the Commonwealth Games.

The complete board and management structure of the FFA is laid out here, although we're still trying to get our hands on some sort of annual report to understand the governance structure. CEO John O'Neill is certainly getting plenty with a package worth $800,000 a year but he has sensibly brought in plenty of former colleagues from the ARU to hammer out broadcasting and sponsorship deals. A quick look at the FFA website suggests they've now locked in loads of sponsors like Qantas, NAB, Coca Cola Amatil, Hyundai and, of course, Westfield.

Frank Lowy initially signed up for two years but then extended by a year until November 2006, after the World Cup is well and truly sorted. By then he'll be 76 and it will be time for someone else to take over. While nepotism is not something that should normally be encouraged, there are suggestions that Frank would like his soccer mad son David Lowy to take over as chairman. What a splendid idea.

David is the only one of the three Lowy boys who has bowed out of executive duties at the shopping centre giant. However, he's done a Lachlan Murdoch by staying on the board as deputy chairman, but would have the time to devote to ensuring Australian soccer continues to grow.

David Lowy was a keen soccer player as a kid and used to tear around the park with fellow Rich Lister Phillip Wolanski, who sits on the FFA board with his dad. This is vital as you can't have a situation where the FFA board is full of people whose first love is another sport. For example, when John Singleton talks sport in public, it's normally rugby league.

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