Media Clips

Telegraph.co.uk

June 11, 2008

INM Board 'Unable to Hire or Fire Chief Executive'
By Juliette Garside

THE board of Independent News and Media (INM) lacks the autonomy to carry out its "primal task'' of hiring and firing the chief executive, it has been alleged.

The claim against the publisher of The Independent newspaper was made yesterday in a report by corporate governance expert and Yale fellow Stephen Davis, commissioned by telecoms tycoon Denis O'Brien before INM's annual meeting in London today.

Mr O'Brien has been campaigning to unseat chief executive Sir Anthony O'Reilly and is INM's second largest shareholder with a holding of just over 25pc. Despite recent corporate governance improvements, INM has "failed to convince watchers that its board is independent enough to pass the one primal task of a board, namely its ability to 'hire and fire' the CEO'', said Mr Davis.

He argues that lack of a counterbalance to Sir Anthony's power within the company could be keeping INM's share price artificially low, because investors are wary of putting money into media companies that do not have strong boards.

Referring to former Telegraph proprietor Conrad Black, and former Mirror boss Robert Maxwell, Mr Davis said:"These cases have nothing to do with INM. But they have everything to do with the way investors look at media companies.

"INM describes itself as fiercely committed to world-class business success but it harbours practices in board independence at INM which unnecessarily undermine investor confidence.'' Lower share price can raise the cost of capital and make it harder to grow through acquisition. He adds that the 20-strong board is nearly double the peer group average.

INM claims 55pc of its directors are independent. Four proxy voting agencies, which advise shareholders on how to vote their stock, say no more than 35pc of directors are independent, says the Davis report. The major stock exchanges call for majority independent boards, and Mr Davis claims 50pc is average for the media industry.

Mr O'Brien, who has been branded a "dissident shareholder'' by INM, said: "This should be a matter of grave concern to all shareholders. It is imperative the corporate governance issues are addressed without any further delay.''

INM has dismissed the Davis report, describing it as "misleading, malicious and wholly inaccurate''.

Earlier this month INM published its own report that gave the company's corporate governance a clean bill of health in what has become an increasingly acrimonious spat with Mr O'Brien.

Compiled by Prof Jay W Lorsch of Harvard Business School, the INM report said the board "is functioning effectively in governing the company and its management and the board is doing what shareholders and other stakeholders expect of it''.