KNIGHTLY VIEWS: By Gavin Ellis

Excoriating is the word that may best describe expat Canadian James Grenon’s 11-page critique of NZME. His forensic examination of the board he hopes to replace and the company’s performance is a sobering read.

You may not have seen the letter. At the time of writing, it was still sitting behind The New Zealand Herald’s Premium paywall. It is, however, available through the New Zealand Stock Exchange. You can access it here.

Grenon is highly critical in a number of areas that he breaks down into sections in the letter. The headings include:

“The combined performance of the two core businesses has been mediocre, to sliding, for the past eight years, despite a temporary period of covid gains.”

“There has been a consistent pattern of over promising and under delivering since covid.”

“Public disclosure is weak, with a slant that I interpret as supporting the status quo.”

Grenon’s letter includes an analysis of NZME’s share price in relation to the perceived value of its OneRoof real estate marketing arm, and the company’s dividend policy. He claims “the disclosure on these two critical elements is, in my opinion, lacking or even misleading”. He also criticises levels of management-level remuneration and high levels of staff turnover which he says “does not suggest a happy working environment”.

NZME’s board has yet to respond to the letter stating — in a note to the New Zealand Stock Exchange accompanying the release of Grenon’s letter — that it will do so in its notice to shareholders before the annual general meeting on April 29.

Were that the sum total of his challenge to the present board, it might be characterised as simply a move to improve the group’s financial performance and its return to shareholders. Much of what he says will, in fact, resonate with ordinary shareholders worried about the group’s financial performance and direction. It may well attract even more votes at the April AGM than he currently commands.

However, there is an enormous caveat hanging over any support for Grenon’s initiative.

He states categorically in his letter that he does not propose to act as a passive board chair (yes, there is an assumption that he will head an entirely new board). Instead, he leaves a strong impression he will be an executive chairman, in effect if not in name.

“I propose to be very active at the management level, leading a board and team that will delve into the operational details so as to be able to challenge management . . . This approach to governance is the only realistic way to ensure NZME gets a fresh set of eyes questioning every aspect of operational effectiveness and shareholder value creation.” The italics are mine and are highlighted for reasons I will return to shortly, but the import is clear: James Grenon and his team will have a finger in the pie.

The second reason for exercising caution on any endorsement of the Canadian’s move relates to the three paragraphs he groups under the heading “Journalism”.

On the surface, he promises better journalism, saying his intention is that “more quality content should be produced, not less”.

In contrast to NZME’s recent announcement to “set a new tone and build positive social momentum for New Zealanders”, our proposal will lift the company’s journalistic standards, resulting in the production of higher quality news content, characterised by independent, trustworthy and balanced perspectives. There will also be material for entertainment value as well. Then all the content will be used in any number of ways to generate profit.

He also applauds the “audience leading ratings of NZME’s audio segment”.

All of this sounds laudible, until one asks the simple question: How?

He has yet to give any specific answers. A request from the journalists’ union E Tū for assurances simply led to Grenon asking more questions about what the union meant by “editorial independence”.

However, let’s return to what Grenon means by his references to NZME’s journalism.

If he means the board will limit itself to supporting an annual budget that will allow NZME’s editors to independently produce the sort of content to which his letter alludes, all well and good.

If he means the aims set out in his letter will be transmitted to editors as an expectation of their approach to journalism, no problem.

However, when read in conjunction with the intentions I italicised above, there are strong indications that he intends to be at least meddlesome and, at worst, to dictate editorial direction and content. There is a signal to his editorial preferences in the fact that he applauds radio ratings that are firmly anchored by NewstalkZB’s right-leaning content.

Nowhere in Grenon’s letter is there any undertaking to observe the principles of editorial independence that certainly permeated The New Zealand Herald when I was editor a couple of decades ago and which I inherited from a long list of predecessors. Nowhere is there recognition that NZME has responsibilities to the general public. Declining trust is seen only in terms of the impact on profits.

Responsible and accountable journalism is something editors and their staff hold in trust on behalf of society. They seek audiences for the dual purposes of spreading that journalism to the general public and, in the process, producing the profits that ensure its ongoing sustainability. Done well, it is a virtuous circle.

However, like all circles, once any part of it is fractured it collapses. If Mr Grenon views the editorial department in the same way he sees every other aspect of NZME’s business, he would be in boots and all. Then it would be only a matter of time before the circle falls in on itself.

James Grenon’s bid deserves support only if he gives cast-iron guarantees of editorial independence, and that requires more than a letter of reassurance. Mere words are not enough.

Well-founded concerns for the future of a vital component of our journalistic infrastructure will be allayed only by changing the constitution of NZME to prevent directors from instructing any employee on editorial policy or operational matters. That protection would be all the more vital if now-stalled discussions over the purchase of Stuff’s titles and associated digital outlets are resumed after NZME’s board battle is resolved.

Both Television New Zealand and Radio New Zealand have statutory protection against ministerial interference in editorial matters. The community deserves the same protection from board interference in private sector media in the public interest.

That, however, has never been a given and many news media enterprises rely on a mixture of tradition and peer pressure to ensure their journalists are insulated from undue influence.

The New York Times, for example, has a proud tradition of editorial independence but that owes more to the Salzberger family than to the company’s articles of association. The Daily Mail and General Trust have a tradition whereby its editors are appointed by the editor-in-chief in consultation with the board chairman, who also by tradition has been Viscount Rothermere (currently the fourth holder of the title). Each editor then controls the content of the respective titles. The editor-in-chief of The Guardian is not appointed by the board but by the Scott Trust, which owns the newspaper group, and reports directly to it.

I commend to Grenon and his fellow board aspirants an essay on editorial independence by the chairman of the New York Times Company, A G Salzberger. You can access it here.

For NZME to have effective guarantees of editorial independence, its articles would need to have a failsafe mechanism to prevent the sort of override that Rupert Murdoch affected with his news acquisitions. Such a mechanism might be special recourse to the Media Council in the event of an attempt by directors to interfere. The council could then independently investigate whether there had been a breach of the company constitution. Disclosure of such a breach could be damaging to both directors and the company.

The combination of protective governance plus an independent review process would allay most of the fears generated by Grenon’s utterances and his past brief encounters with news media — a former shareholding in the right-wing aggregator site The Centrist, and financing of legal action against mainstream media.

NZME shareholders and the public of New Zealand should be very wary if no such undertakings are forthcoming.

• Disclosure: I was formerly a shareholder in the previous parent company of the group but do not currently hold shares in NZME.

Dr Gavin Ellis holds a PhD in political studies. He is a media consultant and researcher. A former editor-in-chief of The New Zealand Herald, he has a background in journalism and communications — covering both editorial and management roles — that spans more than half a century. Dr Ellis publishes the website knightlyviews.com where this commentary was first published and it is republished by Café Pacific with permission.

This article was first published on Café Pacific.

New Zealand-based Canadian billionaire James Grenon owes the people of this country an immediate explanation of his intentions regarding media conglomerate NZME. This cannot wait until a shareholders’ meeting at the end of April.

Is his investment in the owner of The New Zealand Herald and NewstalkZB nothing more than a money-making venture to realise the value of its real estate marketing subsidiary? Has he no more interest than putting his share of the proceeds from spinning off OneRoof into a concealed safe in his $15 million Takapuna mansion?

Or does he intent to leverage his 9.6 percent holding and the support of other investors to take over the board (if not the company) in order to dictate the editorial direction of the country’s largest newspaper and its number one commercial radio station?

Grenon has said little beyond the barest of announcements that have been released by the New Zealand Stock Exchange. While he must exercise care to avoid triggering statutory takeover obligations, he cannot simply treat NZME as another of the private equity projects that have made him very wealthy. He is dealing with an entity whose influence and obligations extend far beyond the crude world of finance.

While I do not presume for one moment that he reads this column each week, let me suspend disbelief for a moment and speak directly to him.

Come clean and tell the people of New Zealand what you are doing and, more importantly, why.

Over the past week there has been considerable speculation over the answers to those questions. Much of it has drawn on what little we know of James Grenon. And it is precious little beyond two facts.

Backed right-wing Centrist
The first is that he put money behind the launch of a right-wing New Zealand news aggregation website, The Centrist, although he apparently no longer has a financial interest in it.

The second fact is that he provided financial support for conservative activists taking legal action against New Zealand media.

When I contacted a well-connected friend in Canada to ask about Grenon the response was short: “Never heard of him . . . and there aren’t that many Canadian billionaires.”

In short, the man who potentially may hold sway over the board of one of our biggest media companies has a very low profile indeed. That is a luxury to which he can no longer lay claim.

It may be that his interest is, after all, a financial one based on his undoubted investment skills. He may see a lucrative opportunity in OneRoof. After all, Fairfax’s public listing and subsequent sale of its Australian equivalent, Domain, provided not only a useful cash boost for shareholders but the creation of a stand-alone entity that now has a market cap of about $A2.8 billion.

Perhaps he wants a board cleanout to guarantee a OneRoof float.

If so, say so.

Similar transactions
Although spinning off OneRoof could have dire consequences for the viability of what would be left of NZME, that is a decision no different to similar transactions made by many companies in the financial interests of shareholders.

There is a world of difference, however, between seizing an investment opportunity and seeking to secure influence by dictating the editorial direction of a significant portion of our news media.

If the speculation is correct — and the billionaire is seeking to steer NZME on an editorial course to the right — New Zealand has a problem.

Communications minister Paul Goldsmith gave a lamely neoliberal response reported by Stuff last week: He was “happy to take some advice” on the development, but NZME was a “private company” and ultimately it was up to its shareholders to determine how it operated.

Let me repeat my earlier point: NZME is an entity whose influence and obligations extend far beyond the crude world of finance (and the outworn concept that the market can rule). Its stewardship of the vehicles at the forefront of news dissemination and opinion formation means it must meet higher obligation than what we expect of an ordinary “private company”.

The most fundamental of those obligations is the independence of editorial decision-making and direction.

I became editor of The New Zealand Herald shortly after Wilson & Horton was sold to Irish businessman Tony O’Reilly. On my appointment the then chief executive of O’Reilly’s Independent News & Media, Liam Healy, said the board had only one editorial requirement of me: That I would not advocate the use of violence as a legitimate means to a political end.

Only direction echoed Mandela
Coming from a man who had witnessed the effects of such violence in Northern Ireland, I had no difficulty in acceding to his request. And throughout my entire editorship, the only “request” made of me by O’Reilly himself was that I would support the distribution of generic Aids drugs in Africa. It followed a meeting he had had with Nelson Mandela. I had no other direction from the board.

Yes, I had to bat away requests by management personnel (who should have known better) to “do this” or “not do that” but, without exception, the attempts were commercially driven — they did not want to upset advertisers. There was never a political or ideological motive behind them. Nor were such requests limited to me.

I doubt there is an editor in the country who has not had a manager asking for something to please an advertiser. Disappointment hasn’t deterred their trying.

In this column last week, I wrote of the dangers of a rich owner (in that case Washington Post owner Jeff Bezos) dictating editorial policy. The dangers if James Grenon has similar intentions would be even greater, given NZME’s share of the news market.

The journalists’ union, E tu, has already concluded that the Canadian’s intention is to gain right-wing influence. Its director, Michael Wood, issued a statement in which he said: “The idea that a shadowy cabal, backed by extreme wealth, is planning to take over such an important institution in our democratic fabric should be of concern to all New Zealanders.”

He called on the current NZME board to re-affirm a commitment to editorial independence.

Michael Wood reflects the fears that are rightly held by NZME’s journalists. They, too, will doubtless be looking for assurances of editorial independence.

‘Cast-iron’ guarantees?
Such assurances are vital, but those journalists should look back to some “cast-iron” guarantees given by other rich new owners if they are to avoid history repeating itself.

I investigated such guarantees in a book I wrote titled Trust Ownership and the Future of News: Media Moguls and White Knights. In it I noted that 20 years before Rupert Murdoch purchased The Times of London, there was a warning that the newspaper’s editor “far from having his independence guaranteed, is on paper entirely in the hands of the Chief Proprietors who are specifically empowered by the Articles of Association to control editorial policy”, although there was provision for a “committee of notables” to veto the transfer of shares into undesirable hands.

To satisfy the British government, Murdoch gave guarantees of editorial independence and a “court of appeal” role for independent directors. Neither proved worth the paper they were written on.

In contrast, the constitution of the company that owns The Economist does not permit any individual or organisation to gain a majority shareholding. The editor exercises independent editorial control and is appointed by trustees, who are independent of commercial, political and proprietorial influences.

There are no such protections in the constitution, board charter, or code of conduct and ethics governing NZME. And it is doubtful that any cast-iron guarantees could be inserted in advance of the company’s annual general meeting.

If James Grenon does, in fact, have designs on the editorial direction of NZME, it is difficult to see how he might be prevented from achieving his aim.

Statutory guarantees would be unprecedented and, in any case, sit well outside the mindset of a coalition government that has shown no inclination to intervene in a deteriorating media market. Nonetheless, Minister Goldsmith would be well advised to address the issue with a good deal more urgency.

He might, at the very least, press the Canadian billionaire on his intentions.

And if the coalition thinks a swing to the right in our news media would be no bad thing, it should be very careful what it wishes for.

If the Canadian’s intentions are as Michael Wood suspects, perhaps the only hope will lie with those shareholders who see that it will be in their own financial interests to ensure that, in aggregate, NZME’s news assets continue to steer a (relatively) middle course. For proof, they need look only at the declining subscriber base of The Washington Post.

Postscipt
On Wednesday, The New Zealand Herald stated James Grenon had provided further detail, of his intentions. It is clear that he does, in fact, intend to play a role in the editorial side of NZME.

Just how hands-on he would be remains to be seen. However, he told the Herald that, if successful in making it on to the NZME board, he expected an editorial board would be established “with representation from both sides of the spectrum”.

On the surface that looks reassuring but editorial boards elsewhere have also been used to serve the ends of a proprietor while giving the appearance of independence.

And just what role would an editorial board play? Would it determine the editorial direction that an editor would have to slavishly follow? Or would it be a shield protecting the editor’s independence?

Only time will tell.

Devil in the detail
Media Insider columnist Shayne Currie, writing in the Weekend Herald, stated that “the Herald’s dominance has come through once again in quarterly Nielsen readership results . . . ” That is perfectly true: The newspaper’s average issue readership is more than four times that of its closest competitor.

What the Insider did not say was that the Herald’s readership had declined by 32,000 over the past year — from 531,000 to 499,000 — and by 14,000 since the last quarterly survey.

The Waikato Times, The Post and the Otago Daily Times were relatively stable while The Press was down 11,000 year-on-year but only 1000 since the last survey.

In the weekend market, the Sunday Star Times was down 1000 readers year-on-year to stand at 180,000 and up slightly on the last survey. The Herald on Sunday was down 6000 year-on-year to sit at 302,000.

There was a little good news in the weekly magazine market. The New Zealand Listener has gained 5000 readers year-on-year and now has a readership of 207,000. In the monthly market, Mindfood increased its readership by 15,000 over the same period and now sits at 222,000.

The New Zealand Woman’s Weekly continues to dominate the women’s magazine market. It was slightly up on the last survey but well down year-on-year, dropping from 458,000 to 408,000. Woman’s Day had an even greater annual decline, falling from 380,000 to 317,000.

Article by AsiaPacificReport.nz