The thought of battling out a lawsuit from Australia's richest woman has apparently struck fear in the hearts of Fairfax Media directors. Before they would allow Georgina Rinehart, the largest stakeholder in the company, a board seat, the directors are said to be seeking immunity from a Rinehart lawsuit, The Australian reports.
In particular, the Fairfax directors want a commitment from Ms Rinehart that she would not file a lawsuit against any of the board members or for the owner of Hancock Prospecting and also for the world's richest woman to sign a waiver not to take legal action against them.
Terms of their insurance contracts excludes immunity from lawsuits from one director who holds over 15 per cent of shares in the company. Ms Rinehart last week went on a shares buying spree and upped her shareholding in the financially challenged company to 19 per cent from 13 per cent.
Lawsuits are not new to Ms Rinehart, who is currently engaged in a family court battle with her three estranged adult children over control of the trust established by her father, Lang Hancock. She also recently filed a lawsuit against the heirs of Mr Hancock's business partner for a 23.4 per cent stake in a mining company.
With a personal value estimated by BW Magazine at $230 billion, Ms Rinehart could afford the best lawyers to represent her in lawsuits.
Fairfax is wary of granting her a seat despite Ms Rinehart acquiring a large chunk of the media company's shares because of concerns that she would use her shareholdings as a leverage to have a say on editorial content, particularly when it comes to issues concerning the mining industry or the different lawsuits she is battling.
Besides family feuds, Ms Rinehart also filed a lawsuit against The West Australian over the paper's publication of documents related to the court case with her children.
Shareholders and directors are apparently split on the entry of Ms Rinehart into the Fairfax board amid speculations that she would call for an extraordinary general meeting of stockholders soon to seek a seat or even push for a major revamp.
As it is, the current management of Fairfax had initiated big changed which would result in the axing of 1,900 jobs, $230 million expenditures over three years, closure of two printing plants and shift to digital platform and tabloid format for The Age and The Sydney Morning Herald.
Analysts are also wary of the impact of the changes on Fairfax's bottom line. Christian Guerra, a Goldman Sachs analyst, held his rating of Fairfax stocks at neutral pending the implementation of the revamp.
"Subscription revenues aside, another question in our minds is whether Fairfax's digital ad revenues will grow fast enough to stem the losses from its print ad revenues. At the moment, this is not the case," The Australian quoted Mr Guerra.
"We still see downside risk to Fairfax earnings, reflecting the broad change in consumer behaviour as our online revolution accelerates, which will broadly undermine the gains from cost savings," The Sydney Morning Herald quoted a note from Citi analyst Justin Diddams.
Employees whose jobs may be at risk likewise do not agree with the changes and are considering industrial action in protest. They are also reportedly wary of losing their journalistic independence if Ms Rinehart acquires a board seat and would attempt to influence editorial policy.
The AMWU has brought the case to Fair Work Australia which has scheduled a hearing on Thursday onthe planned closure of two Fairfax printing presses.