Fran O’Sullivan: Wood contract sent Fraser packing

News that Close Up presenter Susan Wood was in confidential arbitration over her contract was the straw that broke the camel's back for Television New Zealand directors.

"It caught the directors by surprise and backed Craig Boyce [TVNZ chairman] into a corner where he finally had to act," said a high-up source.

The TVNZ directors - who had been in a huddle at Auckland's Northern Club with management for one of their twice-yearly strategy sessions - called chief executive Ian Fraser in on Friday morning for a special meeting. The bonhomie of the previous night's dinner evaporated as directors focused on news that yet another star presenter was at loggerheads with TVNZ's news supremo (aka "Wild Bill" Ralston), leading to arbitration last Wednesday.

The board had a genuine gripe with its chief executive. After two botched negotiations with presenters, it did not want pending discussions with Simon Dallow - the heir apparent to Judy Bailey on One News - to be jeopardised.

Enough value had been destroyed in the business during the past few months, directors told Fraser. It was time for him to pull rank as chief executive.

But instead of taking over key negotiations from Ralston, as Boyce requested, Fraser said he "intended to resign".

The chief executive was nowhere to be seen once the strategy session reconvened. He scuttled off to Wellington, which some directors found "bizarre".

Senior managers, who were still in the dark over the breakdown in the chief executive's relationship with his board, worked on, not sure whether he had "just done an Ian" and left them to run the show.

It was not until late Friday that Boyce let them into the secret, telling them Fraser's intended resignation was 100 per cent confidential; he wanted to try to "repersuade him". But Fraser was gone.

The claims of political interference will not go so readily, despite yesterday's obvious smoothing attempts which saw Broadcasting Minister Steve Maharey and Boyce "at one" over the ructions. Their line: When a chief executive and his/her board had an irreconcilable point of difference, a parting of the ways was inevitable.

But both men are refusing to address the real issue - destruction of shareholder value in a state asset.

Last Thursday, the TVNZ board signed off the 2005 annual result. It was another good performance on the back of historically high national advertising, but vital ratings ground has been lost to TV3.

The moves instigated by Ralston and Fraser to reinvigorate TVNZ have taken too long to kick in. The loss of shareholder value has led to TVNZ' s board - which has been strengthened by directors such as John Goulter, Phillip Melchior and June McCabe - to push for greater effectiveness.

The untidy issues are these:

Judy Bailey's pay packet: Four months ago, Fraser recommended that Bailey's one-year contract be renewed. But Bailey "became history" after the chief executive changed his mind. Opinions diverge as to just who - Fraser or Ralston - ultimately axed Bailey. Was it a Ralston whim or the result of new research Fraser later cited to the board?

The Melanie Jones affair: TVNZ faces a substantial payout to former executive producer Melanie Jones to settle an action she brought after being scapegoated by Ralston for the slide in One News ratings.

Jones was humiliated when she was given little time by Ralston to clear her desk after being told she had been axed following a review of the flagging news operation. Directors are concerned at conflicting reasons for her departure.

Susan Wood at loggerheads: The Close Up presenter's future appears to have been on the skids since rumours circulated that TVNZ political editor Mark Sainsbury - a Ralston confidant - was being lined up to take her job after he steps down from his present role next year.

Wood is hardly a neophyte. Her contract contains arbitration clauses and she is understood to have invoked them, causing last week's summons to Fraser by the board.

Simon Dallow's candle burns: Dallow, a superb interviewer on Saturday's Agenda show, has drawn positive viewer reaction to his trial in Bailey's old job.

But after the Wood affair, directors wanted Fraser, rather than Ralston, to handle negotiations with Dallow.

Boyce maintains that TVNZ still has confidence in Ralston. But if they did, they would not have asked Fraser to ride shotgun.

Not addressed - yet - is whether the "mongrel" Ralston pledged to inject into TVNZ news has still to develop.

The issue of political interference cannot be easily set aside.

Fraser is not (or not any longer) in a position to openly disparage directors. He was forced to retract his allegations of political interference (which from a news perspective were hardly tenable given that, as editor-in-chief, he had ultimate editorial authority). He now has a settlement deal - $300,000 (six months' notice).

But neither Maharey nor Boyce can sidestep questions over the political genesis of the pay ructions. This dates back to the fait accompli handed to the board last December when Ralston doubled Bailey's salary to $800,000, after sending co-presenter Richard Long on his way. Despite misgivings, the board backed management.

But director Dame Ann Hercus, a former Labour Cabinet minister, went feral, blabbing to Maharey that she would resign over it. The Beehive leaked details to bludgeon TVNZ into submission. But couldn't - the deal was done.

And with it went Fraser's confidence in Hercus.

But the politically appointed board had absorbed the Prime Minister's anger at mere newsreaders being paid more than her.

In April, TVNZ issued new terms of reference requiring the board's remuneration and HR committee "to make recommendations to the board in relation to the CEO's remuneration and those executives and presenters (whether on contract of service or contract for services) with a total fixed remuneration in excess of $300,000 per annum".

The terms of reference dig down considerably into what was previously management territory. Yet this is not uncommon in major companies.

But the terms are also clear that it is Ralston, rather than Fraser, who is supposed to negotiate on TVNZ's behalf where news presenters are concerned. The relevant clause requires the committee "to approve the head of news and current affair's proposed bargaining licence for individual presenters in Band 4, which will include recommended parameters for remuneration including any incentives".

By requiring Fraser to step in over Ralston's head and take over negotiations, the board was going against its own terms of reference.

The brute reality is that when a business is going downhill, that is what a chief executive must do.

There are lessons in this affair that the directors should absorb as they prepare to instruct headhunters to launch an international search for a new chief executive.

In particular, role clarity. It is apparent that TVNZ management is concerned at just how tenable it is to deliver public service objectives under a "charter" system at the same time as meet tough commercial objectives.

Fraser, who had no experience at managing a large corporate operation, had the right credentials for delivering public service broadcasting. He was appointed under the chairmanship of Ross Armstrong, who had strong connections with Helen Clark. While he has a solid arts background, questions remained over whether it was his pedigree, or connections, that got him the top job.

The next appointment must be fail-safe.