As reported by the AFR today, Mrs Rinehart has reduced her shareholding in Fairfax, and likely crystallised a financial loss, only to amplify the pressure on Fairfax's chairman. Indeed, her attack on Fairfax's titular head seems rather personal: "We continue to monitor the performance of our investment in Fairfax noting that the shares are trading at record or near record lows, which is an independent assessment of the Chairman’s performance."
Holding an ownership interest in Fairfax greater than 15% eliminates the shareholder litigation protection afforded to Fairfax directors by their directors and officers insurance. Mrs Rinehart says she has cut her interest below this threshold to furnish the Fairfax board with the comfort it requested in order to grant her the two directorships she is not otherwise unreasonably seeking (although there is debate as to the reasonableness of Mrs Rinehart's additional demands, which I have discussed at length here in the past). In her proxy's words:
The sale was completed to resolve an issue that arose concerning the Directors and Officers Insurance Policy, in the situation of a Director having a greater than 15% shareholding in Fairfax. This was one of the key issues recently raised by the Chairman of Fairfax and needed to be resolved by either the Chairman authorising endeavours to raise the 15% limit, which has been able to be reasonably achieved by other companies, or, as also discussed with the Chairman, by sale of shares so that the largest shareholder had less than 15%. Given the Chairman did not undertake the former; we have taken the latter and sold in a single tranche to minimise any market impact. We continue to monitor the performance of our investment in Fairfax noting that the shares are trading at record or near record lows, which is an independent assessment of the Chairman’s performance. We also deny unsubstantiated rumours spread by others, that we are about to “make an offer” for the Company, when we have previously stated we are not seeking control of Fairfax, just the appointment of 2 directors plus an independent out of up to 12 directors on the board. We again urge the Chairman to tell concerned shareholders that he will accept proposed milestones regarding his performance in the interests of Fairfax and its shareholders, or propose other reasonable KPI’s to meet for the continuance of his Chairmanship past the AGM in November 2012.
