Guarding editorial independence pays dividends for Standard

Outgoing Standard Group boss Paul Melly [Photo:Standard]

BY BUSINESS WEEKLY TEAM

Outgoing Standard Group Limited (SGL) Deputy Chairman and Chief Executive Officer, Mr Paul Melly, has spoken on his tenure at the media house.

Melly joined the SGL Board in December 2004 from the private sector where he was an independent business consultant on corporate and financial markets.

Previously the CEO of the Capital Markets Authority (CMA) for nine years, Melly was appointed SGL Deputy Chairman and Strategy Adviser in April 2005.

In an interview with Tuesday Business Weekly, Melly speaks of his reaction when he was tapped in 2004 to spearhead the transformation of SGL.

A holder of a Bachelor of Commerce Degree in Accounting and a Masters Degree in Accounting and Finance, Melly says the scale of corporate re-engineering required to turnaround the Standard Group was immense but not improbable.

In his first ever interview since resigning from SGL, Melly — who also holds a diploma in Financial Management and Modelling — says he was helped by an intimate knowledge of what was needed to turnaround the company from his time at the helm of CMA.

When he resigned, Group Chairman Robin Sewell, on behalf of the Board, thanked Melly for serving the Group “passionately and diligently” and for leading the “dramatic business transformation, growth and positioning as a media house of growing influence.”

 

BW: From the world of financial markets to running a news group is not an easy transition. How did you manage it?

 

PM: It was baptism by fire. At the Capital Markets Authority, I managed public interest through investor protection. The only convergence and similarity between that and my new role was that I would be a leader in my own right with a free hand to implement strategy. At the Standard Group, I would protect public interest through the tools of the media.

I was lucky to have spearheaded the restructuring of the securities market while at the CMA, including the division of the market into three main boards to revitalise it and promote growth of the primary market.

SGL was one of the companies affected and which moved to the new Alternative Investment Market Segment (AIMS).

To be honest, it took quite a bit of soul searching before I agreed to take up the offer, not for the money, but because of the challenge of turning around an organisation that had great potential, and still does. For me, it was an opportunity to contribute to strengthening the local media landscape.

BW: What was the financial health of SGL when you came in and did the scale of changes you needed to initiate perhaps daunt you?

PM:Being one of just two leading media houses at the time, SGL faced serious liquidity challenges. While heading the CMA, I was aware of the financial position of SGL; the Group had even organised a rights issue to raise additional capital in the securities market when it was undergoing some financial constraints.

What I had not appreciated was the crisis of confidence with respect to the company’s products that were the root of the crisis.

This stemmed mainly from direct interference in Editorial matters by various vested interests, which then went on to affect the market’s perception of the Group’s news products on print and television.

Another major challenge was the low quality of the printing due to an outdated press that was at least 25 years old when I joined the group.
 

BW: How did you go about addressing these hurdles?
 

PM: The extent of weak management capacity at all levels in SGL in 2005 was shocking, to say the least. From the Board perspective, it had no independent directors other than the Group Chairman. Others were the Managing Director, Finance Director and one other person who was working for one of the principal shareholders.

My first move was to set up the kind of a professional Board demanded by the stringent corporate governance requirements of a listed company.

This met the standards of a balanced and independent board that could protect the wider shareholder interests. By increasing the number of executive directors with the addition of commercial, editorial and technical directors, I achieved a reasonable balance between the executive and independent directors.

We now had a new Board capable of steering the policy aspect of the business in the right direction.
 

BW: Just how bad was the financial situation of the company when you came in?

 

PM: It was not good at all. SGL had a negative shareholders position of Sh11 million and a deficit of Sh381 million. Its banking facilities at its main bank were exhausted and it had to rely on the main shareholders to inject capital in the business. As a matter of fact, they had injected Sh84 million as a loan to sustain the business, which had moved to an expensive building in Nairobi’s Central Business District with high rental overheads.

It was shocking as the financiers then were concerned about the business viability and had stopped further lending. Strategy included planning for the group to have its own home and improve its asset base.

BW: Local media was at a crossroads in more ways than one in 2005. What were the major challenges you foresaw and what was your strategy in tackling the same?

PM: I gave a comprehensive 30-page questionnaire to management and staff that enabled me, in a very short time — three months to be exact — to get the breadth and depth of the challenges facing the business.
What followed was a multi-pronged strategic intervention.

First was strengthening the balance sheet and financial base of SGL.
Second was building appropriate infrastructure across the existing media platforms in the group at the time (print and TV).

Third was strengthening management at all levels with new staff where necessary, and training the existing staff through a process of culture transformation that included entrenching Editorial independence. The role of management, henceforth, was to shield Editorial from external interference and competing interests that had vested agendas, including political and commercial.

Once these were in place, quality of products and services was next, including a complete redesign of The Standard newspaper titles.

 

BW: What was the cornerstone of the Editorial product positioning and transformation under your watch?

PM: From the very beginning, I placed public interest at the centre of the transformation. Survival of any media house depends on how it is perceived by its consumers (readers and viewers) to be championing their interests. Public interest is the carrier of commercial value to the business and returns to the shareholder.
Conflict between public and commercial interests is a major threat. Media can only thrive if it can enjoy the confidence and trust of consumers.

I quickly realised that when any media house opts to serve other vested agendas at the expense of public interest, confidence of the public in its products is immediately eroded and this translates to circulation and viewership. I opted to place defence of public interest at the centre of SGL’s strategic roadmap. This has seen the newspaper adopt a bold approach on matters of public interest and consumers have responded accordingly. Like the newspaper titles, KTN is now also acknowledged as an authoritative news channel anchored on putting public interest first.

It must, however, be also appreciated that this positioning does not always endear the group as a media house to all within the operating environment, especially those with a vested agenda.

This will become more apparent in the months and years ahead with elections on the way and the setting up of the county government.

 

BW: SGL has undergone a massive transformation in terms of infrastructure critical to the core business at all levels. What is the key highlights of this change?

PM:  The most obvious is a robust printing press, the best in East Africa. The other is a scalable studio and transmission capacity for the broadcast arm of the business comparable to any in the world.

The Group now has its own home at the Standard Group Centre with all converged services for TV, print, radio and Standard Digital that offers the group unique synergies.

The newspaper has grown tremendously after its redesign and is comparable with the best in the world.
SGL has tripled its circulation and readership, and advertisers have seen the quality and effectiveness of communication channels with total revenues exceeding Sh3 billion. By end of this year, profitability should average Sh400 million over the last four years.
The substantial five-fold growth in the group’s asset level to close to Sh3.5 billion from Sh975.7 million in 2005 is very significant. SGL has paid dividends to shareholders over the last four years and is repaying loans to principal shareholders. We now have a very robust media set up.
 

BW: Human resource is critical to any media business. What is your comment given what may be characterised as a predatory media environment?

PM: I can state with a lot of confidence that we have appropriate human capacity, journalists and managers who believe and have passion in doing what is right for Kenya and who believe in the business. It is true that we seem to be supplying staff to the entire industry, but this is a pointer to the inherent strength of SGL, its ability to nurture talent. We are the only media house with capacity to produce for ourselves. One way of judging management is generation of human resource that is in demand across the industry.

BW: You have constantly reiterated freedom of the press. What are the hidden threats to this freedom?

PM: The biggest threat is erosion of Editorial independence. This is because vested agendas, including commercial and political interests, will always attempt to twist the media to tell their story from the lenses of positive ground, and ignore anything negative. How all media manages this is key to Kenya’s political transformation given the level of trust accorded to them by the public.

For SGL, continuing to offer balanced reporting and equal opportunity to all political candidates has been our mainstay. I hope the current characteristics of our print and broadcast businesses remain untouched in the critical months ahead. In an election year, it is not possible for any media house in Kenya yet to endorse a candidate as happens in the West, due to the fragility of the situation, but this might change in 10 to 15 years.
Another threat is the continuing fragmentation of the media supported by limited revenues. New, emerging and growing multiple sources of information will become a compelling challenge to all media houses. The power of handheld devices will become a growing driver in media consumption and convergence in the years ahead. Media has to embrace these changes.

BW: How can media give back to society?

PM:  Media has a unique influence on society in terms of public opinion and national dialogue. Media can help society by using that to mobilise resources and educate them on opportunities available, including wealth creation.

They must lead in corporate social responsibility by giving back to society in terms of space and time in human-interest matters. SGL has been a champion in this area.

Whenever the country has faced food insecurity, SGL has worked with partners to mobilise resources. You recall the Mercy Train that collected Sh30 million to aid starving Kenyans?
We also led an initiative with Kenya Red Cross, Safaricom, KCB and others, including the general public in the ‘Kenyans 4 Kenya’ campaign. I wish to mention my colleagues Bob Collymore of Safaricom, Martin Oduor-Otieno of KCB, Abbas Gullet of Kenya Red Cross and Joshua Chepkwony of Kass FM in this light who were in the steering team, as well as all media houses that put aside their competition quest to mobilise Kenyans from all walks of life to raise nearly Sh700 million in the campaign. That was historical and I’m proud to have been part of it.

Currently, SGL is working on a road safety initiative spearheaded by Safaricom where all media houses have agreed to partner in a campaign to save lives on our roads.

BW: What would you call the defining moment of your tenure at the helm of SGL?

PM: There are two moments I will never forget. First is the raid on SGL by the infamous Artur brothers, the Day of Infamy that was a major affront on media freedom.

Next is the recent threat of compulsory acquisition by the State of the land on which The Standard Group Centre and press is located to pave way for a road toll station. We rallied stakeholders to confront the threat and I wish to acknowledge that Prime Minister Raila Odinga helped the State to see reason. Of course, there are other moments that will only appear in my memoirs. However, it was through the collective pressure of our media fraternity without exception that we were able to prevail. Thanks to our staff and journalists who believe in what we stand for, the public and my — to some extent — strong-willed leadership, we reversed course. I must reiterate that public pressure remains the only insurance of press freedom. A few selfless leaders remain friends of the media in this respect. They include Paul Muite, Gitobu Imanyara and other champions whom I cannot name comprehensively here due to limitation of space.

To them and everyone else, including staff that have been loyal and supportive, I shall forever be indebted at a personal level.

 

BW: As a person holding a position of national influence, there are those who praise your tenure and others that are critical of it. What do you have to say on this?

 

PM: In life, we remain subjects of praise and criticism. Even at a personal level among neighbours, there are those who harmoniously live together but at times are critical to each other, motivated by various reasons. A position of higher responsibility and influence brings with it enhanced attention and envy, which breeds malice, all aimed at bringing the person down.

No wonder therefore that in spite of what is widely acknowledged by many, some remain in a state of denial that SGL has not made any progress, and have been busy engaging in creating false impressions in different areas, including social media, in what can at best be characterised as a haters dominion and no one holding a position of public responsibility is spared as long as they remain alive and in office.

But in the end, it is the pillar of our conscience that enables us to remain steadfast in our duties, some of which inevitably step on sensitive and powerful toes.

It is only history and facts that shall bear out the truth…it is only strong-willed men and women that will withstand tough times, a permanent feature in the cycle of life.

BW: What is your parting advice to your colleagues and successor?

PM: SGL must remain steadfast in defending public interest notwithstanding the challenges that will continue to emerge, especially as we begin the process of transitioning to a new national leadership and continued implementation of the Constitution. I urge all to remain champions and assure them that in my future capacity as a citizen, or potentially among those who will be part of rallying for a transformative leadership, I will remain positively engaged as a consumer of media and defending what we have earned in whatever capacity. I can only wish all of you the very best in the months and years ahead.

I also wish my successor well and urge him to build on what SGL has consolidated as he navigates the business in what will certainly be uncharted waters.

The opportunity I see for my successor is in building a regional and international influence while preserving the group’s Editorial independence and national influence.

My role is now in the past, and what the business must now focus on is the future, where the opportunity lies.