High drama off the screen

Neil Balnaves tells Deborah Light about his extraordinary life

Deborah Light

GEORGE FETTING

NEIL BALNAVES

Philanthropist. Age 69. Lives Mosman, Sydney.

Former media entrepreneur and executive chairman and founder of Southern Star Group. Trustee member of Bond University and in 2009 received an honorary doctorate of the university. Awarded AO in 2010 for services to business and philanthropy, including support for arts, education, medical research and indigenous programs. First job, publishing clerk, aged 15.

AFTER THE HORRIFIC accident that nearly killed him, Neil Balnaves had an epiphany. The revelation for this wealthy businessman-turned-philanthropist wasn’t about altruism; that came later. This was about ego. Balnaves’s painful journey began when his runabout was hit at high speed by a powerboat on the Gold Coast in 2002. The impact pushed his legs into his abdomen; it broke 40 bones, including his pelvis, and put him on life support for weeks. Intensive nursing and physiotherapy followed while Balnaves remained in denial. “I was half-living an illusion I could go back to business, I really thought I could recover;” he recalls of his struggle to return to the organisation he’d built and loved – the TV production and entertainment company Southern Star.

When he eventually returned to the helm many months later, he found with anguish that he’d become surplus to requirements; no longer necessary. Worse, he was no longer as adept at it as his senior staff. “The reality was I had a well-credentialed team that had taken over and they were doing a good job. The realisation of that was the hardest thing to come to grips with. There was only one conclusion: I couldn’t reassert myself into the business and take back from a good team the parts of my job that I wanted.”

He’s moved on since. “You have to get on with it; to accept it,” he says with characteristic verve and good humour. “Otherwise you become hostage to it.” That nature has stood him in good stead because there have been other near-crippling setbacks in his life. The second of three sons, Balnaves grew up in middle-class Adelaide and was seven when he contracted polio, which first isolated him from his family for weeks and then took him out of everyday life for two years. “It was traumatic,” he recalls. “You’re cut off from everybody because you’ve got an infectious disease and it really confused me at that young age.” Despite aggressive rehabilitation he was left a weakened right arm for life and forced to learn to write with his left. His school work also suffered. A self-described “shocking student”, Balnaves was sent by his despairing parents to a career guidance counsellor who predicted: “At best, if I worked very hard, I might be able to get a clerical job in a bank.”

Instead, he left school at 15 for a clerk’s job in publishing, discovered advertising and marketing and the lights went on. “I suddenly found my niche,” he recalls with glee. “I sailed through an advertising diploma.” Balnaves climbed up through the publishing ranks and into the entertainment industry, becoming managing director of the publishing and leisure division of James Hardie Industries before doing a management buyout and renaming the venture Southern Star. He’d struck a great deal. With five other investors putting in $500,000 and him putting up an equal amount, having mortgaged his family home: “We bought Southern Star, then valued at $12 million, for $1 million in cash, $11 million borrowed, with security from the sellers that, if we couldn’t perform, they would get their assets back. We ultimately sold it for $168 million.”

Things got hairy in between. “There were two periods that were pretty ugly,” Balnaves reflects. “I had a financial controller who wouldn’t let me sneeze, wouldn’t let me buy a box of tissues if I’d wanted to sneeze. He would fight me every day – and the rule was I had to sign every cheque so I knew where every penny went. And I learned about cash flow. The one thing most entrepreneurs don’t get is managing cash flows. You’re managing growth but you’re not managing the actual materials that make growth possible. When you’re dealing with your banks, and having to manage your cash flows, the lesson you have to learn is actually controlling the cash flow by doing deals to bring the money in faster, as well as making sure you got the best terms by stretching out your repayments.”

The company survived, flourished and was soon the dominant force in local television production, pumping out hits that included Police Rescue, Blue Heelers, Water Rats, The Secret Life of Us and Big Brother. This made growth tricky because the local networks feared becoming hostage to one production house, so Balnaves began to seek markets overseas. “I was probably away six or seven months of the year and constantly on the go. It was a very heady time and successful.”

Then came the boating accident and his catastrophic injuries. And, as if the challenges of his physical rehabilitation weren’t enough, he then took on a major insurance company that disputed his claim. It became a decade-long battle. Balnaves says of his stand: “If you believe you’re being wronged, there is a point where you either have or don’t have the resources to stand up and battle an insurer for what you believe is your fair share of compensation for the insurance you pay for. It’s not a complicated issue – if you pay for insurance and you have those rights under your policy, you’re entitled to get that.” Balnaves suspects that most people in his situation eventually give up because they run out of money and time. “[Insurance companies] have this game of: ‘I can outlast you. I can keep this dispute going for a lot longer than you can because I have fundamentally much deeper pockets than any individual.’ ”

As it’s turning out, Balnaves’s long war hasn’t had a decisive outcome, and certainly not one he’d been led to expect. “The judgement in court did not come out entirely in my favour. On the basis of who caused the accident, they believed the other guy more than me. There were no witnesses. I won much less compensation than my legal advisers had told me I should expect.” The fight had cost Balnaves four to five times what he’d expected in compensation anyway, but he’d figured: “I had the wherewithal to make that stand. I was told my case was extremely strong so I go charging into this for right and goodness – I’m standing up to the insurers and defending the little guy and I basically put my head in a noose and got hung. Lesson learned: don’t listen to your legal advisers.”

That was then. A new challenge was emerging in what to do with his wealth after he finally cashed in his stake in Southern Star, which had been acquired by Kerry Stokes’s Southern Cross in 2004. Ultimately Balnaves was due a fortune: some $38 million, which would trigger a huge tax payout – $16m to $18m – and that made him bristle because he reckoned he’d already more than paid his dues. “There was quite a lot of tax paid in the five years leading up to this – $40 million to $50 million – and a lot more would have been paid as a result of this deal. I made the choice to put it into a foundation. This would be something I could enjoy doing and I thought: OK, you did well, give something back to the country. I’d be damned if I’m going to pay it in tax and never see the end result of it.”

Some 70% of his wealth would be going into his foundation, he planned, and that raised another tricky issue. How would his children react? “I thought: don’t do what happens generationally in families; don’t make your kids rich and take away their choices, their sense of achievement and their self-esteem. Make sure your kids are comfortable, not rich.”

He consulted his kids – Alexandra, Hamish and Victoria, then in their 20s. “I asked their permission to spend their inheritance. They collectively took the view that it was OK – as long as they could have some involvement in it.” All three are trustees of the foundation, which was established in 2006 and disperses over $2 million a year to support education, health, the arts, indigenous communities and the disadvantaged.

Hamish, a former teacher, is now general manager of the foundation and oversees the family’s property interests. “He’s brilliant,” Balnaves enthuses. “He’s taken to it with no experience. He’s better at this than I am.” Fact is, Balnaves admits: “I never quite got over the fact he didn’t want to take over my [media] business. None of the kids wanted a bar of it and all my kids have great talents.” Could that have been because they’d seen just how hard their father worked? “I think there was a bit of that. They also thought it wouldn’t be easy working with dad.”

Now Balnaves faces his next dilemma and once again he may have worked himself out of a job. He’s characteristically exuberant and energetic, so you mightn’t guess that he’s now planning for the final stage of his working life. “How do I exit?” he wonders. “The final act of the drama is just starting to be played out. The first act was never having any aspirations, the second act is having all the aspirations and being very successful. The third is dealing with your mortality and what are you going to do with all that wealth and how to deal with that within the family. Now the fourth act – which should be the last one – is how do you try to be less controlling, not stay too long and dispossess the kids of control? How do you allow your kids to take it over and not interfere? That’s what I’m trying to do now.”

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