When it comes to corporate law, the US might have all the perversity of Delaware with its gerrymanders and poison pills, but at least the land of the free has solid public disclosure when it comes to related party transactions with board members or key executives. For instance, if the CEO of a US-listed company employs his son as the office cleaner, it must be publicly disclosed.

Australia boasts some world’s-best governance features such as the ability to ask questions of public company auditors, but when it comes to related party transactions, there are far too many loopholes.

So when Tom Hywood, the son of Fairfax Media CEO Greg Hywood, scored a job at the company’s Domain property division a few years back, investors weren’t told, as would be required in the US.

Correction: Tom Hywood was employed by MMP prior to both Greg Hywood’s involvement with Fairfax and Fairfax’s initial purchase of MMP.

A spokesperson for Fairfax told Crikey: “Tom was employed by MMP in April 2010 — at that time Greg Hywood was CEO of Tourism Victoria. Greg joined the Fairfax Board in October 2010. Fairfax acquired 50% of MMP in July 2013 and Tom’s employment at MMP was disclosed to the Fairfax Board. Tom Hywood was never an employee of Domain.”

However, Tom Hywood’s Linked In account says he was a Key Account Manager for domain.com.au from December 2012 until August 2014.

MMP acts as the sales agent for Domain in Victoria.

Lo and behold, Tom has then used some of this knowledge working for Fairfax to go into competition with the company with a new website that helps buyers with off-the-plan apartment purchases. And his business partner is none other than Jordon Catalano, the son of Antony Catalano, who is now CEO of the rapidly expanding Fairfax Domain business.

Catalano senior doesn’t really need to work any more as Hywood senior has just persuaded his board to give the Domain CEO $25 million worth of shares in Fairfax, in exchange for his stake in a Melbourne-based property business known as Metro Media Publishing Holdings. How do we know its $25 million worth? It was reported in The AFR’s Street Talk column on January 13, the day after Fairfax made this announcement about the $72 million purchase of a 50% stake in Metro Media Publishing Holdings.

Catalano was previously a property journalist at The Age who also spent a stint in management in charge of circulation, among other duties.

He left the company and then teamed up with some real estate agents to launch MMP in April 2010, primarily publishing a series of glossy free newspapers called The Weekly Review. Hywood joined the Fairfax board as a non-executive director in October 2010 just as the battle with Catalano over real estate advertising was cranking.

Hywood was made Fairfax CEO in February 2011, and one of his first strategic moves was shortly before Christmas 2011 when he effectively surrendered to Catalano by paying $35 million in cash and folding in Fairfax’s existing Victorian community newspapers to MMP, with Catalano serving as CEO.

Once Catalano shifted from running a 50-50 joint venture to being CEO of the whole of Fairfax’s Domain property group in November 2013, the on-going related party transactions should have been publicly disclosed. Instead, Fairfax went the other way in 2013-14, only disclosing the pay details of 4 executives, down from 5 in 2012-13. And Catalano’s deal was excluded. How will they treat it in this year’s annual report?

The current situation is that Fairfax is yet to advise the ASX that it has contracted to issue 1.2% of the company’s equity to a senior executive and it certainly won’t be seeking shareholder approval for this large related party transaction. All we were told was that Catalano had agreed to sell his undisclosed amount of MMP equity entirely for Fairfax shares whereas his real estate agents partners were getting 35% in cash, or some $18.5 million in total. Under Australian law, it would be different if Catalano was a director of Fairfax Media as we all too often see ASX announcements detailing the tiniest of share dealings by directors. But the system is much slacker with senior executives.

The Hywood and Catalano families don’t seem too concerned about the optics of all these dealings, based on this revealing interview the boys gave to Business Insider last September, which opened as follows:

“Greg Hywood, the CEO of Fairfax Media, and Antony Catalano, the founder of Metro Media, reportedly laughed hysterically when their sons called to tell them they were creating an online property sales business to compete with their fathers. ‘They were in absolute hysterics,’ says 22-year-old Tom Hywood. His father was at a function and sitting next to Antony Catalano, the father of his friend Jordon, when Tom called.”

What next? Fairfax agreeing to issue these boys a chunk of shares for their property business as well? You can’t deny a couple of 20-something lads an opportunity to try their luck in an entrepreneurial endeavour, but given their property knowledge, connections and PR is being very much assisted by their heavyweight Fairfax fathers, it would have been better all round if they’d been talked out of it.

Besides, competing with one Catalano has already proved expensive for Fairfax, so why would the CEO let his son do it again with the next generation? And what does the board make of all this?

Stephen Mayne was an unsuccessful nominee for the Fairfax board at the last AGM.