It’s game, set and match for Kerry Stokes’ conglomeration of his media and equipment empire with institutional shareholders almost certain to approve the $2 billion related party transaction in Sydney next Tuesday.

The $115 million earn out — that’s the market value of the 15 million shares Stokes is risking based on last night’s Seven closing price of $7.68 — is a sensible compromise although like with all short-term profit incentives it has the potential to raise issues around the integrity of the 2010-11 result.

If the Australian dollar keeps rising and hits parity with the US dollar, WesTrac’s $231 million EBITDA forecast would certainly be at risk given yesterday’s statement confirmed that each US1c rise costs WesTrac  $2.54 million in pre-tax earnings.

If that were to happen, Seven’s audit signing partner Ken Reid, from KPMG, and the independent directors would need to be all over the accounts to ensure temptations such as delaying maintenance or front-loading revenue wasn’t pursued.

We’ve all seen the pump-and-dump efforts of private equity and a highly incentivised management team in the way Myer’s prospectus forecasts were maximised at the expense of longer term sustainability. Sure, slashing 5000 staff cut costs but there’s no long-term value when such a move severely hits a basic business necessity such as customer service for shoppers.

Paul Xiradis, from Ausbil Dexia, and John Murray, from Perennial,  run outfits that collect about $20 million from client super funds to manage their money, so some form of negotiated improvement of the Stokes deal was always on the cards.

It was a shame the three so-called independent Seven Network directors with their combined 48 years of service for the non-Stokes forces didn’t negotiate the 15 million share forfeiture arrangement in the first place.

Indeed, Prof Murray Wells and Dulcie Boling should be contemplating a speedy retirement after the merger, given they are 73 and 74 respectively. Maybe it was a case of age wearying them.

Which brings us to the question of selecting new independent Seven directors.

Without the 92 million votes from his dad, young Ryan Stokes would have been voted off the Seven board at last year’s AGM with just eight million votes in favour and 38 million against.

One of the olive branches offered by Camp Stokes to get the WesTrac deal over the line was this March 28 update proposing the appointment of two new directors before this year’s AGM with Stokes abstaining from voting on their reappointment.

Given that this will expand the Seven board to 11, with WesTrac CEO Jim Walker becoming the fourth management appointee as part of the current proposal, the institutions clearly should have negotiated the right to appoint three or four independent directors. That would reflect their 32% stake.

And rather than Seven appointing Egon Zehnder to conduct the search, it should be institutional investors directly engaging the head hunter.

It is remarkable that Australia’s super funds aren’t more actively engaged in shaping membership of the directors’ club. They should have a pool of trouble-shooting directors available to tap for such situations and direct relationships with the head hunters who currently only work for the self-selecting and self-serving director community.

For mine, two suitable new Seven directors would be Michael Robinson, who quit the Seven board over governance issues 15 years ago, and Paul McClintock, the lead independent director of Macquarie Infrastructure Group, who stood up to Nicholas Moore and showed the Macquarie Airports directors how to negotiate a divorce.

McClintock’s experience as John Howard’s cabinet secretary working under Max Moore-Wilton has him well-versed in the art of dealing with aggressive rent seekers.

If McClintock was one of the Seven independents he might have even managed to extract some form of indemnity from Stokes in the event of Caterpillar terminating the WesTrac franchise, as Michael Pascoe sensibly suggested yesterday.