Was the appointment of Meredith Hellicar as chairman the turning point that saw James Hardie capitulate over its asbestos liabilities?
So all those corporate savants and smart investors and analysts who confidently predicted the that ‘corporate veil’ would not be pierced to make James Hardie take responsibility for its asbestos responsibilities have been proven utterly wrong.
UBS analyst Mark Ebbinghaus would be close to top of the pile amongst the dills for comments last month. Check out how Crikey reported them and comments by another, unfortunately anonymous, but more informed analyst: http://www.crikey.com.au/business/2004/07/30-0004.html
What Mark and all those others in broking firms and investment banks forgot that the company and its board were the only ones who could ‘pierce the corporate veil’ and they did it on Friday, to rid themselves of the the greater risk of a lashing in David Jackson QC’s final report next month, and endless and increasingly expensive legal action. Check out the James Hardie’s announcement to the ASX after its huge change of heart was revealed almost at the end of the last day of hearings of the Jackson Special Commission of Inquiry in Sydney.
What the analysts also forgot or still do not understand, that in the end a company’s reputation and that of its board and senior managers are important non- financial assets to customers, investors and employers. In that respect there is a direct financial measurement: the performance of the company’s shares on the market, the way customers regard the company and buy its products and things like staff turnover.
Hardie was looking at a loss in stockmarket value of $2.60 a share from the high of $7.74 last October, to Friday’s close of $5.14. That was approaching a gross figure of $1.2 billion. Any further opposition or twisting and turning, plus the Jackson report to the NSW Governmment on September 21, risked increasing those losses and making investors more angry, not to mention the potential PR disaster and legal liabilities for some of the current and former directors and executives.
These were obviously the major issues that confronted the board this week. First there was the first quarter results showing solid profits, but worries about the cost of the Commission (pushing $8 million in all) and the impact on the company’s reputation and sales in Australia.
Then long-time chairman, Alan McGregor resigned the day after on Wednesday after revealing he had suffered a recurrence of lymphoma, a tragic irony that didn’t go unobserved by many of those in the victims group and their supporters at the inquiry.
Long time director Meredith Hellicar, a former spindoctor for the failed NZ company Chase Corporation, was named as chairman. She’s been there since 1992 and obviously has a good handle on how Hardie reached this present point and what it had to do to get out of the predicament.
Her appointment is the only major variable that could, from the outside, be said to have been a possible trigger for the change of heart.
While Hardie had last month and then earlier this week signalled an attempt to set up some sort of ‘officially sanctioned’ fund and non-legal mechanism to meet the claims, Friday’s capitulation represented a startling about face. If the new chairman has driven this latest offer, and the company sticks to it and doesn’t try to finesse it away in the detail, then Hellicar deserves congratulations for her realism and astuteness.
Why it couldn’t have been done much, much earlier, say in February 2001 when the Trust was set up to handle the claims, is for the company to ponder. It would have saved a lot of money, but more importantly, a lot of angst and pain for the victims and their families and friends, and a lot of reputational damage for Hardie, the board and its management, especially CEO Peter Macdonald.
From his comments on Friday during the revelation of the Hardie offer at the Commission, Mr Jackson is of a mind to hold the company responsible by possibly suggesting in his report that directors be held accountable in some way to stop that responsibility being forgotten as the years go by.
Hardie says the offer is subject to it being approved by shareholders, but Hardie and its advisers have already suggested in the Commission that a better than legal offer would be approved by shareholders, and they were talking about the events of 2001. Besides all it needs is a recommendation from the Hardie board for it to be approved, and Hardie is surely not saying that that recommendation won’t be made.
True to form, NSW Premier Bob Carr was all over the story on Saturday, claiming credit. And so he should because it was his government that set up the inquiry. Check out the ABC online report here. But it should not be forgotten that Carr’s Government allowed itself to be lobbied by former NSW ALP Senator, Stephen Loosely and the lobbying firm, Hawker Britten, back in 2001 about not standing in the way of the company’s plans to set up the trust and then to move its domicile to Holland.
Mark Latham belled Bob’s cat when he handed back the money the ALP had received from Hardie in the past few years, despite Bob washing his hands of the idea a week earlier. Here’s what Crikey reported on that last week, and what turned out to be some important comments from Mr Jackson about Hardie’s conduct: http://www.crikey.com.au/business/2004/08/05-0002.html