Dramatic news at Amcor.
Amcor has today revealed a thorough trashing and a top level clean out at the packaging giant over possible breaches of the Trade Practices Act after the company said certain officers and employees may have been involved in “cartel conduct”.
CEO Russell Jones has been fired in spectacular fashion and the share price has quickly tanked eight per cent in one of the most dramatic days for a big corporate in recent times.
Amcor is a worldwide packaging giant, with annual sales of around $11.5 billion and ranks in the top three in many of its segments that include paper-based packaging to PET bottles, glass bottles in Australia, enclosures for pharmaceuticals and consumer products such as toothpaste and cigarettes.
The dramatic news was made to the ASX today after a late night board meeting in Melbourne. That saw the top management of Amcor lopped by the board at the meeting in an emergency session. The board heard an interim report from its legal advisors on the anti-competitive arrangements reported on November 22.
As a result of that report, managing director Russell Jones and Australian operations chief Peter Sutton offered their resignations which were accepted by the company’s board with minimal payouts. A consultancy with Sutton’s predecessor, Peter Brown, has been terminated.
The news saw the company’s shares fall 59c at one stage to a low of $6.95 when trading was resumed after an earlier halt.
The company’s Sydney-based chairman, Chris Roberts, will be acting executive chairman of the Melbourne-based giant as an interim move and Louis Lachal, the present executive operations boss, will become acting chief operating officer.
Roberts will hold a press conference this afternoon and he’ll need all the experience he can muster from his days running the Arnotts biscuit extortion crisis to handle this saga. Check out the dramatic Amcor statement to the ASX here.
The trigger for the clean out was the move by four senior managers in the Australian corrugated box business to set up a rival operation. John Durie did well again and had the details in today’s Chanticleer column in The AFR but he missed the board decisions as they happened late last night.
That move by the four senior managers, according to the Amcor background statement, led to a series of legal actions that resulted in information being delivered to the company’s solicitors on the afternoon of November 19 “which suggested the company may have been involved in breaches of competition laws.”
That resulted in the company telling the ACCC and the ASX of the possible breaches three days later.The board also started its own investigations.
“To date, its investigation has revealed that certain of its officers and employees appear to have entered into and given effect to arrangements which constituted cartel conduct in the corrugated box business.”
“The full nature and extent of the arrangements has not yet been ascertained by the company,” the Amcor statement said.
The company said it was also not aware of any other anti-competitive behaviour in other parts of the company. The Australasian corrugated box business represented around 9% of group revenue (or about a $1 billion) and 8% of group earnings before interest, tax, depreciation and amortisation.
It also said it could not say what the financial impact on the company would be.
For their to be cartel behaviour, other parties have to be involved, especially other producers and perhaps wholesalers and intermediaries. Dick Pratt’s Visy group is the other giant in this sector but we’re not suggesting Australia’s third richest man has been involved.
The extent and coverage of any such arrangements should be disclosed as quickly as possible, with the ACCC also saying for its part, how and where it intends to investigate.
It is further evidence that any push by business to water down the impact of the competition laws and the activities of the ACCC should be strongly resisted by the Federal Government.
The Australian Competition tribunal looms as a significant means by which the ACCC’s writ in takeovers and mergers can be by-passed. That is the thin edge of the wedge.
Just why Russell Jones and Peter Sutton offered their resignations needs to be explained. Was it because they were directly implicated, or was it because they accepted responsibility for the activities of underlings and direct reports?
If that’s the case then perhaps the board should look at itself and its performance because this is surely an audit and risk management responsibility, as well as corporate governance in the broadest possible sense.
Amcor’s directors include recently ousted NAB chairman Charles Allen, who seems to attract trouble. Former Alcoa heavyweight and London Metals Exchange chairman John Pizzey is a relatively newcomer and probably the biggest name on the board. Keith Barton, the former James Hardie CEO who first announced the move to Holland, is another dealing with this crisis.
Another is the heavily over-committed Geoff Tomlinson whose reputation has suffered another hit after NAB, Pineapplehead, Reckon and Mayne all struggled during his tenure.
Avoid Monomeath Avenue at all costs
Finally, there is a lesson for Melbourne-based executives here. Whatever you do, please avoid the kiss of death that comes from living in Monomeath Avenue in Canterbury.
Stan Wallis and Rupert Hamer put the street on the map over planning disputes in the mid 1990s. Hamer moved out and Wallis eventually came a cropper as the underwhelming chairman of Coles Myer and AMP.
Then NAB CEO Frank Cicutto decided to quit Templestowe and build an $8 million mansion on the street. He was fired over the $360 million currency losses whilst construction was underway and is only now getting close to moving in.
And now we have Russell Jones, the last remaining major company CEO on Monomeath Avenue, getting sacked for competition law breaches. Oh dear.