By Stephen Mayne


The BHP-Billiton management and board
shake-up driven by Queenslander Don Argus has sealed the departure of
the last remnants of the old guard. Carbon steel boss Bob Kirbky, a BHP
veteran since 1978, has bailed and we’re also seeing the last of BHP
Petroleum boss Phil Aiken, who will retire at the end of the year after
nine years. Of the 16 top executives at BHP-Billiton, only one of them,
Iron Ore boss Graeme Hunt, was with the old BHP before Paul Anderson
was recruited from the US to clean up the mess in 1998.

Terry
McCrann was fulminating this morning about BHP-Billiton clarifying
whether Aiken’s departure was connected to BHP Petroleum’s dodgy $5
million gift-loan to Saddam’s Iraq. McCrann is right, but unfortunately
we’re dealing with someone known as Don’t Argue who still hasn’t
explained why former CEO Brian Gilbertson was sacked in 2002. The AFR’s
John Durie also mounted the high horse this morning, savaging
BHP-Billiton for bringing Anderson onto the board as a non-executive
director after a four-year hiatus.

The governance theorists are
right to argue that old CEOs shouldn’t hang around like a bad smell.
The worst example is Eric Mayer who was ousted after seven years as CEO
of National Mutual in 1990 when it was almost broke, but then only quit
as a director in 2001. John Elliott did the same when he stepped down
as Elders IXL CEO in 1990, but didn’t finally leave the board until
1992. Stan Wallis did the same at Amcor, as did Ian Burgess at CSR.

QBE
Insurance has gone from strength to strength under John Cloney, who was
CEO for seven years until 1998 and has been chairman ever since.
However, he is the exception to the rule, which explains why the likes
of Durie are not happy. The circumstances are a bit different when you
leave a board for four years and it should be noted that Anderson has
not returned as chairman, although he would make a good replacement for
Don Argus when the time comes.

BHP used to run a system whereby
former CEOs automatically went on to become chairman. However, the club
liked to have a gap, which explains why WMC chairman Sir Arvi Parbo was
cosily borrowed by the Big Australian to be chairman in 1991 and 1992
whilst former CEO Brian Loton was groomed to step up from deputy
chairman. The low point came in 1997 when Brian Loton stepped down as
chairman and Jerry Ellis was promoted from BHP Minerals boss to
non-executive chairman, above his great mate John Prescott, the CEO for
seven long and unfortunate years after Loton.

This system was
unscrambled in 1998 as billions were written off and Argus came across
from National Australia Bank. He hired Paul Anderson who knocked the
business into shape and then merged it with Billiton, allowing him to
be “terminated” a year early and walk off with an $18 million pay-out
and 3.1 million largely free shares which are today worth more than
$100 million.

Whilst Anderson’s appointment has merit, there is something wrong with
inviting someone onto a board after giving them a $3.2 million
“termination” payment – but the fact remains that he is a stand-out
performer who fixed BHP and then turned Duke Energy around in the US.

The
more concerning element of BHP board restructure is the recruitment of
former Ford CEO Jac Nasser, because he and Argus have been mates for
years and sit on the Brambles board together. Assuming that Anderson is
still on cosy terms with Argus, the chairman does appear to be shoring
up his numbers. Does this mean the longest serving BHP director,
accountant and Argus mate David Crawford, is preparing to finally
retire after 12 years? After all that other Argus supporter, Michael
Chaney, retired from the BHP board last year to take the chair at NAB
and Woodside Petroleum.

That left only CBA chairman John
Schubert as a long-term Argus ally on the board because the rest of
them have a strong international flavour and wouldn’t be attuned to the
archaic succession planning heritage of Club Melbourne.

Peter Fray

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