Crown's curious reshuffle sees John Alexander rewarded for a demotion

The board of James Packer’s Crown Resorts could never have been described as being the poster child for corporate governance. But after years of previously ignoring complaints from shareholders, it has shocked investors by dragging its governance into the new decade with the radical decision to strip its executive chairman and long-time Packer henchman John Alexander of his chief executive and chairman roles.

Crown late on Friday announced former Liberal senator Helen Coonan, a nine-year veteran of the board will be elevated to chairman and chief financial officer, Ken Barton, will take on the chief executive role. John Horvath a former government chief medical officer and one of the late Kerry Packer’s former physicians, will become deputy chairman.

Crown's outgoing executive chairman John Alexander.Credit: Getty Images

But the details of this executive reshuffle make it anything but conventional.

Add to this the timing of the changes – they have been announced during the first week of an inquiry into Crown initiated by the NSW gaming regulator in which Alexander has been called as a witness.

The inquiry will focus on the proposed $1.76 billion sale of nearly 20 per cent of Crown to Melco Resorts, the Hong-Kong based group run by Macau casino billionaire, Lawrence Ho.

It will examine accusations the casino giant failed to alert regulators about the sale of shares to Melco before the deal was announced publicly, and the potential it may have breached the terms of its NSW casino licence.

There is not an adequate explanation as to why Alexander will retain an unspecified executive role and $3.5 million in annual pay

The inquiry will also examine media reports of money laundering and involvement in junkets.

The executive/board reshuffle also comes hot on the heels of a rare visit to Australia by Crown’s 36 per cent shareholder James Packer.

Packer, whose family charities have donated $5 million to assist with recent bushfires, has indicated he will be spending more time in Australia in the lead up to the opening of Crown’s Sydney Casino which is earmarked for later this year.

The Crown board went to great lengths to present the changes as a governance issue that was motivated by increasing pressure from shareholders and one which was spearheaded by the independent directors with support from Packer.

If a more modern corporate governance structure was the primary motivation the board did not offer an explanation as to why Alexander could have retained just one of his roles – either as a chairman or chief executive.

Nor is there is not an adequate explanation as to why Alexander will retain an unspecified executive role on $3.5 million in annual pay, plus remain eligible for bonuses.

To put this in context, the new head of the National Australia Bank, Ross McEwan, will receive $2.5 million in base pay this year – an amount that even some of its shareholders have deemed generous.

Alexander’s duties will be to help transition the new chairman – itself an unconventional role. He will also be responsible for showing Barton the ropes. Barton has been Crown’s chief financial officer for 10 years so he should be familiar with its operations.

Alexander’s new employment contract is of 12-month duration so his future following its expiry remains unclear.

While Crown said it had been contemplating changes to the board and management for a year, there is no suggestion that an external search to replace Alexander was undertaken nor was there a replacement lined up for Barton’s chief financial officer role.

It would not be surprising if the inquiry will also occupy a decent amount of Alexander’s time. Crown is clearly taking the hearings seriously – evidenced by the heavyweight legal bench strength it has enlisted.

Former counsel assisting the banking royal commission, Rowena Orr, will head the Crown team. Melco will be represented by Jeremy Stoljar, SC, of the trade union royal commission.

There is a lot riding on the inquiry for Melco whose acquisition of 10 per cent of Crown and its proposed acquisition of an additional 9.9 per cent will be examined.

Melco has been very keen to keep the Crown deal alive as it forms a central plank in its international expansion strategy. Receiving probity approvals in Australian state jurisdictions is considered an important entree to gaining regulatory approvals in other international regions.

However Melco’s quest to access the Japanese market could have received a setback over the past week with reports that its offices had been visited by Japanese authorities in connection with a political bribery scandal.

Back in Australia, Crown and fellow casino operator The Star are being confronted with the fallout from the spreading coronavirus which is said to have resulted in the cancellation of China tour groups to Australian casinos, but not as yet impacted the VIP visitors.

With all these issues on Crown’s plate, the timing of its board and executive reshuffle is curious.