Superannuation giant HESTA has placed Mineral Resources on its “watchlist” amid concerns over the miner’s response to a tax scandal involving boss Chris Ellison and the pace of the embattled founder’s exit.
On Friday, the $88 billion industry super fund announced it had been engaging with Mineral Resources over its recent governance failures, after revelations Ellison and four other MinRes executives made millions using offshore companies to peddle an equipment markup scheme between 2003 and 2009.
Chris Ellison.Credit: Michaela Pollock
HESTA chief executive Debby Blakey said she had been disappointed by the company’s response and the pace of a succession plan that will see Ellison retain his role as managing director for up to 18 months.
“Our concerns include that the managing director’s succession timeframe does not reflect the seriousness of the issues and that the issues identified indicate a systemic failure of governance at the senior management and Board level,” she said.
“As a result, HESTA has placed MinRes on our watchlist, and subject to our engagement escalation framework.
“We believe the MinRes Board has a critical opportunity ahead of the company’s upcoming Annual General Meeting to provide investors with confidence they are taking appropriate action to address these governance failures.”
Mineral Resources joins energy majors Woodside and Santos on the watchlist, where companies are subject to closer engagement and monitoring.
Where the fund believes a company has failed to address risks that pose a financial threat to members, Blakey said it would contemplate voting against director elections or even divestment.
The move comes just days after the miner revealed a probe into the tax evasion scheme — first published by the Australian Financial Review last month — had concluded Ellison used company resources for personal gain.
The investigation found the miner had provided financial benefits to related parties, with rent paid to entities in which Ellison had an interest, staff directed to work on the billionaire’s personal property — including his boat — and finances and relief afforded to entities tied to his daughter Kristy-Lee Craker.
It was also uncovered that emails related to the offshore entity at the centre of the scheme were deleted in 2019 around the time Ellison began self-disclosing to the tax office.
The billionaire will repay almost $3.8 million in funds owed, forfeit bonuses tipped to be worth $9.6 million and make charitable donations totalling $5 million over the coming years.
Ellison, who founded the entity that led to the formation of the $7 billion company in 1992, said he was “deeply sorry” for his conduct and the impact on the company’s reputation.
The news coincides with credit ratings agency Moody’s cutting its outlook for MinRes to negative, and comes less than 24 hours after the corporate watchdog confirmed it had launched a full-scale probe into the scheme.
During a senate hearing on Thursday, Australian Securities and Investments Scheme deputy chair Sarah Court confirmed its preliminary enquiries had triggered a formal investigation about a week ago.
Despite the probe being in its initial stages, Court said the investigation group had already begun liaising with the Australian Taxation Office.
AustralianSuper sold more than $48 million worth of MinRes shares last month, relinquishing its status as a substantial shareholder and declaring it would be reassessing its long-term position in the company.
But the response from shareholders has been mixed, with Melbourne-based hedge fund L1 Capital voicing its support for a strengthened corporate governance protocol and Ellison remaining at the helm.
L1 Capital is MinRes’ second-largest shareholder behind Ellison, who retains an 11.5 per cent stake.
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