Analysts split on fallout from Cleanaway CEO Vik Bansal’s conduct

Analysts are split on whether the conduct of CEO Vik Bansal will have a lasting effect on Cleanaway, as its shares fall for a second day.

Analysts are divided on whether Cleanaway CEO Vik Bansal’s conduct will have a lasting effect on the company’s fortunes.

Shares in embattled Cleanaway Waste Management tumbled another 5 per cent on Tuesday, after falling as much as 14 per cent on Monday, following revelations of instances of alleged bullying by chief executive Vik Bansal. Some investors are increasingly concerned about the corporate culture at the group and the impact it may have on securing new contracts.

On Monday Cleanaway announced the CEO had conceded his improper behaviour when interacting with staff. But the highly successful Cleanaway boss, who has seen the share price rise 300 per cent since his arrival, escaped without any financial penalty or impact to his career.

At the same time it announced the findings about its CEO, the waste management group said its chief financial officer would resign.

Shares in Cleanaway slumped 14 per cent on the two news items, before closing down 7 per cent on Monday. On Tuesday they fell another 5.3 per cent, to $2.22.

Morgan Stanley analyst Xindi Shao said the issue could impact the company’s corporate culture and impede it from winning new contracts, especially from government agencies.

“We anticipate a negative share price reaction to this news, and we are wary of its potential business impact as a strong corporate culture and reputation is material to winning and retaining government contracts, and the company’s growth strategies require strong operational focus,’’ the analyst said.

An analyst at Credit Suisse took the opposing view, arguing the allegations around bullying and the corporate culture should not have long term impacts on the business.

“We think the board has dealt with this issue appropriately, and the CEO appears to be focused on changing his behaviour. It is unlikely to be an ongoing issue for the shares, in our view,’’ the Credit Suisse note to clients said.

There were also some fears the CEO could leave Cleanaway, following his successful leadership of the company, leaving no obvious successor.

“The media attention on the conduct issues appears to have brought more attention to the share sale last month and raised concerns that the CEO may be preparing to move on. This would be negative for the shares as Vik Bansal has been highly regarded and there is no obvious internal successor,” Credit Suisse analysts said.

“Our best guess is that he is unlikely to move on and is likely to be focused on overcoming any risk to legacy from the conduct issues.”

At a time when some of the nation’s most powerful chief executives and managers at companies such as AMP and QBE have departed following breaches of codes of conduct, Mr Bansal will only have to put up with what the board has termed “executive leadership mentoring, enhanced reporting, and monitoring of the CEO’s conduct.”

In a statement to the ASX on Monday the $5.2bn Cleanaway said it was responding to claims of poor workplace behaviour within the company.

“The board of Cleanaway takes allegations of misconduct in the workplace very seriously.”

Mr Bansal’s behaviour was described as “overly-assertive”.

“Mr Bansal had some issues with overly-assertive behaviour in the workplace and has acknowledged that he needed to address them,’’ said Cleanaway chairman Mark Chellew.

“The board is disappointed in the circumstances but has taken appropriate action. We have noted the committed and sincere manner in which Mr Bansal has responded. The board will not tolerate any further instances of unacceptable conduct.”

It said the board had been working closely with its CEO Mr Bansal to ensure that his workplace conduct meets their expectations.

“Mr Bansal has acknowledged that his behaviour should have been better and expressed contrition. He has discussed this openly with the board and with his colleagues and has embraced changes in his approach.”