New court claims push Super Retail board to finally sack CEO Anthony Heraghty
The directors – who claimed a thorough investigation of allegations Heraghty affair before backing him unconditionally – enabled the debacle to drag out.
They were clearly captured by a chief executive who was delivering on the financials and their strong support of Heraghty at the expense of whistleblowers, has made them unwitting players in the scandal.
Nor was there any obvious succession planning in place with the retailer on the back foot, which owns the Supercheap Auto, Rebel, Macpac and BCF chains, as it launches a search for a new boss.
New developments in allegations surrounding Heraghty’s relationship with the company’s former HR executive Jane Kelly (who left the business in late 2023) were contained in a batch of new subpoenas filed by two whistleblowers with the Federal Court last week. While these documents are yet to be made public, the retailer’s board was briefed on the explosive claims.
The board, led by former Fonterra Australia boss Judith Swales, met over the weekend to consider further claims and put information to the chief executive. They concluded Heraghty’s previous disclosures on the issue were “not satisfactory”. In other words, his long-running version of events didn’t stack up.
Swales had little choice but to move on Heraghty and immediately. This ended an extraordinary period of nearly 18 months of distractions, denials and reputational hits for the retailer.
Heraghty, who took charge six years ago, now forfeits at least $2.5m in restricted shares and substantial performance rights.
Whether the Super Retail board will aggressively pursue clawbacks of some of the $1.6m in cash bonuses paid to Heraghty in the past two years for the period covering the scandal remains in doubt.
Super Retail’s CEO mess
Swales took charge as chairman in November, but has served as a director since 2021.
She inherited the CEO mess from Sally Pitkin, who had firmly aligned herself with Heraghty since the scandal was made public in April last year. However, the claims by the two whistleblowers who were sacked in May 2024, were raised internally before then. Super Retail has consistently denied from the outset an affair took place between Heraghty and Kelly.
Pitkin’s exit was long foreshadowed, but she is deep into the scandal and is subject to separate court allegations that she also attempted to suppress staff complaints of the CEO’s alleged affair. Pitkin has strongly denied the allegations in her own court filings. It is important to know that Pitkin was not part of a board subcommittee investigating the claims surrounding Heraghty. Even so, if she was still with the board today her position would be untenable.
Five of Super Retail’s seven independent directors have been on the retailer’s board for the duration of the scandal, which is now a full-blown governance problem.
Boards can investigate so much and take the word of a CEO embroiled in a scandal at face value. But the Super Retail affair means this is unlikely to be the case in the future with board likely to err on the side of caution.
Gaming interest Tabcorp last year sacked its then chief Adam Rytenskild over allegations of crude comments he made about a regulator. Rytenskild has strongly denied the allegations even during an internal investigation, but the board still moved on him. The former CEO has launched an unfair dismissal claim.
Just this month Swiss food giant Nestle dismissed its boss Laurent Freixe after an investigation revealed an undisclosed relationship with a direct subordinate.
This case is different in that Super Retail has supported its chief executive all the way and spent millions in legal fees doing so.
As recently as last month, Swales gave full vocal support to her chief executive, adding the retailer was “vigorously defending” the Federal Court action. The whistleblowers were claiming as much as $30m in their case against the company which also extended to bullying allegations.
Swales said there was a “comprehensive board review” into the matter and this was supported by independent advisers.
“The board’s review and investigations concluded that none of the allegations were substantiated,” she wrote in Super Retail’s annual report. That assertion is now on unstable ground.
Based on the turn of events in recent days, investors are right to be angry and will be asking how comprehensive the investigation was or, even how seriously, Super Retail took the claims.
Like Qantas under a former board and chief executive, it was easy to ignore cracks in governance as long as the profits kept coming in. The airline had its day of reckoning with regulatory heat and its board and management has since been rebuilt under new chairman John Mullen.
After a bumpy December half, Heraghty delivered stellar results in the June half with better-than-expected sales and strong momentum into the new financial year. The figures sent shares up more than 12 per cent on the day of the full-year results, although much of the gains have since evaporated.
Super Retail closed down more 4.1 per cent on Tuesday, spurred on by the leadership vacuum.
At this stage, a strategy day planned for next month is still scheduled to move ahead under acting chief executive and chief financial officer David Burns. But this might be superseded by a new chief executive who might have an entirely different view on strategy. One candidate to watch is former Kathmandu chief executive Reuben Casey who was appointed last month to head up Super Retail’s outdoor business MacPac.
Swales last month revealed Super Retail had attempted to settle with the whistleblowers but had yet to reach an agreement.
The retailer has so far set aside an $11m provision to cover the Federal Court action, but on the current turn of events that’s going to be inadequate.
The legal action is still ongoing, but it is very likely the sacking of Heraghty will force Super Retail’s hand towards a more costly settlement. However, the disruption across the retailer will be more expensive.
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Annual BHP vote
BHP’s new chairman Ross McEwan is sticking with the miner’s annual director elections – a policy dating back to Jacques Nasser that aligned BHP with UK corporate governance codes. Even after recently retired chair anf governance stickler Ken MacKenzie elevated the primary listing to the ASX, relegating London to secondary status, BHP kept the annual votes. Fellow dual-listed miner Rio Tinto does the same, though Australia’s governance principles only require one-third of directors to face re-election yearly. This is the norm for corporates.
This annual re-election, combined with MacKenzie’s retirement, has left BHP with a relatively young board by tenure. Four directors arrived in 2020, with two more – including McEwan – joining just last year.
Next month’s AGM brings the real test: investors must approve a five-year incentive package for CEO Mike Henry worth up to $US7.45m ($11.2m). This will be paid on top of annual base salary and shorter term bonuses. There’s growing talk about the timing of Henry’s eventual exit – he’s been running the miner since early 2020 – though a “good leaver” clause ensures he’ll be paid out until his departure date.
The message is clear: BHP’s governance may follow UK traditions, but CEO pay follows North American appetites.
johnstone@theaustralian.com.au
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