Bain managing director Mike Murphy has made no secret of the fact that he didn’t consider Paul Scurrah as the long-time boss at Virgin under his control, and the change is set to happen by Christmas.
He didn’t shout this from the rooftops, of course, because he wanted to make sure he had the staff and the unions on side to get the deed of company arrangement safely through the creditors’ vote.
But as noted in this column in the lead-up to the deal, Scurrah was never going to be the long-term boss.
Murphy was not taking phone calls on Wednesday and that is not a good look. Wen the challenge is set, it’s best to meet it head on rather than to hide behind closed doors.
That is why the terms of Scurrah’s departure will be carefully scripted to make it look like Scurrah’s decision, not Bain’s, when the world knows the reverse to be the case. Jayne Hrdlicka has already moved to Brisbane to establish her position as the new boss and it’s now just a matter of the departure being set on Scurrah’s terms.
This will be something along the lines of the change of control has now been completed, and the airline is being established on commercial terms, so with my job done it is time to move on to other opportunities.
Scurrah will be well remunerated, but the challenge for Murphy will be to regain credibility after publicly backing him as boss.
The unions will feel double-crossed as the staff are devoted to Scurrah, and customers had also got used to him being the leader of the airline and someone they knew even though ownership had changed.
Hrdlicka comes to the job with a reputation as being a highly competent, hard-nosed operator.
The plan to bring the fun back to Virgin doesn’t seem to fit the script any more.
With the airline industry on its knees, the reality is no one has much of a position from which to bargain, and the staff and pilots who still have jet fuel in their blood will reluctantly accept their fate and line up for their jobs back.
The unions will make some noise, but they too will know that the International Air Transport Association says this year will be the worst in the industry’s history, losing $US84.3bn ($118bn), and only slightly less next year.
That’s the market Bain has invested $1.6bn in, and it’s not going to be sentimental about how it is done but it will also quickly learn that it’s the travelling public that will determine its fate and its competitor Qantas is a national icon.
Fagg fights for survival
Boral chair Kathryn Fagg is fighting for her survival at this month’s annual meeting, with three out of the three proxy advisory firms recommending against her re-election due in large part to her relative longevity on the board.
She has served as chair for two years and been on the board for six years at a time when the company has materially underperformed by 40 per cent over three years, 27 per cent over five years and 45 per cent over 10 years.
Ownership Matters has joined the no vote chorus largely on the back of her support of the disastrous Headwaters deal in 2016 that cost shareholders $3.5bn, of which $1.2bn has been written off.
In the next fortnight the company’s new boss, Zlatko Todorcevski, will announce the results of a corporate review and all the talk suggests it will recommend the sale of the company’s US assets, including Headwaters.
If that happens and the commitment is real, then shareholders must examine the case of tossing the chair, given the fact in two years she has shown foreigner boss Mike Kane the door, presided over the decision to sell the US assets and on Wednesday appointed highly regarded former Qantas executive Tino La Spina as CFO and strategy chief.
Todorcevski is untested, but in La Spina there is a ready-made replacement, just as in new director and former CSR boss Rob Sindel there is an ideal candidate as next chair of Boral.
If the corporate review is weak and/or the board makes no firm recommendation about the US assets, then Fagg’s position is tenuous at best and in fact she would already be on the way out the door.
If she does the right thing about the US assets, then you have to say why dump her?
As chair she has moved quickly to dump the old boss, find a new albeit untested one and hopefully commit to selling the US assets, which just about answers everyone’s prayers.
Granted she gave Ryan Stokes and Richard Richards an easy ride into the board without any commitment from the 20 per cent shareholder in terms of a standstill agreement or so-called “come along agreement” to support the board. This was a mistake, but balanced against the other changes you have to say she would have ticked the other boxes that shareholders including John Wylie at Tanarra have been looking for.
Wylie has sought a board seat at Boral, but with 3.5 per cent of the company was outmuscled by Stokes buying 20 per cent.
By granting two soft seats, Fagg effectively acquired their votes for her re-election, but with the proxy firms united albeit for different reasons against her, she will need to deliver more than yesterday’s statement to win support.
The US review is promised before the annual meeting and just maybe is the meal ticket if it is not all too late. Wednesday’s attempt to appeal for support was just form over substance.
If Fagg can deliver the US separation, shareholders must ask what else they could demand from her.
Pumped-up prices
The ACCC revived an old favourite with Wednesday’s court action against Brisbane-based B&K Holdings, trading as FE Sport, for alleged resale price maintenance in bicycle parts.
The ACCC has varying priorities, including more recently cartel and consumer breaches by big companies, with the questions being whether real harm is being caused and where it sees most detriment.
Others argue the law is well understood and manufacturers know their way around the law by using “recommended retail prices”. But the economic thinking has also swung back in favour of a legal crackdown, with some arguing price fixing is part of cartel activity. In this case against FE Sports, the ACCC said it had warned the company three times against the practice.
Media code nears
The ACCC is finally heading towards the conclusion of its media bargaining code, with draft legislation due to be finalised in the next two weeks.
The code is designed to govern how the big digital platforms deal with media companies to compensate for their content, but Google and Facebook have threatened to stop using all media content if forced to co-operate.
The ACCC is expected to make selective releases of the draft to ensure the wording meets the objectives. It is likely to have cut the notice period for algorithm changes, ensure the platforms do not have to release details of the secret combinations and the arbitration process recognises referrals from the platforms to the media companies, and also ensure arbitration takes into account referrals from the platforms to the media companies, but will stick with the final offer arbitration system and the non-discrimination clauses.
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