Email, text probe forces exit of QBE chief Pat Regan

QBE chief Pat Regan to exit over ‘poor judgment’ following a scan of company emails and a female employee’s complaint.

QBE CEO Pat Regan is set to depart the company. Picture: Britta Campion

Insurer QBE’s dumping of chief executive Pat Regan has triggered a mixed response from shocked shareholders, with several demanding the board release more information about the poor conduct that led to his ousting.

Mr Regan left QBE with immediate effect on Tuesday following a complaint from a US-based female staff member and an external investigation into emails and texts sent to the employee.

The Australian revealed online that QBE had tapped law firm MinterEllison to conduct the sweeping review of Mr Regan’s communications, and the findings were presented at a board meeting on Monday evening. There was unanimous board support for Mr Regan’s departure, sources said.

The review was said to have highlighted numerous instances of inappropriate communication by the CEO, but QBE did not provide details on Tuesday.

Fund managers were told the emails and text messages were inappropriate, although may not constitute sexual harassment or bullying, which spurred widespread investor confusion.

The MinterEllison review followed the complaint being made by the female employee about 10 days earlier. She has since tendered her resignation.

While some shareholders applauded the move by QBE chairman Mike Wilkins to act quickly to remove Mr Regan, others are demanding more board disclosure about the nature of the CEO’s communications, to be able to gauge whether his axing was warranted.

QBE’s shares tumbled 6.3 per cent to close at $9.94 on Tuesday as investors digested the departure and lamented another period of instability at QBE. Mr Wilkins — who also had a stint as executive chairman of AMP after the Hayne royal commission triggered a management and board exodus — will take over the QBE CEO role as well as being chairman while a search is conducted.

QBE’s statement said Mr Regan’s behaviour showed “poor judgment” and fell short of standards in its code of ethics and conduct, but didn’t provide detail.

The insurer doesn’t appear to have a succession plan in place after several recently announced departures.

QBE’s chairman Mike Wilkins. Picture: AAP Image

Vivek Bhatia — who led QBE’s Australian operations — last month announced his exit to become CEO of ASX-listed Link. The insurer’s group chief risk officer Peter Grewal is leaving at the beginning of next year to join London Stock Exchange-listed M&G.

Last year, operating boss David McMillan left to become CEO of British insurer esure, with his responsibilities reallocated among existing executives.

QBE is still working out Mr Regan’s exit pay, and details of any package were not provided.

Mr Regan pocketed nearly $US4.43m ($5.9m) for 2019, which included a cash bonus of $US665,000.

The latest conduct scandal follows AMP last week losing chairman David Murray and board member John Fraser after investors revolted against the company’s response to several incidents, including the mid-year promotion of Boe Pahari despite a 2017 sexual harassment complaint.

Mr Pahari was demoted last week back to his infrastructure equity position, and won’t lead the AMP Capital division. AMP also lost its Australia boss Alex Wade last month due to conduct issues, with The Australian revealing he sent lewd photos to a female employee.

Fund manager Paul Xiradis, whose Ausbil Investment Management is a top 20 QBE shareholder, said he was surprised when he heard Mr Regan had behaved inappropriately, labelling it “totally out of character” for the Englishman.

“It was totally unexpected. Equally, the board taking very decisive action quickly, I think, is a credit to the organisation. The CEO was very well regarded and I think the board should be commended for (removing him).”

Pat Regans home in Sydney on Tuesday. Picture: Jane Dempster for The Australian.

AustralianSuper, QBE’s fifth largest shareholder, spoke to Mr Wilkins on Tuesday and is also understood to be pleased the board took swift action.

But Allan Gray portfolio manager Simon Mawhinney called the QBE board’s decision to dismiss the CEO “another example of poor corporate transparency” because it didn’t more information.

“The board has kept shareholders in the dark about the reasons and as shareholders we are therefore unable to assess the appropriateness of this significant decision,” he said.

“Corporate Australia can ill-afford for board decisions to be anything but measured and appropriate. Reputation-saving decisions which are not fair are as unacceptable as inaction when warranted.”

At least one other fund manager is also pushing the board for further information.

Mr Regan’s simplification strategy had won support from some investors, and was gaining traction.

In QBE’s statement, Mr Wilkins said: “We are committed to having a respectful and inclusive environment for everyone at QBE. The board concluded that he (Mr Regan) had exercised poor judgment in this regard.

“While these are challenging circumstances the board recognises and thanks Mr Regan for his hard work and contribution to strengthening QBE.

“However, all employees must be held to the same standards.”

Mr Regan took charge three years ago following another bout of QBE instability. He replaced John Neal who was forced to ­resign as CEO following a string of profit downgrades, and a scandal over a relationship with his secretary that he ­didn’t disclose.

The relationship saw the board dock Mr Neal’s pay by about $550,000.

Mr Wilkins spoke to large shareholders on Tuesday to attempt to explain the latest situation, while staff received a memo from the board.

One major shareholder was told the material sent by Mr Regan wasn’t as bad as the explicit photos AMP’s Mr Wade sent to a colleague.

Another major shareholder, who also asked not to be named, voiced disappointment at the news of Mr Regan’s inappropriate behaviour. “He’s f...ed up. It’s disappointing but it shouldn’t really have a big impact on the business ... And then you just go ‘you idiot’. You get to this top position and you’ve just got to be more careful. Just don’t do it.”

QBE’s statement said the board would implement further initiatives to develop a “vibrant and inclusive culture”, including a review and a new avenue for employees to raise concerns and receive support.

“We want our people to have the avenues they need to safely speak up, with the confidence that they will be heard and that all concerns raised will be treated consistently,” Mr Wilkins said.

He moved to reassure investors the fundamentals of the business were strong.

“While COVID-19 has created significant challenges, QBE is successfully navigating this period of uncertainty, and the group’s demonstrable financial strength positions us well to capitalise on accelerating pricing momentum.”

JPMorgan analysts said Mr Regan’s exit could hurt QBE’s shares in the short term.