Ian Smith’s history of explosive behaviour at Orica

RUSSELL Caplan last year gave the first public hint that not all was well within the company with Ian Smith’s management style.

Russell Caplan says he and Orica chief Ian Smith have ‘very straight conversations’. Picture: Aaron Francis

WHEN Russell Caplan conducted a series of quiet fireside chats with institutional investors in the middle of last year to discuss Orica’s strategy, he gave the first public hint that all was not well within the company with Ian Smith’s management style.

While he never said so directly, the chairman gave the very real impression that he was canvassing the attitude of investors towards Smith.

Was the man known for his aggressive nature and hired as a change agent to transform the mining services giant the right man to take the company into the next stage of its evolution?

The question was rudely answered for Caplan and the board in January at a meeting involving Smith, Orica’s general manager of investor relations Karen McRae, general manager of corporate communications Miche Paterson and chief financial officer Craig Elkington.

“There was a vigorous discussion on the topic of investor relations that morphed into Ian being overly aggressive. He apologised,” Caplan said yesterday.

The incident led to the departure in late February of McRae, who had worked with Smith in his former life at Newcrest. Paterson left immediately, having only been with Orica for three weeks.

“I’ve spoken to the person involved,’’ Caplan said of McRae, who was berated by Smith at the meeting. “We were all disappointed, as was Ian himself, that this had occurred.’’

But for Caplan and the board, which includes two senior and respected businesswomen in Nora Scheinkestel and Maxine Brenner, it was the last straw.

Caplan had fired a very public shot across Smith’s bow in an extraordinary September interview with The Australian , when he called his CEO a “challenging and confronting leader’’ who had to be “managed’’.

He also revealed that he and former Orica chairman Peter Duncan had spoken to Smith about individual incidents of ­“aggression”.

“Ian and I have very straight conversations; I would not have done the interview if this was not the right thing for Orica,’’ Caplan said yesterday.

“Ian was very interested in your interpretation of my comments. It’s fair to say they precipitated the (subsequent) discussions that we had.”

Sources close to the company said Smith had a long history of explosive behaviour dating back to his time as the head of miner Newcrest, which he left in 2011. Smith took over the reins at Orica in February 2012.

Even some of the enemies he has accumulated over the years have admitted Smith is unbelievably bright and capable of being immensely charming and able to disarm opponents — but this can quickly turn to yelling and abuse.

However, there is no record of any complaint against him being lodged at the Fair Work Commission or the Federal Court. So why did no one speak out? “No one wants to be little miss DJs,” one source close to Orica said yesterday, referring to the storm of publicity that enveloped David Jones publicity co-ordinator Kristy Fraser-Kirk after she launched a sexual harassment lawsuit against the retailer’s then chief executive, Mark McInnes, in 2010.

Battered by a media storm, Fraser-Kirk left David Jones — and Australia.

According to her LinkedIn profile, after a stint in Singapore she is now working in public relations in London under her married name.

It is believed Smith’s outbursts were not gender-driven. Some members of Orica’s male-dominated senior ranks were reportedly “in tears” and appeared physically shaken after leaving executive meetings with Smith.

“He was very direct,” says one ex-employee who says he saw episodes of bullying.

“I think it was done very much to disarm people. But you cannot argue with Ian’s track record in turning the company around.”

Questions were yesterday being raised about Orica’s corporate culture, which some observers say indulged Smith’s outbursts and where executives “managed out” dissenters.

But Caplan yesterday dismissed the criticism, claiming that he and the board were confident by the end of last year that Smith had his temper under control. He stressed that Smith had never been “defensive” about discussing the issue. He is believed to have told fund managers yesterday that if he believed that any of Smith’s behaviour amounted to a sackable offence, the board would have moved on its CEO.

“At the end of 2014, Ian went off to have surgery. He returned to the office and had counselling from his wife and kids that the general pressure of the job was getting to him,” Caplan said.

“Throughout all of this was the relentless pressure of the restructure of Orica. That’s not an excuse but it’s the reality.”

But after the January blow-up, there was no turning back.

Both men agreed to meet in late-January after returning from holidays and there was a meeting of minds.

“We both came to the view independently that it was best for a transition to occur,” Caplan said.

He added that the board chose to inform the market of Smith’s departure before settling on a new candidate because Orica had a live buyback in the market and Smith still had a notice period to serve out.

He noted the board didn’t want to seek a new chief executive “under the cloak of secrecy”. Smith remains an independent director of toll road operator Transurban and is scheduled to attend that company’s two-day strategy forum in Brisbane that starts today.

The episode hasn’t been easy for Caplan, who has immense regard for Smith.

“Nobody likes this. Nobody wants this,’’ he said.

During a 42-year career with Anglo-Dutch multinational energy giant Royal Dutch Shell in executive roles spanning the globe, Caplan conducted plenty of his own rescue missions.

But as he acknowledged last September, he is in the fortunate position of never having worked with a “dysfunctional” company at any point of his career.

Given its profit performance, Orica may not have been “dysfunctional” at any point under Smith.

But some critics might rightly say that Caplan and the board’s inability to change the ways of their at-times firebrand CEO eventually made working in the C-suite at the company just that.