BHP chairman Ken MacKenzie is in danger of clear conflicts of interest in taking on the role as “senior strategy partner” at new investment bank Barrenjoey Capital.
The Magellan and Barclays-backed firm said in a statement MacKenzie would be available “to provide strategic advice and senior counsel to CEOs, chair persons, boards, executive teams and business owners in developing and executing their long strategies”.
No mention of his day job, which is as chair of BHP.
The new investment bank, like the rest of the industry, makes its money from transactions from buying and selling shares to assets and companies, which inevitably creates a conflict between the competing aims of the firm and its clients.
There is also a question mark over why Magellan, a fund manager with $100bn under management, wants to start a $400m investment bank with the conflicts that may entail. But for this group of old friends watching the industry earn $555m post-COVID to raise $33bn for corporate Australia at zero risk makes it look like money for jam.
This said, the Magellan-backed firm — attracting key talent from UBS and led by former executives Guy Fowler and Chris Williams — will on paper be a winner.
It has some bizarre links, like Brian Benari’s inclusion as chief executive after well-timed departures from Challenger and before that Zurich Financial.
Its first investment will be $65.9m in Magellan stock through the 1.2 million share issue, which leaves it a little short of the 22.2 million in shares held by Magellan executive chair Hamish Douglass.
The proposed full-service bank sits between the bank-backed global giants such as Citi, Goldman Sachs and BAML and the boutiques.
Ironically enough a key battleground will be with New Zealand-based Jarden, which includes a couple of big former UBS names like Robbie Vanderzeil and Aidan Allen, who like Barrenjoey come to the table free of the compliance rigours of the big global houses.
This gives the firm the flexibility to plan a compliance-light entrepreneurial role, which will prove enticing to new staff just as Macquarie did in its early days.
Investment banking is more about the people or the talent than the firm, but you need both to succeed.
Jarden and Barrenjoey will be playing on the same field, not trying to compete with the capital and deal flows against the global giants.
Former UBS chief Matthew Grounds is sitting on the sidelines awaiting the next tranche of his stipend from UBS due next March, but is also leaving plenty of clean air before stepping back into the market.
His old friend David Gonski, due to leave ANZ shortly, is tipped as the first non-executive chair of Barrenjoey and who like Grounds, Fowler and MacKenzie just loves being part of the game.
BHP’s MacKenzie, it should be noted, has no plans to step down from his day job and rejects the concept that he could be in conflict.
In an interview with The Australian, he said the BHP board considered the move and with the right protocols saw no problem.
He stressed BHP was his number one priority, he is an adviser to Barrenjoey with no statutory position and is merely advising the firm and its clients.
MacKenzie said he would not advise on transactions and would not be involved if there was any conflict.
MacKenzie, or “brand Ken” as he is known, made his name in Australia running Amcor, which he restored to being one of the nation’s top performing companies and now a truly global organisation. He is 56 and says he has no intention of taking on other executive or statutory roles.
MacKenzie said he presently mentored others and this role was no different, although he did acknowledge his new role would come with a stipend.
Investment banks make money from transactions and the value they can bring to the table, which goes further than the fine details of the deal in question, but ultimately it is also about doing deals that benefit the bank and hopefully the client in that order.
BHP shareholders would probably think the strategic advice MacKenzie plans to give Barrenjoey and its clients is what he is meant to do at BHP, and just how the chair of Australia’s biggest mining company can step out providing advice to other chairs is difficult to fathom.
An investment bank ultimately makes money from transactional work advising on buying and selling assets.
The folk at Magellan were obviously aware of the perception of the conflict’s risk because in the release unveiling his appointment it said he was “one of Australia’s most highly regarded senior executives”.
One might have thought being chair of BHP was worthy of mention in the release.
A BHP spokesman said MacKenzie thinks conflict protocols in place would prevent any issues, but that misses the point that the former Amcor boss has a very real day job now and this one risks that.
Barclays would no doubt have considered just how this appointment might affect any role the bank and Barrenjoey might play with BHP in the future, which by rights would be minimal.
IAG’s safe pair of hands
Insurance Australia Group chair Elizabeth Bryan has chosen a highly regarded safe pair of hands in Nick Hawkins to run the insurance company, but the question remains just where the growth is coming from.
His predecessor, Peter Harmer, has sold off the growth options in Asia, but Hawkins believes the company is only half through its simplification program and with 30 per cent of the local market.
The next question is where CEO rival and Australian boss Mark Milliner goes next — with QBE an obvious option.
Hawkins will pick up base pay of $1.6m, down from the $1.9m earned by Harmer last year and indeed below his starting pay as chief of $1.7m.
Hawkins, a long-time IAG finance chief, is well known to the market, which will welcome his appointment as a good one, but it remains to be seen just where the blue sky can be found.
Skyline’s helping hand
About 1700 students in Melbourne will be studying maths in the Skyline Foundation’s inaugural online exam revision program as part of the not-for-profit group’s education program.
The foundation run by Jane Sydenham Clark runs a tutorial program for 103 students across Victoria who were nominated by their schools as being academically talented but suffering from financial and other disadvantages.
The two-year program over year 11 and 12 directs income to the students, helping with books, computers, uniforms and mentoring assistance.
UBS bankers and the firm led by Kelvin Barry have helped the foundation, which has come into its own this year.
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