Succession planning falls short at QBE

Outgoing CEO Pat Regan has forfeited around $10m worth of options. Picture: Bloomberg

The QBE board passed one test on Wednesday with a relatively tough payout for fallen boss Pat Regan but the biggest hurdle remains in finding his replacement.

Given a string of planned and past departures there are zero obvious candidates among his direct reports.

Regan will collect $310,000 on the way out which for most would be okay, but by CEO standards well short of the usual one year’s pay which was awarded to Orica’s Ian Smith when he left five years ago.

Chair Mike Wilkins would probably say the payout was “appropriate” and given Regan’s fixed pay last year was $3m-plus, and even with the cancelled share rights he still owns 1.1 million QBE shares worth around $10.4m and convert to around $550,000 in annual dividends, so the rent won’t be a problem.

He has forfeited around $10m worth of options but then again that assumes he was going to satisfy the hurdles on the outstanding options, which in the insurance game is anyone’s guess.

The real problem is Wilkins is acting chief executive and as good as he is, it doesn’t say a lot about succession planning that he is still in the position.

One of the key tasks for a chief executive and a board is succession planning and that has plainly failed at QBE.

The good news is the still unexplained reasons behind Regan’s departure suggest the company is due for yet another cultural overhaul which means an outsider would be best placed to fill the role.

CFO Inder Singh is the most obvious internal candidate given the departures of Vivek Bhatia to Link, Peter Grewal as head of risk and Richard Pryce in the UK.

Pryce is retiring so maybe Wilkins can talk him into staying as happened with Peter King at Westpac.

Singh is considered a more likely candidate for the Australian job presently in the very capable hands of Frank Costigan.

All of which would be best left to the new boss of the Sydney-based global insurer.

Over at Wilkin’s old shop at IAG, chief Peter Harmer is due to step down shortly, with known internal candidates in Nick Hawkins and Mark Milliner.

The decision should be known before the October AGM which is a big step ahead of QBE.

It is a tough time for a global search but then that is what head hunters are there for and the good news is insurance is a small world globally so the QBE board should have some clues about who would be best placed to take the top job.

The clock is ticking and as safe as Wilkins’ hands may be it would not look good if he was still in the job at year’s end.

Succession planning is a core competence for any top tier board and on the evidence today QBE is not rating highly.

Spanish win Infigen

Spanish renewables giant Iberdrola has won full control of Infigen with rival bidder Philippines conglomerate UAC accepting on Wednesday which means the Spanish now have over 97 per cent of the company.

This means it will be able to compulsorily acquire the remaining stock in the $890m bid for the old Babcock & Brown Wind vehicle.

UAC had maintained it would not sell its 20 per cent stake but with an average entry price below 80c a share and the bid at 92c there was little point in being a minority holder.

Separately, it’s more than the US tech stock moves that are shaking the market with portfolio mandate changes resulting in some moves.

Nufarm is a case in point, trading above $4.20 a share in mid-August before falling to $3.85 on Monday and then recovering up 10.2 per cent in the last two days to close at $4.25 on Wednesday.

There was no news to report.

Stalemate at ASX

When ASX acquired the Sydney Futures Exchange back in 2006 Computershare tried to intervene with an ultimately failed competing bid and the two companies have not been best friends since.

On Wednesday Computershare’s Anne Bowering hosted a webinar titled Ensuring a Smooth Transition to Chess Replacement, which was a different take.

The event included Dennis Orrock from software provider GBST, whose main concern was the difficulty in changing systems, and Ian Matheson from the Investor Relations Association, who has long campaigned for better information from the ASX.

Case in point is the Chess replacement project which goes on trial starting in stages from December ahead of the proposed April 2022 launch with the first stage being backroom software.

The much vaunted switch to blockchain distributed ledger technology is just for the clearing and settlement system but is a major upgrade and the ASX should tell its shareholders about the proposed cost.

As always the monopoly exchange is cautious with its words and simply says the bulk of its annual $85m capital expenditure will be spent on the project so let‘s assume the figure is $70m over the last four years which is $280m.

But then there is the 40 per cent owned consultant Digital Assets so the exact sum is not known.

Sometimes companies don’t disclose technology upgrades because they don’t want the embarrassment of a cost blow out but as the governance guru you would expect the ASX to be a little more explicit.

Likewise it chooses its words carefully in ruling out fee changes on “like for like” services.

Given the simplicity of the new blockchain model maybe the ASX could have cut prices but as a monopoly has returns to make.

The big brokers are just pleased at the introduction of a global messaging system known as ISO 200022 which will bring Australia finally into line with other markets and are not too fussed about the blockchain revolution.

Computershare and the Governance Institute want to use the once in 26 years clearing system upgrade to change the governance of the market, separating clearing and settlement from the trading platform.

In a recent note on Computershare JP Morgan warned “Downside catalysts include … distributed ledger technologies starting to remove costs from the registry function and, therefore, profit opportunities”.

It was somewhat fitting then that Wednesday’s webinar ended with Bowering being muted with a frozen computer screen.

Vale Peter Mitchell

Melbourne legend and one of the Moonie Oil founders Peter Mitchell sadly died this week, aged 85, and his family said in the death notice “a memorial service will be held when the dictator is overthrown”.

The notice described him as “an exceptional man with an exceptional mind”.

Suffice to say Premier Dan Andrews’ COVID lockdown is not winning too many friends. especially as he was the Health Minister in the Brumby government from 2007 to 2010 so presumably was across some of the issues on running the state’s health system.