BHP succession once again in the spotlight

The boards of most big companies would have you believe that succession planning is a process that starts the day a new CEO steps into the job

CEO Andrew Mackenzie has turned BHP into a leaner, meaner machine. Picture: Aaron Francis

Succession planning is a normal process, a common process, and one that starts the day a new chief executive steps into the job. Or so the boards of most big companies would have you believe.

“Succession planning and executive development is a process and not an event, and at BHP Billiton this process is ongoing and thorough. It starts from the first day the CEO and his team are appointed.

“In terms of CEO succession, where we are now, is where any company would be two, five or more years into the tenure of a CEO. That is, we continue our commitment to the succession planning process we put in place when our CEO was appointed.”

Those were the words BHP chairman Jac Nasser used at the company’s annual Australian shareholder meeting seven years ago, effectively ringing the bell on Marius Kloppers’ tenure in the company’s top job. The internal jostling was already under way, but ramped up after Mr Nasser’s comments, amid a formal process to anoint a successor.

The announcement of Andrew Mackenzie’s ascension to the top job came at BHP’s February 2013 half-year results announcement, with the changeover taking place in May — albeit with a clause taking Mr Kloppers’ formal employment through to October.

Then, as now, the BHP board was under growing pressure to outline a time frame and process — or not — around the tenure of its boss.

If the board is in the mood for change you’d expect similar comments from current chairman Ken MacKenzie at Thursday’s Australian shareholder meeting.

Of course, Mr Mackenzie is in a very different position to his predecessor.

Mr Kloppers faced BHP’s 2012 AGM on the back of a 35 per cent profit slump, $US3.6bn ($5.2bn) worth of asset impairments — largely from the disastrous foray into US onshore gas — and following the cancellation of expansion plans at Olympic Dam and in its Pilbara iron ore operations.

By any measure Mr Mackenzie’s reign has been far more successful. BHP is a leaner, meaner machine than it was during the mining boom and his tenure has been largely free of disasters.

And his chairman doesn’t seem in any particular hurry to kick off a public process, despite reports that BHP is out looking, internally and externally.

Speaking after BHP’s London shareholder meeting, Mr MacKenzie set a similar tone to Mr Nasser, repeating the same old saw about succession planning as a continuing process.

“Like any board, our most important task is planning for the succession of our CEO. So it’s our normal process, and it’s an ongoing process,” he said.

And the other Mackenzie doesn’t quite look like a man ready to go. If there is a criticism of his tenure it’s that, while the oil now glistens on BHP’s joints, there hasn’t been much real growth in the pipeline for a while.

But, with new petroleum discoveries looking good, the Jansen potash project closing on a decision point, and the (admittedly slimmer) possibility its Resolution copper joint venture in the US may start moving through the permitting process, it’s possible that Mr Mackenzie still believes he has unfinished business.

For investors, the portents around a potential leadership change will be the most interesting part of BHP’s annual shareholder tea and bickies session.

The other key moment of the meeting will come at the end, when the Australasian Centre for Corporate Responsibility tests its numbers on the floor of the meeting, over two resolutions — one to amend BHP’s constitution to allow shareholders to propose advisory resolutions at AGMs, and the second to recommend BHP quit the membership of industry associations that lobby in a manner “inconsistent with the goals of the Paris Agreement”.

BHP’s board opposes both, but similar motions attracted the support of 22.2 per cent of shares voted — a substantial number for an activist motion not related to pay or performance. If a similar, or better, result occurs on Thursday it will send a message to both BHP and the rest of corporate Australia that investor pressure on climate change is gaining strength, and can no longer be dismissed as a fringe issue because big money is backing the play.