Billionaire Andrew Forrest’s boiler room implosion at Fortescue Metals Group
The Fortescue Metals Group chairman has claimed that an extraordinary wave of management departures at the firm was sparked after he found the company’s strategy had been hijacked by some of its executive team.
A defiant Andrew Forrest has claimed that an extraordinary wave of management departures at Fortescue Metals Group was sparked after he returned from an overseas trip to find the company’s strategy had been hijacked by several of its executive team.
In an explosive interview, the billionaire chairman of the $62bn mining giant said executives who had left the iron ore major had struggled to cope with the “boiler room” conditions of the company and were not following his green vision.
He said he was not to blame for the rapid hiring and firing of staff that had engulfed the company.
Dr Forrest also paid tribute to his wife Nicola, saying their recent break-up could have been challenging had it turned bitter or become acrimonious.
And he added that he had faced far tougher tests in his corporate life, but said friends and media had inquired about his health this week following a hectic schedule that had inflamed an asthma condition.
Dr Forrest founded Fortescue two decades ago and built the West Australian company into one of the world’s most powerful mining companies, taking on its bigger competitors in BHP and Rio Tinto, and with plans to build an even bigger business targeting green energy.
However, rapid fire turnover at the Fortescue empire in recent times has accelerated, raising fears over the mogul’s influence on operations and strategy.
This week, chief executive Fiona Hick and chief financial officer Christine Morris quit while former Reserve Bank deputy governor Guy Debelle said on Friday he was resigning as director of green hydrogen subsidiary Fortescue Future Industries.
Dr Forrest said he had recently returned from overseas and was alarmed to find Fortescue not clearly as focused on its future as a “very successful green energy, metals technology business” as he would have liked.
“You put a lighthouse on a hill and aim at it (but) there was a feeling that another lighthouse was emerging and the organisation – particularly when the chairman was overseas for three months – was being pushed towards another lighthouse.”
Dr Forrest said Ms Morris was “very lucky” to have been appointed chief financial officer in June and had “just scraped in over an internal candidate – which was an error”.
Her subsequent exit and that of Ms Hick, Dr Forrest claimed, were proof that executives and staff remaining at the company were buying into his vision and that anyone leaving was due to finding it difficult in the “boiler room” of a company “frontrunning government policy” in striving for a green-energy future.
“When you’ve got people whose character justifies that they work really hard to get a position in the company, then once in it have difficulties because it’s going green, you have to question, where is that difficulty coming from?
“If you set foot inside Fortescue now, it is calm, focused, relieved and everyone is head down and tail up. It is just a classically constructed working environment”.
He said a “think-tank” the Fortescue board recently held had helped the company “come back to the centre and come back to your focus and the ideas poured out to do even better”. “In that process it became really evident that there were outliers, and those outliers had to make a choice,” he said.
The Weekend Australian understands that the Fortescue board and executive leadership recently convened at Minderoo station, the Forrest family’s ancestral home, for a three-night lock-in. It is normally a convivial affair hosted by Mr Forrest on the Ashburton River in the Pilbara region as the company accounts are finalised and the board signs off on key decisions.
Yet the most recent get-together, on the eve of Fortescue’s 20th anniversary last weekend, was a different story.
According to sources with knowledge of the meetings, the event was particularly tense and draining as Ms Hick and Dr Forrest clashed over the strategic direction of the company.
It was there that it became clear that Ms Hick would have to go, as revealed in a shock announcement on Monday.
It came a day after Dr Forrest had hosted the 20th anniversary party, having arrived wearing a cravat atop a dump truck waving a giant Fortescue flag and subsequently singing on stage with Jimmy Barnes before hundreds of guests flown in for the occasion.
Dr Forrest played down suggestions Fortescue was enduring a more tumultuous time than at any stage of its history as it transformed from an iron-ore giant to meet his aspirations of becoming the biggest green-energy company in the world.
“Our commitment is no different than when people left me, when people said they would leave me when I wouldn’t go into coal or I wouldn’t go into gold,” he said.
“I said no, we’re sticking to iron ore. I said no we were going to stay focused, and people signed on to that focus.
“So to me, it is a repeat of that. If we had signed up for coal, life would have been easy 15 years ago but would we have got to where we are now? No. We have to stay focused.”
Dr Forrest has also attracted widespread publicity regarding his recent split from wife Nicola, who now has a larger shareholding on paper than he does as a result of their parting.
When asked about having his personal life generating headlines, Dr Forrest said: “It probably would have been tough if Nicola wasn’t such a champion. If there was bitterness or acrimony, that would have been tough.
“Nic is a really good person and the two of us have accepted our roles as trustees of the wealth that has been created, and is continuing to be created for philanthropy for the benefit of future generations.”
The pair, and their Minderoo charitable foundation, will share in about $1.1bn of dividends from the $1-per-share dividend to all FMG shareholders from the $US4.8bn net profit the company unveiled on Monday.
But the results were quickly overshadowed by the departure of the Fortescue chief executive, chief financial officer and Dr Debelle by the end of the week.
When asked if he was blaming the departures of executives, which some estimates tally as high as 12 or 14 in the past three years, rather than taking responsibility himself for any internal company issues, Dr Forrest said: “I haven’t worried about anything other than Fiona or Christine. Everything else was completely proper and orderly. Yes, we’ve made changes and, yes, we’ve upscaled and some people stay for 20 years and some don’t. I don’t think from a C-suite perspective that the 12 (number) is anywhere near accurate.”
The diverse list of attendees at last weekend’s birthday bash included former Collingwood AFL president and television host Eddie Maguire, fellow billionaire Alex Waislitz – who was stopping in on his way to Bali – Multiplex heir Tim Roberts, and rival referendum campaigners Noel Pearson and Warren Mundine.
But the party atmosphere had barely died down when on Monday Fortescue revealed, just ahead of the release of the company’s annual accounts, that Ms Hick had “made a joint decision with the Fortescue board” to depart and that her resignation had been both “friendly and mutual”.
By Wednesday, Mr Forrest was saying on the sidelines of the Boao Forum in Perth that the departure was due to differences of opinion over the company’s green transition.
“You either get on the bus or get off the bus, but you make the choice. No one was pushed,” Dr Forrest said.
Ms Hick’s role was taken by chief operating officer Dino Otranto in a move that had barely been settled when three days later it emerged that Ms Morris was also leaving.
On Friday, Dr Debelle effectively traded a board role at Fortescue Future Industries for one as director of ASX-listed Tivan, a small-cap battery materials-focused business with market capitalisation of only about $100m.
Dr Debelle had left the Reserve Bank after 25 years to become chief financial officer at FFI, before an accident last year caused him to step down from the day-to-day role. But he said the experience at Fortescue was a valuable learning curve.
“I learned a hell of a lot. It was very exciting and interesting,” Dr Debelle said. “It was a great experience. I learned a lot from Andrew.”
Asked if he had spoken to Dr Forrest over the management turmoil at Fortescue this week, Dr Debelle said: “No. I think he’s got a few other things to get on with. So no.”
He said he would “not provide commentary” on the mining mogul’s vision for green energy.
Dr Forrest this week made an emotional presentation to the Boao Forum about the dangers of “lethal humidity” resulting from higher temperatures, with slides that suggested “this is the beginning of the end” and “this time there is no cure”.
He said he had directly briefed the White House, Chinese Premier Li Qiang and Indian Prime Minister Narendra Modi about the imminent danger to humanity and was buoyed by the standing ovation he got from forum attendees.
One Perth business identity said that while Dr Forrest was “a force of nature, the latest stuff on fatal humidity is a bit of an indication that he can go off on tangents that his management knows nothing about or he’s bored”.
Dr Forrest said he had more energy than he had ever had, and was committed to changing the company to having more of a green-energy focus and not “dumbing it down” to concentrate on older fossil fuels.
Nev Power, who ran Fortescue for seven years until 2018, said the iron ore producer was now a different beast from the company when he was chief executive.
“It was a different phase of the organisation,” Mr Power said. “I worked there when we took it up from 30 or 40 million tonnes up to 170 million tonnes (of iron ore) and through a big capital expansion phase. It was a very different phase in the company’s life.”
The mining industry would likely need a broader set of solutions for switching to green energy than simply Fortescue’s favoured hydrogen strategy, according to Mr Power.
“From a big picture we know that the energy profile of the globe and Australia and mining companies is transitioning into renewable energy,” Mr Power said.
“And I think there’s going to be a wide range of solutions to this. I don’t think there’s any one solution.
“I’m sure hydrogen is going to be a part of it, ammonia will be a part of it and wind and solar will be a part of it. Who knows where that mix ends up down the track?
“But I think we’re on that trend and mining’s no different to any other part of the industry or the community. We are part of that transition process.”
Dr Forrest reiterated that Fortescue would not spin out FFI into a new entity to separate its green-energy intentions from its money-making iron-ore mining.
“It is the oneness of culture that created Fortescue,” Dr Forrest said. “It is not a brilliant leader, it is not great ore bodies, or anything like that. If you don’t want to share that culture then the choice is yours. And to resolve that for a whole heap of people who want a different culture, by spinning it out, I think would be a sugar hit.
“We’ve had an expression of interest of $US20bn for our non-iron ore assets and I think most CEOs would take that while thinking of the positive headlines. But we haven’t, because we see what the world will want … which is an integrated solutions company that they will go to when they need technology, batteries, metals, energy and anything that gets them out of a global warming jam.”
