Boral chairman Kathryn Fagg to step down
Kathryn Fagg will step down from the construction materials company in 2021 after pressure from shareholders and proxy advisers.
Boral has capitulated to shareholder pressure with chair Kathryn Fagg to quit in 2021 and the Kerry Stokes-controlled Seven Group withdrawing one of its board seat nominations, capping a turbulent period for the construction materials supplier following a string of profit downgrades and corporate governance concerns.
Ms Fagg, one of Australia’s highest-profile directors, had faced a desperate battle for survival after three proxy advisers recommended against her re-election at next week’s annual meeting.
Frustrations had mounted over the poor performance of Boral’s US business following its $3.5bn takeover of Headwaters in 2016, earnings pressures and fears over board independence following Boral’s decision to hand two director roles to Seven, which owns 19.9 per cent of the company.
After backing Ms Fagg on Wednesday to continue as chair to ensure “leadership continuity, strength and corporate knowledge”, Boral reversed its position a day later and said she would leave next year.
Ms Fagg, an NAB director and former Reserve Bank board member, was appointed a Boral director in 2014 and elected chairman in July 2018.
“Kathryn has been requested by the board and has agreed to stand for re-election at the 2020 AGM to support leadership stability during this period of renewal, on the basis that she will retire and there will be an orderly transition to a new chairman in 2021,” Boral said.
Former CSR chief executive Rob Sindel, who will stand for election as a director at Boral’s AGM on October 27, is considered the leading candidate to succeed Ms Fagg as chair.
Ms Fagg on Thursday called John Wylie’s Tanarra Capital and Perpetual, who sparked the backlash, to inform them of her decision to retire in 2021 along with Seven agreeing Richard Richards would not join the board, to appease shareholder and proxy adviser concerns.
Both Tanarra and Perpetual — who combined have more than 10 per cent of Boral’s shares — will now vote in favour of Ms Fagg’s re-election after previously being opposed and will also back the appointment of Ryan Stokes as Seven’s sole director to sit on the Boral board.
Activist investor Sandon Capital, which had voted against Ms Fagg’s re-election, said the decision was a “sensible compromise” by all parties.
“The chair’s position was frankly untenable,” Sandon portfolio manager Gabriel Radzyminski said. “Given the performance of the company over a number of years, there needed to be genuine accountability at a director level.”
Seven’s loss of a director’s role will dilute its influence at Boral and represents a rare misstep by the conglomerate backed by billionaire Kerry Stokes, which pounced on Boral’s weak share price earlier this year to build its 19.9 per cent stake.
Still, the wording of Boral’s statement on Thursday suggests the door remains ajar for Mr Richards to join the board at a later date, with the company “recognising that the position can be reconsidered once further board renewal is undertaken”.
Tanarra, Perpetual and proxy advisers had complained about the disproportionate nature of Seven’s influence compared to its shareholding, and lack of transparency over contractual arrangements between the two companies.
The board shake-up caps a rollercoaster ride for Boral in the last year with the exit of long-serving boss Mike Kane, who oversaw the Headwaters deal, amid pressure from shareholders to review its underperforming US business. The arrival of Seven as its major shareholder along with a US accounting scandal and profit downgrades added to pressure on Ms Fagg and the broader business.