Fortescue makes a hash of CEO succession
Andrew Forrest’s decision to return to the helm of Fortescue’s iron ore business strongly suggests that internal candidates for the role are now out of the running for a promotion.
You would be hard pressed to find a way to make a bigger hash of a chief executive succession than Woodside Petroleum did last year, but Fortescue Metals Group appears to have managed it.
Woodside spooked the market last April when it up-ended its succession plan for long-term chief executive Peter Coleman, announcing his immediate exit – rather than the previously flagged second-half departure when a replacement was found – and the appointment of Meg O’Neill to an acting chief executive role.
While it wasn’t clear at the time, and O’Neill eventually won the top job, in retrospect the oil and gas major’s board at least had the excuse its deliberations were complicated by the fact it was in discussions with BHP over a merger of their oil and gas divisions.
Absent a yet-to-be-revealed plan to merge with Vale, Fortescue has no such excuse.
Elizabeth Gaines announced her plans to step down at Fortescue in December, and told reporters only a few weeks ago the Fortescue board had been presented with a short list of candidates for her job.
As of Wednesday, Fortescue founder Andrew Forrest says he is stepping back into an executive role, and the company appears to be restructuring to separate its green energy arm (Fortescue Future Industries) and money-making iron ore division, with each to have their own CEO reporting directly to the board.
And yet Forrest also says the company is still considering that shortlist of candidates for Ms Gaines’ role, telling The Australian on Wednesday that the shortlist is still in front of the board and contained a number of “Mrs and Mr Rights” – some of whom could still be considered candidates for the Fortescue top job, but may have extended notice periods to work through if appointed – and that the board was still working through its options.
Whatever has happened, there is a clear sense that Ms Gaines has lost patience with the process and set an August deadline for her departure, triggering Wednesday’s extraordinary announcement that Forrest will again officially step into an executive role at the company.
Fortescue has now been in the market for a replacement for Ms Gaines for more than five months. It speaks volumes that Fortescue has been unable to find one.
And Forrest’s decision to return to the helm of Fortescue’s cash generating iron ore business strongly suggests that internal candidates for the role – including chief financial officer Ian Wells, FFI boss Julie Shuttleworth, and current chief operations officer Dino Otranto – are now out of the running for a promotion.
Whether any of them will join the mass exodus of senior executives that have left the company over the last 18 months remains to be seen – but would not be surprising.
The snub will certainly not help morale among the ranks of the company’s iron ore division – already hit by the board’s shock decision last year to slash management bonuses, and looking on with envy at the resources and staffing being ploughed into Fortescue Future Industries, the shiny new jewel in Dr Forrest’s crown.
Their mood will not have been helped by the way the news was broken given that, like Fortescue’s investors, the first its employees knew about the change in the company’s leadership was through a story dropped to friendly media – complete with interviews and pictures – and not from their employer.
Forrest’s abilities as a charismatic and inspirational leader are not in doubt, and nor is his ability to convince investors and lenders to back his vision, or customers to buy his product – first as Fortescue developed its iron ore mines, and now as it looks to become a player in green hydrogen.
His brand of chaotic creativity has helped bring his visions to reality, and made him a billionaire.
But analysts and investors lauded his decision to step down and hand over the running of Fortescue to operations-focused Nev Power 11 years ago, and there is no doubt Fortescue’s operational performance improved substantially in the wake of that decision.
Fortescue’s iron ore division is now a far larger and far more complex business. Investors would be well within their rights to ask why Forrest has now reversed that decision.
To join the conversation, please log in. Don't have an account? Register
Join the conversation, you are commenting as Logout