MacKenzie: BHP board must ‘evolve’
BHP chair Ken MacKenzie has backed his CEO, noting they’re both firmly in control, as he flagged board renewal.
New BHP Billiton chairman Ken MacKenzie, in his first BHP annual general meeting, has strongly backed chief executive Andrew Mackenzie but indicated a board shake up is looming at the world’s biggest miner.
And the new chairman has strongly rejected claims the company is being run by shareholders such as activist fund Elliott, saying his chief executive and himself are firmly in control.
In statements that will be seen as a rejection of speculation there was management change on the way at BHP, Mr MacKenzie told BHP’s London AGM on Thursday that his chief executive, Mr Mackenzie, and his team had set BHP up for future success in the past five years.
“During this time, BHP has become simpler ... more efficient ... more disciplined ... and stronger,” Mr MacKenzie said.
“Andrew, I look forward to working with you and your management team as you drive these outcomes even further.”
Mr MacKenzie, a former Amcor chief with no non-executive corporate experience outside BHP, was a surprise appointment to replace Mr Nasser.
His appointment, in beating seasoned ASX chairmen and experienced BHP board members Malcolm Broomhead and Lindsay Maxsted to the position was attributed in no small part to investor pressure, led by hedge fund Elliott, over the ill-fated 2011 US shale oil and gas acquisitions and call for more capital discipline.
At the AGM, Mr MacKenzie said more board change was on the way.
“We recognise that the board needs to continue to evolve to take into account the rapidly changing environment in which we operate,” he said.
“So, we will undertake a review of the board skills and experience requirements during this financial year.”
He said a mix of skills, background, knowledge and experience was required, supported by diversity of geographic location, nationality and gender.
“Board refreshment was a topic of discussion during my meetings with shareholders,” the chairman said.
“Investors, just like the board, believe regular renewal is important but are also aware of the value corporate memory brings to a board. In this context, a number of appointments were made this year to make sure the board is balanced and fit-for-purpose.”
Despite a listening tour of more than 100 investors in eight countries since he was appointed, Mr MacKenzie said the board would make its own decisions.
“While the purpose of the tour was to listen, it was not a polling exercise — it is the role of the board as the company’s stewards to listen and be responsive to our stakeholders,” he said.
“But ultimately, it is up to the board to choose the course it believes will best benefit shareholders.”
Elliott representatives were among the roughly 180 people that attended the London AGM and the Elliott representatives also sat in on a shareholder briefing by the CEO before the meeting.
At the meeting, one shareholder asked the chairman whether he and the chief executive were running the company or Elliott boss Paul Singer and his associated.
“On your question on who’s running BHP, it’s Mr Mackenzie and Mr MacKenzie,” Mr MacKenzie said, noting his chief executive first by motioning to him.
He said the company would listen to individual shareholders but would make desicions around the best path forward for all shareholders.
“If shareholders like the direction we’re taking, they can buy the stock. If they don’t like the direction we’re taking the company they can sell the stock,” he said
Elliott has zeroed in on long-known BHP quirks such as its unwieldy dual-listing in London and Sydney and its large US oil-and-gas arm. Elliott has urged BHP to spin off its US oil-and-gas assets and criticised the company for “value-destructive deals,” saying management should instead focus on its “world-beating mining assets” and share buybacks.
The hedge fund recently wrapped up a world tour meeting BHP investors and has built support for some of its ideas.
Elliott began advocating for changes at BHP last year and disclosed a big stake in the company this spring. Elliott holds about 5 per cent of BHP’s London shares, with a market value of nearly $US2.64 billion, according to FactSet.
BHP has so far stood firm against Elliott’s push to collapse the dual-listed structure, saying it is too expensive to change. The company has also rebuffed Elliott’s demand for a regular schedule of buybacks, saying they reduce the company’s flexibility.
But the planned shale sale, the appointment of Mr MacKenzie and a quick reversal on a plan to accelerate development of the Jansen potash project in Saskatchewan after Elliott opposed it have bolstered the image of the activist fund as an agent of change at BHP.
Mr Mackenzie told last night’s shareholder meeting that the company continues to review its options regarding its US shale business. “We will be urgent and patient,” he said. “Your company is in strong shape,” he added.
Craig Evans, a portfolio manager at Sydney fund manager Tribeca Investment Partners, a BHP investor that has joined Elliott in criticising the mining company’s performance, says he has been impressed by comments by new chairman Mr MacKenzie, about returning cash to shareholders. Tribeca continues to call for changes to BHP’s board, which it has criticised for expensive and badly timed acquisitions in recent years and lacking a diversity of experience.
Additional reporting: Dow Jones
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