Mineral Resources board under fire as investors call for Chris Ellison to stay at helm
The Mineral Resources board is under attack on multiple fronts after a backlash from retail shareholders who want maverick chief executive Chris Ellison to stay at the helm of the company.
The Mineral Resources board is under attack on multiple fronts after a backlash from retail shareholders who want maverick chief executive Chris Ellison to stay at the helm of the company despite his involvement in tax evasion and dubious third-party deals.
Calls for a shareholder vote on whether Mr Ellison stayed in charge were greeted with applause from many in a crowd of about 300 at the annual general meeting in Perth on Thursday.
Mr Ellison touched briefly on plans to replace him, saying he supported the board and would manage the business through the transition phase.
He then talked up his achievements and plans for the future of the company in comments that fuelled suggestions he may be gearing up to ride out the governance storm.
L1 Capital’s Rafi Lamm has been among the major backers pushing for Mr Ellison to stay, saying it is what the majority of shareholders favour.
Mr Ellison also raised the spectre of intervention by Gina Rinehart’s Hancock Prospecting, saying it had been a sizeable shareholder in the past and would be a great partner in developing oil and gas assets in Western Australia.
In agreeing to buy key MinRes assets in the Perth Basin for $1.13bn last month, Mrs Rinehart said she welcomed the opportunity to work alongside “my friend Chris Ellison and his MinRes team”.
Rusted-on Ellison supporters spoke out in his defence at the AGM and attacked the board’s plans to replace him some time in the next 12-18 months.
In contrast, super funds and others are pressing the board to ditch Mr Ellison sooner rather than later over a series of scandals that have seen about $1bn stripped from the value of the company.
MinRes suffered a first strike on its remuneration report, with proxy advisers making clear the concerns over governance standards and Mr Ellison’s involvement in tax evasion and third-party transactions that in some cases involved his family and friends.
Chairman James McClements batted away questions about why the board had not taken more decisive action or made timely disclosures after ordering an investigating into Mr Ellison more than two years ago.
Mr McClements said the board had a duty to protect shareholder value and that it was not in their best interests to suddenly remove Mr Ellison.
He admitted revelations about Mr Ellison’s conduction had damaged shareholder value and put at risk shareholder trust and confidence in the company’s ability to “comply with its obligations and generate sustained returns”.
Mr Ellison has told shareholders he deeply regretted his involvement in a tax evasion scheme and using company resources for his person gain.
“Many years ago, I was a partner in a private company and made an error of judgment with reporting of personal tax. I later went on to report it and subsequently paid penalties, interest and tax that was due and payable. I deeply regret the impact this has had on our business and our people,” Mr Ellison said.
“I can’t stress enough how much I hate what I’ve done.”
It took a whistleblower to alert the board to Mr Ellison’s settlement with the Australian Taxation Office last year over a scheme that involved buying and selling mining machinery through a company registered in the British Virgin Islands.
The tax evasion occurred in the 2000s but was not self-reported until many years later.
In regard to using company resources for his own benefit, Mr Ellison said he had never left MinRes out of pocket.
Mr McClements said MinRes had been repaid in a timely manner for any work performed for Mr Ellison. This included work on his boat, properties, private accounts and procurement.
MinRes is also moving to exit or unwind business deals with parties related to Mr Ellison in the wake of the governance scandal engulfing the company.
Mr McClements said the deals under review included paying $45m for a 49 per cent stake in a trust that owns industrial land north of Perth. The balance of the trust is controlled by a company whose owners include Mr Ellison and his wife Tia.
The acquisition was made in May at the height of the board-ordered investigation into Mr Ellison by law firm Herbert Smith Freehills.
Other arrangements that are under review relate to Ship Agency Services, a business owned by Mr Ellison’s daughter Kristy-Lee Craker, and with Resource Development Group, whose managing director is Mr Ellison’s brother, Andrew.
The company’s long-term lease of commercial properties owned by a consortium led by Mr Ellison is also under review.
“The future of all transactions and arrangements of this nature is they won’t exist unless there is a strong, compelling business reason to retain them – and any arrangements would need to be arms-length and on strictly commercial terms with regular oversight and independent review,” Mr McClements said.
An ethics and governance committee led by relatively new board members Denise McComish, Susie Corlett and Jacqui McGill has been tasked with reviewing transactions involving key management personnel and their related parties. The committee will also oversee internal and external investigations.
The Australian Securities & Investments Commission has launched an investigation into MinRes, and the ASX has been probing its disclosure obligations.
Mr McClements, who is under pressure around his oversight of MinRes in his role as chairman and a board member for almost a decade, confirmed his plans to step down as a director sometime in the next 12 months.
Long-time MinRes investor David Bowden told the meeting Mr Ellison had been subjected to a “trial by media” and should remain at the helm of MinRes.
The MinRes remuneration report was voted down three years in a row from 2016-2018, prompting Mr Ellison to accuse proxy advisers of dumb behaviour and inviting them to get off the register.
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