IOOF cops royal drubbing

IOOF’s very survival is now in question even if APRA’s attack represents what the industry sees as low hanging fruit.

Kudelka’s week. Cartoon: Jon Kudelka

IOOF’s very survival is now in question even if APRA’s unprecedented royal commission-inspired regulatory attack represents what the industry sees as low hanging fruit.

In his 21-year acquisition-fuelled expansion, IOOF boss Chris Kelaher has established a reputation cemented in his royal commission appearance as being arrogant and on the low end of the corporate governance curve.

Like that other easy target, AMP, IOOF stands at the centre of the severely tarnished wealth management sector at the very time it was set to prosper because the banks were forced sellers.

Both IOOF and AMP were on the ropes heading into the final royal commission hearings so a regulator like APRA wanting to show how tough it is was inevitably going to have a crack at one of them.

That is also why gossip in the legal community says AMP and NAB are potential targets if Commissioner Ken Hayne is planning to recommend criminal action.

The latter is centring on its superannuation trustee, Nullus, and conflicts of interest.

All of the above centres on the wealth management side of the industry, which as this column has repeatedly argued is a sham with fast-talking sales people selling products 80 per cent of the population don’t really need but justified as necessary financial advice.

At the time this column went to press there were no official statements, but clearly IOOF chair George Venardos and chief Chris Kelaher will be forced to step down, maybe permanently, and the planned $977 million ANZ sale of its superannuation business to IOOF will be cancelled.

Venardos assumed the IOOF chair with a stellar reputation in the insurance industry, but appears damned for not exerting control over his executives.

ANZ simply cannot proceed with the deal and still hold its head high and the cancellation will come as something of a relief to many of its executives who were none too impressed with the deal negotiations.

Wealth management is a game of trust and once you lose customer confidence you are gone, which is why AMP chair David Murray confided that his new boss Francesco De Ferrari was “this company’s last hope of survival”.

IOOF has yet to find its saviour and its market value fell yesterday by $877 million, almost the same value as the ANZ deal.

Its credibility lies in tatters even if its Questor financial service business is found to be justified in paying client remediation out of an account specifically designed for this purpose.

Trouble is by the time the court rules on the APRA claims the damage is done, precisely because IOOF entered the royal commission with a reputation for playing fast and furious with governance amid a myriad of poorly integrated acquisitions.

The big banks may have been on the nose, and certainly so in Canberra, but at least their businesses stood on firmer footings. Suffice to say, the royal commission has done its bit well before next February’s report is released.

Food for thought

Over 20 years ago as a young executive at the Cincinnati-based Chiquita Brands, Nigel Garrard was stopped on the 29th floor by the then boss of the multinational company who wanted to know “how the Aussie was going”.

He didn’t know Garrard’s name but he knew who he was and that fact alone taught the Orora boss a lesson.

“Everybody matters, and acknowledging people for what they do is important for them and you,” he added. After more than three decades in the fast-moving food game Garrard knows better than most the importance of people to his business.

Orora’s managing director and CEO, Nigel Garrard.

The trick to leadership, he said, was “to create a vision and culture that people feel part of and want to be part of it. People want to belong and to believe.”

Garrard has worked with some of the greats in the Australian food manufacturing sector including former Coca-Cola Amatil boss Terry Davis in his SPC days and the legendary Ken MacKenzie at Amcor. MacKenzie left Amcor three years ago and is now well settled into his role as BHP chair.

Orora was spun out of Amcor in 2013, but the MacKenzie vision and operating systems are alive and well at Orora. Internally, old timers still feel their former boss’s focus and vision as they attempt to create the new Orora.

“Ken has left a fabulous legacy. His strong returns focus was good for internal discipline, along with an underlying belief in the importance of people and customers,” he added.

Garrard has had a strong association with Amcor given his one-time chair at SPC Ardmona was former CFO David Meiklejohn.

With this also comes a firm belief in the future of manufacturing in Australia.

“You need to be resilient and innovative to survive, if you don’t invest and stay current then you’re gone,” he said. “People say the market is too small but there are 25 million people in Australia and five million in New Zealand. There are high costs to operate and energy is just one of them, but you have to play with the cards you are dealt.”

Garrard comes from the school which says if life served you lemons, then make lemonade.

“You either say woe is me or you get on with it,” he adds.

The Adelaide born and bred Crows football tragic studied part time after following his father’s advice starting straight from school at what is now KPMG.

His late father was an accountant and his mother a librarian. She was the one who led family discussions on current affairs.

“She was the glue that kept the family together,” he said. Cricket and football offered relief from work as he combined sport with his studies for more than six years. After nine years with KPMG he started a boutique corporate advisory business where he worked until one of his clients was sold to Chiquita and he started with the US firm.

“It was a great opportunity to learn about trade and international business,” he said.

Travelling through Asia from his base in Australia and New Zealand was the experience he took to SPC in 2000 before Coca-Cola Amatil acquired the business.

“Australians want to buy Australian-made products,” he says. To this day the Garrard kitchen is still stacked with SPC beans, Ardmona tomatoes and IXL jams.

The business has struggled, however, and Amatil has it on the auction block.

After being hired by MacKenzie in 2009 to join Amcor, Garrard is continuing to work with the industry but from a packaging perspective.

When the business was spun out in 2013 he had staff choose the name and after first coming up with Arora as “the new beginning” it was found this was already an established name elsewhere so the letter O was added to signify “our … new beginning”.

“It’s not often you get the chance to start again with a business, set its strategy and its name, even though it’s been running for over 100 years,” he says.

Amcor concentrated on flexible packaging, leaving Orora with the paper-based business including its thriving bottling plants.

These were established 15 years ago by then Amcor boss Russell Jones as a start-up operation and have grown with Australian wine exports. But the company doesn’t break down its earnings other than to say 65 per cent is generated in Australia and the bulk of the rest is in the US.

His mission statement includes, “together we deliver on promises of what’s inside”, underlying the close relationship with customers.

Garrard says the culture is built around values which include passion, teamwork, respect and integrity. “We hire for character and train for skill,” he says.

The idea then is to have “people who live our values, innovate the lead, enhance the core and invest to grow”.

It’s a model Garrad plans to execute for some more years yet.