Anglo needs a pesky South African
WHAT is happening at Anglo American? After Cynthia Carroll announced her resignation on October 26, Anglo said it would move smartly to find and install a replacement. Three weeks isn’t a long period for an appointment as sensitive and critical as this one in the life of a corporation, so the real issue is how is chairman Sir John Parker going about the search?
I have to presume that Parker stood squarely behind Carroll until the very end. He certainly made all the right noises of support for her. Finally, however, he must have been under so much pressure from City institutions that, no doubt with one eye on his own reputation, he would have had to tell her that he could no longer guarantee her position. That would have signalled the approach of the tumbril and Carroll jumped rather than await the guillotine.
She will stay in position until her successor takes office. It’s a lame-duck role, hardly one that she will enjoy. But, just as Anglo did when it said it was searching far and wide for a successor to Tony Trahar, it sounds very much as though it will scour the globe this time too.
Is that really wise? I am guessing, of course, but I expect that the antipathy felt in London towards Anglo’s continued reliance on SA for the bulk of its earnings will play a role. The institutions are probably whispering that they don’t want a pesky South African at the helm.
But it would be a pity to listen to those wailing their siren dirge. They have done quite enough damage to this house, and it all began when they banged on about the need for "focus" in preference to Anglo’s strong suit as a conglomerate.
There’s always much to be said in favour of an in-house appointment. He (or she) is ensconced in the company’s milieu, understands its character, has probably played an integral part in devising its long-term strategy, and is familiar with its culture. Another plus factor in selecting from within is that it is seen as rewarding talent and excellence. Appointing from outside can have the unwanted effect of limiting loyalty and signalling a ceiling of sorts.
An external appointment can bring many benefits, however. The individual may possess a wide range of talents outside those immediately available, alongside a different world view which may (or may not) prove invaluable. The disadvantage is that a newcomer is unaware of the nuances in the house, its characters, culture and perceived strategy. He or she will need to hide in the long grass, perhaps for as long as six months, to gain the necessary knowledge and the required leadership confidence.
And committees, by the way, don’t bring the requisite ability to a selection of this kind. It will need the personal remit of the chairman and he must live with his choice.
But this may be the season for musical chairs among mining house CEOs. The daily The Australian says BHP Billiton CEO Marius Kloppers, one of Brian Gilbertson’s protégés, "is either a victim of a public hanging or public suicide, depending on which side of the fence you sit, but either way conjecture about his position is damaging the company".
All this started when Kloppers said he was happy to stay in the job. The Australian says, however, that many think five years is enough for any CEO. It seems that Kloppers’s admission that he misread the Chinese slowdown and thought the boom would continue has damaged his credibility. The fact that it is conceded that he brought "market rigour to the iron-ore trade" and a new discipline to its operating mines doesn’t appear to have improved his vulnerability.
If he goes, he will be the third big mining CEO to be shown the door — after Mick Davis (Xstrata), and Carroll. I wonder how Tom Albanese over at Rio Tinto (appointed CEO in 2007) is feeling right now.
A FIRST-class row is brewing over the implementation of Basel 3, the tough bank capital rules devised by the Basel Committee on Banking Supervision.
US bank regulators say they will not impose the complicated new rules from January 1 next year. In a joint announcement on Monday they said they won’t require US banks to follow Basel 3. The prestigious Wall Street Journal says it makes perfect sense for Basel 3 to encourage banks to load on sovereign debt since "the world’s governments have proven to be hands-down the issuers with the most dishonest accounting".
But the world’s second-largest economy, China, says it has no intention of postponing the implementation of Basel 3. The Shanghai Security News, the China Securities Regulatory Commission’s formal news channel, says China will not be affected by the US’s decision.
The Wall Street Journal quotes negative views expressed by Andrew Haldane, the Bank of England’s executive director for financial stability. He told a recent meeting of central bankers that to meet the new Basel 3 rules, Europe’s banks "will have to create 70,000 new full-time compliance jobs".
Haldane called on fellow regulators to rip up the Basel accords and start again with simpler rules based more on "supervisory judgment" than a "ticked box approach".
As I reported in this column (Basel 3 a bigger danger to growth, May 23), observers fear that the Basel 3 requirements have the capacity "to be the biggest risk to global economic growth at present … rating agency Fitch reckons the world’s biggest banks may need to raise $556bn (R4.9-trillion) of common equity to meet the latest rules, to be implemented by 2019".
The Wall Street Journal’s scorn is unmistakable when it observes that Haldane’s research reveals that Basel’s "intricate models" were comparatively useless. This wasn’t surprising, it said, since Basel’s job was "to strike political compromises among global regulators, who have rarely been confused with the best and brightest minds in finance".