Nasser Has Inside Run At Bhp, When Argus Goes

The Age

Saturday June 21, 2008

Barry FitzGerald

The contest might be some way off, but with BHP Billiton chairman Don Argus' 70th birthday in August, early odds are being calculated for his successor, with former Ford supremo Jac Nasser among four insiders in the fray. Resources editor Barry FitzGerald reports.

THERE have been four chief executives of BHP Billiton since 1999. But only one chairman. One Don Argus - the former bank executive credited with pulling BHP back from the abyss after a spate of acquisition and mine development disasters in the 1990s.

The former Bundaberg boy celebrates a milestone in August, one that will rekindle speculation on just when Argus will be calling it quits. He is turning 70.

Until last year, BHP's articles required a special resolution covering the appointment or reappointment of a director on reaching 70. Age discrimination acts were behind that change, not the milestone Argus is about to reach.

The milestone will prompt discussion about Argus' eventual departure and who will take over. It's a momentous decision because BHP could be one of the world's top five companies if it pulls off the Rio Tinto bid.

As the discrimination acts intend, reaching 70 does not mean someone is off their game. Anyone who saw Argus' performance at a packed Australian Shareholders Association investors' briefing in March would know that.

At that Melbourne meeting, Argus attacked the "chatter" surrounding the group's spurned takeover bid for a defiant Rio Tinto.

He also continued to claim national champion benefits of a Melbourne-based BHP having its way with the London-based Rio, even though "national champion" is a term he says he hates to use. It was a polished presentation. Both aggressive and comforting where it needed to be. Compelling stuff, as BHP managing director Marius Kloppers might say.

Ask BHP what Argus' retirement intentions are and there is a stock reply: "He has not announced any plans to retire as chairman. When he eventually does retire, the board has a rigorous succession program in place, which has been the case for non-executive directors and executive directors for several years."

There is at least an acknowledgment in that Argus will "eventually" retire. Company watchers assume the retirement date will be sometime after BHP either wins or loses the titanic battle for control of Rio. That means the back half of next year at the earliest.

What is more certain is that succession planning has been under way for Argus' replacement. The introduction of some new blood at the board level and the good lieutenant service of others mean that if restricted to internal candidates, BHP finds itself with no shortage of options.

Despite the lack of an announcement on Argus' retirement plans, the book covering the various options is already being framed. The betting has followed four current directors - John Schubert (aged 64), Paul Anderson (62), David Morgan (61) and Jacques (Jac) Nasser (59). Dr Schubert, formerly chairman and managing director of Esso Australia and Business Council president, was an early favourite, if for nothing else than he is listed as the effective deputy chairman - BHP actually does not have one-if the need arose. He has also been on the board since 2000.

Anderson is a former chief executive (1998-2001). The American from Duke Energy is credited, along with Argus, of being behind BHP's recovery from the woes of the 1990s.

The only question with his rise to the chairmanship is to do with corporate governance issues.

Is it right to be appointing a former manager to the role, even if there could be at least eight years and three other chief executives between Anderson finishing up as chief executive and becoming chairman?

BHP has shown signs that it thinks it would be OK but students of history will remember that when BHP was looking to replace Argus' predecessor as chairman, Jerry Ellis, it made a point of ensuring the new chairman "has not previously been involved in the management of BHP". Ellis, a former chief of BHP's minerals division, bypassed the CEO position-held at the time by John Prescott - to become chairman to his former chief.

Dr Morgan is the newcomer to the BHP board.

The La Trobe University economics graduate joined the board in January. Supremely confident and ambitious, Morgan was previously chief executive of Westpac.

Like Argus, he brings a wealth of financial services experience, including stints with the International Monetary Fund in Washington and as the senior deputy secretary of the Australian federal Treasury.

While Morgan's background suggests a rerun of Mr "Don't Argue" Argus' chairmanship, his IMF experience would be valuable as BHP increasingly pushes into developing countries seeking opportunities.

Having said that, it is the last of the current contenders, Nasser, who is considered most likely to succeed Argus.

Known as "Jac the Knife" from his years at Ford Motor Co, Nasser joined the BHP board in June 2006, along with the return of Anderson.

His status as favourite has more to do with what outsiders perceive as Argus' personal choice than a reading of his Ford career might suggest.

Nasser's 33-year career with Ford started in 1968 when he was appointed a cost accountant at the Broadmeadows head office on the Hume Highway.

The Lebanon-born,Melbourne-raised and now Michigan-based executive took charge of the Broadmeadows plant in 1989 and went on to get the top job in Detroit in January 1999.

It made Nasser the highest-paid Australian executive in the world, with his salary and bonuses topping $43 million in 2000.

But Ford's market share was to fall sharply and attempts by Nasser to slash costs and build a global brand caused union confrontation, falling profits and slashed dividends.

He left Ford in 2001, the same year in which he told a story about himself while accepting in Washington the highest national honour for Lebanese expatriates.

As Age motoring writer Ian Porter reported at the time, Nasser proudly recalled how he had once been taken hostage by Ford workers in Argentina, how he had battled 1000% inflation in Brazil, become known as "Jac the Knife" for his deep cuts at Ford Australia, managed even greater staff reductions at the company's Thai operations and survived the lot."

I know how to get through tough times," he said.

While BHP and the rest of the industry is enjoying boom conditions, dealing with the inevitable tougher times ahead could make that quality a handy one for a chairman to have. That was certainly the case with Argus' rise to the chairmanship.

© 2008 The Age

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