Investors who live to enjoy the power of compounding returns need to apply both science and art. First comes patience and its mathematically-based logic. Then there’s the art of intuitive ability to read people. Or, in the case of companies, accurately calling whether the leadership team is fit for purpose.
The late great US West Coast wealth builder Phil Fisher introduced “scuttlebutt” to the investment lexicon, refining informal observations about businesses into an art form. A modern successor, Warren Buffett, takes a Mid-Western “better to have loved and lost” approach – trusting the morality and honesty of those running companies unless he discovers something to change his opinion.
Their advice was uppermost while I absorbed Anglo American Plc’s AGM. The resultant feeling was uncomfortable. Very uncomfortable. Anglo’s leadership referred often to its operational restructuring as work in progress. A far bigger but apparently unrecognised challenge is a deeply embedded hierarchical culture long past sell-by date. Something starkly obvious to outsiders.
___STEADY_PAYWALL___
It is encapsulated in how the meeting was set up with the first two rows of seating reserved for the group’s managers, flanked on either end by burly security fellows complete with earpieces. Not surprisingly, most of the 80 shareholders who made the trip to London congregated at the back of the conference hall. Only once these co-owners of the business had been seated did the 12 directors join proceedings. Walking in, single file, to named places on a raised podium. Like a school headmaster leading in teachers on Speech Day.
For the next three and a half hours, Anglo’s chairman and CEO did all the talking, begging the question why the other 10 directors were on the stage at all. Except, as some did rather blatantly, to glare at those shareholders who asked difficult questions. Or perhaps it was so they could depart half way through the meeting, as one did, leaving an embarrassingly empty seat on the podium.
All this set the tone for what followed. As you might expect from a mining company, a fair number of antagonistic questions were posed by a few hardy souls representing concerned local communities (Brazil); trade unionists (SA) and disgruntled staff (Australia).
Shareholder activist Theo Botha got to the mic just before the meeting ended. He was as feisty as ever, but mostly providing outgoing chairman Sir John Parker the opportunity of cementing the impression of a condescending autocrat who speaks too much and knows too little. Like throwaway comment when referring to the past year’s in-service fatalities with “Five, wasn’t it…?” Erm, not even close. Anglo killed 11 people last year. Up from 7 the year before. But as Parker also reminded us, it is a big improvement on “the 50 a year killed ten years ago.”
Maybe things will change under a new headmaster. Fans of CEO Mark Cutifani, an accomplished miner who has just hired a lookalike fellow Australian FD, will be hoping so. But unlike those who have been piling into the shares lately, I wouldn’t bet good money on it. Thanks in part to this callous chestnut: Because of higher on-the-job fatalities, we were told, the board’s remuneration committee decided to cut executive bonuses by 7.5%. Seriously.
And when quizzed by Botha why the names of deceased workers were not carried in the annual report, chairman Parker picked up a copy, paged to the back and opined that as it ran to over 200 pages already “we can’t cover everything.” You have to wonder what message that sends to those like one of the earlier questioners, NUM’s Peter Bailey who made the trip from SA.
Talk is cheap. Until those in Anglo’s obviously detached ivory tower realise that lives shouldn’t be, it’s unlikely the company’s true potential will be realised. Ditto any improvement in its fractious relationship with SA politicians – no matter how many politically correct board appointees are co-opted.
