LONDON (Reuters) - Three of the world’s biggest miners are hunting for new leaders for their boards at a time when the industry faces questions from investors about its conventional diversified business operations and strategies for growth.
BHP Billiton, Rio Tinto and Anglo American, whose chairmen have all announced their intention to step down, are also generating healthy cash flows, putting them under pressure to give more money back to shareholders.
The task to find the right candidates is particularly urgent for BHP Billiton and Anglo American due to the growing influence of major investors at both companies who have raised doubts over their future direction.
U.S. activist investor Elliott - which holds a stake of about 4 percent in BHP’s London-listed shares - has taken advantage of the planned departure of incumbent Jac Nasser to launch a campaign to shake up the world’s biggest miner.
Elliott’s proposals include getting rid of BHP’s dual company structure, spinning off its oil and gas assets and returning more cash to investors.
BHP has so far dismissed them and many other investors have also been skeptical, but say the attack highlights the need for a strong new chair to back up the CEO and unite a disparate shareholder base.
Anglo American’s new board leader will also have to deal with a new share register. Shortly after incumbent chairman John Parker announced in February that he would step down, Indian miner Vedanta’s chairman Anil Agarwal used an exchangeable bond to acquire a sizeable chunk of Anglo American shares and buy influence.
The favorite to lead Rio Tinto’s board is Sam Laidlaw, former CEO of Britain’s largest energy supplier Centrica, whom Rio made a non-executive director in February this year, four industry sources said, speaking on condition of anonymity.
BHP has said it is aiming for 50 percent women in its work force within a decade, but the sources said finding a woman chair with the availability and experience could for now be tough.
All four sources said Gail Kelly, former chief executive of Australian bank Westpac, who was an early favorite to replace Nasser, was no longer being considered but declined to give a reason.
Other names that two of the sources said have been considered were outgoing Dow Chemical’s boss Andrew Liveris and an existing BHP director, Malcolm Broomhead.
One candidate mooted to be Anglo’s new chairman, two of the industry sources say, is Guy Elliott, a former chief financial officer of Rio Tinto. None of those mentioned as a potential candidate was immediately available for comment.
Anglo’s chairman Parker’s eight-year tenure included dealing with the fallout from the miner’s costly 2007 investment in Brazil’s Minas-Rio iron ore operation, which analysts say will struggle to justify the capital outlay.
Headhunters said that although three big companies were all looking for new heads of boards at the same time, the pool of potential candidates was wide for such a global business.
Kit Bingham, a partner at top executive recruiter Odgers Berndtson, said there should be no shortage of people keen to fill the roles, which present challenges, not just from shareholders but from wider transitions, such as rolling out new technology.
That calls for all a chairman’s diplomatic skills in negotiating with governments concerned about possible job losses. “Candidates will know there’s a change agenda to deliver. It’s a pretty exciting time when the future needs to be different from the past,” Bingham said.
The new board leaders will mark a generational shift for mining companies that have spent the time since commodities prices slumped in 2015 and early 2016 cutting costs, selling off assets and restructuring their businesses to boost cash flow.
Their predecessors had overseen multi-billion dollar acquisitions at the high point of the commodity cycle, saddling their balance sheets with massive debts.
Now the search is on for new ways to grow without making the same mistakes as before.
Bruce Duguid, a director of Hermes EOS, which advises on more than 260 billion pounds ($332 billion) in client assets, says any global mining chairman needs a range of skills “to manage the many pressures on its business model”.
“These include the need to reduce costs and maintain strict capital discipline in the face of unpredictable commodities demand, management of increasing sustainability challenges as ore grades decline and overseeing a material improvement in (gender) diversity at all levels of the organization,” he said.
Hanre Rossouw, portfolio manager at Investec Asset Management, which owns shares in Anglo American and BHP, said the mining companies needed people able to help management deal with the breakup of assets and strategic de-mergers.
“You do need a chair that can think more creatively in terms of value creation with unbundlings and break-ups always options to consider,” he said, referring to Elliott’s proposal to spin off BHP’s oil and gas assets and Anglo’s plan last year to sell or spin out its South African iron ore unit.
Rio Tinto, which is losing chairman Jan du Plessis to telecoms group BT where he will take up the same role, needs a replacement who will be able to keep a tight grip on governance.
The world’s second-biggest miner after BHP is embroiled in a corruption scandal that has led to two senior dismissals last year and a legal challenge from one of those sacked.
Both Rio and BHP scrapped their progressive dividends in response to the commodity price crash of 2015 and early 2016.
Elliott wants to introduce a formula for delivering more money to shareholders, which BHP has said it cannot do because of the cyclical nature of mining. Anglo suspended its dividend at the end of 2015 and has said it will bring it back around the end of the year.
Investors will also be keeping watch on the pay packages of the new recruits. Anglo was hit last year by a shareholder revolt over CEO Mark Cutifani’s pay and has since proposed a cap, agreed by shareholders this week, on how much executives can earn from share awards.
(This version of the story corrects paragraph 13 to show Minas Rio purchase was before John Parker’s appointment)
Editing by Lina Saigol and Philippa Fletcher