[BHP-Billiton’s] Mackenzie’s clean break is bigger than you think – by Robert Gottliebsen (Business Spectator – February 25, 2013)


I have personally known every BHP chief executive (they used different titles) for the last 50 years. During that time there has never been a BHP chief remotely like Andrew Mackenzie. The company is headed for a period unlike anything in the last 50 years of its history and I suspect this is a once-in-100-year change.

BHP shareholders, employees, and Australian governments need to understand what it means to have Australia’s largest company change direction and become more interested in productivity and shareholder distribution than expansion. The directional change is in part a response to what is happening in China (China will spoil Australia’s energy equation, February 22), the demands of shareholders, and the high cost of capital investment in Australia. The directional change by our largest miner will be followed by others, including Rio Tinto, and heralds a far less expansive Australian mining industry.

And remember the BHP board chose Andrew Mackenzie because they have embraced the plan he put to them as he pitched for the top job. During the last 50 years each BHP chief executive has aimed to leave his successor with more resources. Better productivity and shareholder distribution have always been in the agenda but have been swamped by expansion and other issues.

Andrew Mackenzie is aiming at allocating more money to dividends/capital returns plus lower borrowing so new investment projects will have to be very good. Given the high shareholder payouts and lower gearing agendas of BHP, the Big Australian might even find itself short of capital to do what it would have done without hesitation during most of the last 100 years.

But BHP is a company that has forgotten its history so the magnitude of the change is not apparent to most of those at the top. The BHP greats of Essington Lewis, Ian McLennan, James McNeill, and Brian Loton all came up through the ranks and BHP had a training program to produce CEOs. The CEO after Loton, John Prescott, showed after he left BHP that he was very talented but Prescott presided over two major disasters – Magma Copper in the US and the attempt to produce iron in Western Australia with North West Shelf Gas.

I will never forget talking to a distraught Prescott on the day of the horrific announcement of the two failures. Prescott feared he might even have put the survival of his beloved BHP in jeopardy. Prescott left BHP in 1998 and for the next 15 years every BHP chief – Paul Anderson, Brian Gilbertson, Chip Goodyear, Marius Kloppers and now Andrew Mackenzie – all won their spurs outside the company.

For the rest of this column, please go to the [Australian] Business Spectator website: http://www.businessspectator.com.au/bs.nsf/Article/BHP-Billiton-Andrew-Mackenzie-Rio-Tinto-Kloppers-pd20130225-58S5E?OpenDocument&emcontent_Gottliebsen