With the wish that herd-think would STFU just for once, this was part of the intro to IKN196, published yesterday.
CEOs are chosen because they’re CEO
material
What with
the reported near $50Bn or so in collective write-downs (1) that the mining
industry has seen recently along with the fall of several top CEOs from the big
and bigger mining companies out there (Albanese
at Rio and Carroll at Anglo are the recent headline grabbers in that category,
though for me the defining news was when Aaron Regent ‘was resigned’ from
Barrick and replaced by the company CFO), a lot of talk has resulted about
the way in which the new crop of CEOs in the majors (along with the few that have survived until now) will be more
conservative in their approaches to company development and growth, with
big-ticket mergers or projects that threaten capex blow-out a thing of the past
and smaller, organic deals that give premium to robust economic parameters in
politically safer jurisdictions the future.
Well
yeah, maybe, for a while at least. A corporation (such as Barrick) may decide
to rein in its top level decision-making and go for a more conservative approach
for a short while, or maybe even into a medium-term timeframe, but it won’t
last. Let’s stay with Barrick as our example (slightly unfair, I could have chosen plenty of others, but ABX is as
good as any) and imagine a time two, three or even five years down the
line. If Barrick goes into caution mode it’s unlikely to do any systematic harm
to the company itself, but if and when the economic and dealmaking climate
improves, it risks being left behind by a peer (or even peers) who take a more
aggressive stance and is led by an individual who sees the market opportunity,
goes for it and makes her or his name in the process. At the same time, the
“whatever happened to good old Barrick?” questions will start cropping up in
the mining world chattering classes and the company would have picked up an image
of fustiness, of resting on its laurels, or the cardinal sin of them all; of failing
to maximize shareholder value.
So
promote a CFO to become the new CEO and ride out a choppy period in the market
if you will, but CFOs are very rarely the stuff that “star CEOs” are made of.
The people that make their mark and claim headline spaces in the bizrags are
nearly always risk-takers by nature and the ones that make it up to CEO will
have (by luck, judgement or a combination
thereof) made risky calls, got them right and earned kudos from those who
work with them all through their career. If a sector leading company such as
Barrick goes into caution mode for a while it’s not such a big deal as long as
others do the same, but it will eventually create a vacuum of opportunity that
gets filled by the up and coming company headed by the next generation of
thrusting corporate executives. Or in practical terms, now that the sector has
decided not to take risks, look out for the first deal done by a Tier 1 or Tier
2 miner that’s considered “audacious” or “against the grain” by the market
because whichever company it turns out to be will probably be worth following
into the next cycle.
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