Date: November 08 2012
SUCCESSION planning has begun for a replacement chief executive for the world's largest mining company, BHP Billiton. At the very least the market has been alerted to the fact that the process is under way using what seems to be a subtly managed campaign leak to the Financial Times in London.
While there has been plenty of speculation in the Australian press that Marius Kloppers' position was being assessed by the board, until now the company had not been baited into a response.
BHP's announcement following the report out of London was a far cry from a denial. It said: ''Succession planning for the CEO and senior management team is an ongoing process and one of the most critical tasks of any board.''
The talk is that high-profile recruitment firm Heidrick & Struggles will be undertaking the international search.
The prospect of replacing Kloppers kicked off talk in financial markets about who might be in line for one of the most prestigious jobs in the corporate world.
It is probably no accident that BHP Billiton has sent a signal to the industry that Kloppers' job is up for grabs at a time when there is plenty of other movement in the upper management ranks of the mining industry.
Anglo American chief executive Cynthia Carroll is set to leave her job and Mick Davis will soon be sidelined when the merger of Xstrata and Glencore is completed.
Carroll would not be considered a contender for BHP's top job but Davis could be in the mix.
One dark horse could be Guy Elliott, who has announced he is departing his post as chief financial officer of Rio Tinto - but his CV is tainted by his role in the ill-fated $38 billion acquisition of Alcan.
One source suggested that candidates from the oil and gas industry should not be discounted given this has been a recent focus of BHP's investment activity.
Despite this coming game of musical chairs, the consensus within the industry is that Kloppers' replacement will come from within BHP's own ranks.
With only one exception this has been a BHP practice for 20 years. This includes its major division heads - Mike Yeager from oil and gas, Marcus Randolph who runs the company's powerhouse ferrous and coal division, Andrew Mackenzie, who is in charge of non-ferrous, and Alberto Calderon, who heads up corporate development.
Much of the CEO replacement talk in Australia emerged thanks to the last year's ill-fated $20 billion acquisition of shale gas assets in the US, on which BHP has already taken a $US2.8 billion write-down.
Some insiders considered that to be a tipping point - an embarrassing and potentially expensive investment decision. Kloppers took a cut to his 2012 bonus as a result. He argues that some of the investment - the oil rather than the gas - is already yielding a good return. But it could be years before the price of gas rises to levels that could make the overall deal look good.
His detractors also point to Kloppers' failure to clinch a merger with Rio Tinto back in 2008 - though it would be unreasonable to blame Kloppers for a deal that was ultimately torpedoed by the European competition regulators.
To the extent he might deserve some criticism it would be for his misreading of the backlash from regulators and the Chinese at the attempt to consolidate so much of the world's supply of iron ore in the hands of one company.
While it was gutsy and financially clever to make a play for a wounded competitor, it may never have been realistic. But it was probably worth a try, as was the later attempt to merge BHP and Rio's iron ore operations.
These two unsuccessful deals took several years of BHP management time for no result. With the value of hindsight it was a poor decision.
Then there was the failed $40 billion bid for Canada's PotashCorp. Another good deal that was skewered thanks to external resistance - this time from the Canadian government.
Last month marked Kloppers' fifth anniversary in the chief executive's chair, telling BusinessDay: ''I certainly love the job and enjoy every minute of it.''
In the same interview he acknowledged that there were examples where chief executives stayed too long in the job, and used Jack Welsh, who was chairman and chief executive of GE for 20 years, as an example. But Kloppers, aged 50 and with five years under his belt, should be given more time if the board is sufficiently happy with his performance.
Those who know Kloppers suggest there is a major difference in style between him and his chairman, Jac Nasser - the latter being more entrepreneurial and perhaps less focused on process.
There have certainly been lengthy delays to decisions on many of BHP's large projects, such as the expansion of Olympic Dam and the Port Hedland harbour, and there is a perception that the company is not nimble enough.
The two men are not close, according to most in the industry, and Nasser is taking a more active role in the organisation - talking with major investors and representing the company at events.
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