The premature resignation of one high-ranking employee at a $66bn ASX-listed company in any given week could be considered unfortunate. When three leave in less than a week, it rattles investors, raises concerns from governance groups and shows all may not be well at the Andrew “Twiggy” Forrest-led miner Fortescue.
On 26 August, Fortescue celebrated its two-decade anniversary at a lavish Pilbara party, flying in celebrities and politicians while trumpeting the success of a company that went from pipe dream to the world’s fourth biggest iron ore producer before turning 21.
In the days after, the new chief executive of its mining business, Fiona Hick, left after just six months in the role. She was followed by Christine Morris, the division’s chief financial officer, who was only appointed in June.
On Friday, the former Reserve Bank deputy governor Guy Debelle revealed he too had exited Fortescue after a modest stint. Fortescue’s share price crumbled, down more than 5% on Friday alone and erasing more than $3bn in value.
“The question for retail investors is, ‘what’s happening?’, and we will be asking that question,” said Rachel Waterhouse, chief executive of the Australian Shareholders’ Association.
“We need to know what are the governance structures, and who’s making these decisions.”
Fortescue did not provide any substantive reasons for either Hick’s or Morris’s exits, which came at a sensitive time, given it had just released its full year financials. They showed a US$4.8bn net profit, representing its weakest result in three years, weighed down by a sputtering economy in China, where its ore is sent.
It did not announce Debelle’s resignation: that was indirectly left to the new resources company he is joining on the board, the aspiring critical minerals miner Tivan.
“Retail investors often get concerned when they see a finance executive leave around the time of reporting, and they want to know why,” said Waterhouse, referring to Morris. Fortescue did not respond to questions on Friday.
While executive turnover has become a recurring theme at Fortescue, recording 11 executive departures in less than three years is so unusual that market veterans Guardian Australia spoke to cannot recall an equivalent.
But the structure of Fortescue is also unusual.
While chief executives usually set the vision for a company, that role at Fortescue is taken by Forrest, who is founder, executive chairman and a major shareholder (even if the latter has been complicated by his recent separation from his wife, Nicola).
From its roots as a pure Pilbara iron ore miner, Fortescue recently reorganised into two divisions – metals and clean energy – whereby the chief executives of each area report to Forrest and the board, creating tension and competition between the business units.
Fortescue plans to decarbonise its iron ore operations by 2030, without the longterm use of controversial carbon offsets, while simultaneously creating a hydrogen-led green energy arm. Its iron ore business is providing the capital to do so.
This week’s departures come from different parts of the business, with Hick and Morris on the mining arm, and Debelle on the green energy side of the business.
Fortescue has just hired the former British chancellor Kwasi Kwarteng, who oversaw a disastrous mini-budget last year that crashed the pound, in a part-time advisory role to develop its clean energy division.
Prior to the most recent changes, Forrest described the already high level of executive turnover as a necessary part of a business in transition. He regularly talks about the need to “fail fast”.
But the opaque detail around the resignations is prompting concerns from investors.
Fortescue announced Hick was leaving in the eleventh paragraph of a lengthy statement to the stock exchange that portrayed the change as pre-planned. As one analyst told Guardian Australia: “You don’t pre-plan the resignation of a chief executive after six months.”
In response to a question about Hick’s departure, Forrest told the AFR in Perth this week that “you either get on the bus, or get off the bus” when it comes to the company’s vision to turn green.
In a brief statement on LinkedIn, Hick said: “I now look forward to time with family and friends while I consider my next move”.
As one of Australia’s biggest companies, Fortescue shares are widely held by retail and institutional investors, including superannuation funds. Its share price wobbled after Hick’s departure was announced on Monday, before falling heavily on Friday under the additional weight of the resignations of Morris and Debelle.
Most large investors were reluctant to speak publicly about the executive turnover on Friday, although their comments divided into two camps: those who back Forrest and his vision given past successes; and those who want to see a suitably qualified chief executive handed the reins.
Peter Strachan, a Perth-based independent mining analyst, said the rapid-fire resignations were not a good look for the business, but he said some upheaval was to be expected.
“He’s built a business over two decades that is now spitting out cash like an ATM, so he expects nothing but total commitment to his vision from his staff,” said Strachan.
“A lot of people find that a little bit hard. The share market is showing that there’s some concern, but it is also a business in transition.”
