BHP-Billiton 2001 AGM transcript
July 9, 2008
Here is an edited transcript of the 2001 BHP-Billiton AGM.
MR MAYNE: I'm a proxy holder. I've just got two questions. One's on management and one's a legal question. At the time of the merger meeting you were commenting that BHP would wither on the vine if we didn't merge and that we would fail to attract top management people. And then a few weeks after that one of the fated Billiton managers, Mick Davis, who was the chief finance officer, quit and went to work for a Swiss company. I'm wondering if you can give us a blunt assessment about how that management integration process has gone?
A lot of people commented that that was going to be the biggest challenge, putting together two cultures, and that losing top management in that process was one of the big down side risks. So I know that Mick Davis is the one that's in the public domain, but I was hoping you could give us a fairly frank assessment of say the top 40 managers that we would have hoped to have kept, what the realistic position is on how many of those we've lost.
And the second question relates to the Longford gas disaster. Esso's on the record saying that it's cost them 500 million. I think there's a lot of people who regard the way that Esso's conducted themselves as fairly lamentable. They came out and blamed the workers for the explosion. They then got fined a couple of million dollars and they're trying to do confidential settlements I think of 18 different quasi criminal actions.
What's our share of that 500 million? Is it 50/50, or can we avoid some of these losses because it's - Esso's got the management contract, obviously, over Langford. So how's that broad split works, and I'm a bit disappointed that BHP hasn't been able to exercise a bit more influence over Esso to some sort of this lamentable behaviour where they're getting criticised in courts, by politicians, by workers pretty much across the board for their conduct through this process.
CHAIRMAN DON ARGUS: Thanks, Stephen. On the management issues I'll give you my perspective and then I'll get Paul to give you his view on it because he's closer to the operations. Look, in any merger of two organisations like this you're going to lose top talent because there's going to be a duplication of jobs. We were sorry to see Mick go obviously, and that's unfortunate. But he sees opportunities elsewhere and we've got to understand that. But the team that's in place now, you can see the following individual here behind me, from a board perspective, I think the talent that's there and the talent in the next layer down is quite encouraging. And I've - again all I can do is say to you that in a merger such as this, or acquisitions or whatever you're in, you're going to lose individuals and you're going to lose some good talent. Paul?
CEO PAUL ANDERSON: Well, I agree with your comments, but I would go a step further and say that we have had remarkable retention. Because with the exception of Mick, no-one has left the company that where there wasn't a conflict of two people in one job, if you will. We obviously lost some people we would like to have retained, but when you have two treasurers you're only going to end up with one treasurer, that sort of thing. But as far as people packing it in and saying, "I don't want to be part of the team", Mick is the only person we've lost, and I think you know, in Mick's case it was a very special set of circumstances. And as Brian, I guess Brian just pointed out his situation, but a number of people have already moved to new locations, they've accepted jobs, they've taken up new homes. I mean, the integration is basically done at this point in time. All the jobs are filled, we had a meeting of the top 150 managers a little over a month ago, almost two months ago I guess now, and that group 16 is in place and working together as a team.
DON ARGUS: Thanks Paul. Stephen, on the Esso thing as you know that's before the courts and I really can't comment about that, but we don't have any claims against us as you well know, but again that's all I can comment on that particular issue.
The re-election of director John Ralph
MR MAYNE: Chairman, I have got mixed feelings about this resolution. One of the big problems in Australia is the lack of non-executive directors with relevant industry expertise. So clearly Mr Ralph is probably the best non-executive director to have on this board because he had his 30 years with CRA and did a good job there. I think other speakers have commented about his workload which is a fair criticism. I was at the Pacific Dunlop meeting last Friday in this very room and he hasn't actually retired yet. It's another two months time. So this week is classic case where at Pacific Dunlop they are trying to sell their $900 million Pacific brand business; it's a key time for the company and Mr Ralph is going to be heading off in the executive jet to London for a couple of days for the Billiton meeting over there. It's the time he should be here on his Pacific Dunlop duties. In terms of his performance overall, clearly Pacific Dunlop has been a shocker for the shareholders.
DON ARGUS: Stephen, please don't raise another company's affairs in this meeting.
MR MAYNE: It's relevant to the performance of directors.
DON ARGUS: I can assure you that the proxies that you demand suggest that Mr Ralph's performance is first class and you know that.
MR MAYNE: All I am saying is he has done a good job at CRA, Commonwealth Bank, Telstra but there has been one shocker in the portfolio which is Pacific Dunlop and that should be acknowledged. I have also got reservations about supporting any director who was previously on the BHP board who supported the merger on the grounds that as JB Were and many other reputable independent analysts said, there was a $5 million transfer of value from the BHP board to the Billiton board. The BHP board got seriously out negotiated by the Billiton board. It has been reflected in the share prices subsequent to the merger and the directors of BHP Limited who signed up that deal and transferred all that value really should be questioned as to whether they should be given another three years given what has happened.
On the final point Mr Ralph was good enough last Friday after three separate attempts and proddings to reveal the proxy situation as to how many shares were held by the chairman as opposed to the general category. So with Pacific Dunlop there was 181 million open proxies. 57 million of those were in the chairman's back pocket, John Ralph's back pocket as proxies that he held. Now you refused to reveal the undirected proxies that you held at the merger meeting despite a couple of requests. I am asking you today to reveal exactly how many shares you hold as part of this proxy process.
DON ARGUS: We will get them for you Stephen. I now put the motion. Those in favour please hold up your hand green admittance cards? Those against? Carried on the show of hands. As I explained earlier all items of the business will be subject to a poll and we will have the opportunity to vote on that later on. Would shareholders now please move and second a motion for the re-election of Mr Ralph to the board of BHP Billiton PLC? The third candidate to be considered is myself and I will hand the chair over to the deputy chairman Mr John Jackson while this side of the business is being considered.
The re-election of Don Argus
MR JACKSON: Don Argus is extremely well known to shareholders here today. Don was appointed a director of BHP Limited in November 1996 and chairman in April 1999. He has been chairman of BHP Limited and BHP Billiton PLC since the merger since June 2001. He has recently assumed the chairmanship of the new Nominations Committee which serves the joint boards. As you all know he is the former managing director and chief executive officer of the National Australia Bank Limited. He is chairman of Brambles Industries Limited and a director of Southcorp Holdings Limited. He is needless to say a most experienced chairman and company director and has very considerable international business experience. Don played a key role in the merger of our two great companies and he has without doubt the vision, it's a vision we all share, to see BHP Billiton take its place as the pre-eminent resources company in the world. Would shareholders please move and second a motion for the re-election of Mr Argus who retires by rotation and being eligible offers himself for re-election as director of BHP Limited? Thank you sir. Thank you. Does anybody wish to speak to the motion?
MR MAYNE: I will be very brief Deputy Chairman. I guess the view you take here is that if you thought the merger deal was a bad deal then this is the resolution to vote against because Don was the man on the board who really really drove this deal through very aggressively. Now home side aside he has obviously had a good record at the National Australia Bank and I would like to commend him for the fact that he has increased his stake in the company from 39,000 shares to 183,000 shares in the past year which is a good sign. It's important that directors own shares in the company. I guess my specific question is that last year he received $440,000 in directors fees which I think may be 36 the highest paid non-executive chairman in Australia and my question is that obviously there wasn't a full year of the merged entity in last year's figures. What will be the annual fee for Mr Argus for the next three years, will it be more than $440,000 and if so what will the figure be?
MR JACKSON: Under the constitution of the companies these are matters which are determined by the board on the recommendation of the executive directors and the particular matter you raised has not yet been considered.
Re-election of David Crawford
DON ARGUS: Thanks for your confidence and thank you for that. The next candidate is David Crawford who retires by rotation and being eligible offers himself for re-election. David was appointed a director in May 1994. He is a chairman of BHP Billiton Superannuation Fund and serves as chairman of the Risk Management and Audit Committee. David has degrees in law and commerce, is a fellow of the Institute of Chartered Accountants in Australia, a fellow of the Australian Society of Certified Practising Accountants in Australia and official liquidator of the Victorian Supreme Court and a member of the Australian Government Costs Advisory Committee. A director of Lend Lease Corporation Limited and Foster's Group Limited, he was until recently the Australian national chairman of KPMG. He brings to the board his extensive accounting experience with specialisation in corporate restructuring and turnaround in companies in financial difficulties. Would shareholders please move and second a motion for the re-election of David Crawford to the board of BHP Billiton Limited? Thank you. Thank you. Does anyone wish to speak to the motion?
MR MAYNE: BHP wrote off $10 billion over 10 years which is unprecedented in Australian corporate history. There were three directors still on the board who have some responsibility for that Ron McNeilly was there for the whole time, David Crawford who joined in 1994 and John Conde who joined in 1995. Earlier you talked about the fact that the company used words like tottering, taking a deep breath, a pretty rough trot and when you defended Paul Anderson you said, and I quote you, that he has not been involved in any of the decisions that got us into this position. You then talked about the footy coach analogy where if you don't perform to the shareholder demand that you are out. I think all of that does apply to Mr Crawford given that he joined the board before the Magma Copper takeover decision and before the commitment to HBI and the Venezuela project - it may not have been before Venezuela but it was definitely before the board gave the green light for HBI. Those two decisions have cost the shareholders $7 billion. The board is too big, as you have said. You talked about accountability. David Crawford is a terrific accountant, he has got a terrific record. He was the receiver of choice in the late 80s and early 90s for Quintex and Channel 7 and others but if you are talking about accountability you should vote against his re-election today on the grounds he signed off on those decisions that cost $7 million. He is the longest serving non-executive director who has got some legacy issues here and its important shareholders send a message in this regard. I would also be speaking against Mr Conde's re-election on those grounds as well but obviously he is not up for re-election and also because he was the man behind permitting cash for comment at 2UE in Sydney.
SHAREHOLDER JOHN POPPINS: I would like to ask a question on a matter of some concern. I am not questioning Mr Crawford's capabilities however I notice that he has been a major player in KPMG. I notice that they are auditors to the company. I notice that he is on the audit committee. I would strongly question the independence of audit under these sorts of circumstances. I have not had time unfortunately to look at the other business that KPMG get from BHP but those figures would no doubt be illuminating. Would you care to comment?
CHAIRMAN DON ARGUS: I would Mr Poppins, that's a good question. The KPMG involvement wasn't with the old BHP, it was with the old Billiton. So we haven't put the audit out to tender at this stage so KPMG, Price Waterhouse and Arthur Andersen are all in the audit process in the combined group. I think it's a bit unfair to say because David was the head of the KPMG here in Australia that he should have some conflict because he really hasn't. Can I cover your question. I would also like to cover Stephen's comments about David too. This person is a very talented individual and whilst I have read snippets of a recent report that comes out to suggest that the heads of former auditing partners shouldn't be sitting on audit committees of companies where they are a board member, I find that quite a perverse sort of an argument because here you are, you have got the skills, you have other people sitting on a committee and a board and they are making decisions about independent decisions themselves. So he really doesn't have an influence as to where these tenders or other work goes. I would hate to think that we are going to push this thing too hard because there are some companies where yes you might query those but I would suggest the way the corporate governance works in this company, I am thankful we have got David as the chair of the audit committee and I am certainly thankful we have got him on the board.
As for Stephen's comments, Stephen I note that but David was one of a group of individuals in that environment. I don't know what the Discussions were, you don't know what the discussions were and I think that's a harsh judgment to be able to put that on people when we really don't know the full circumstances. I have no hesitation in supporting David to the board. I now put the motion. Those in favour? Those Against? Motion is carried on a show of hands and subject to the later poll.
Board and executive pay resolutions
DON ARGUS: Stephen before you start, those back pocket proxies, 1.3 billion.
MR MAYNE: In your back pocket?
DON ARGUS: Yes.
DON MR MAYNE: I trust the whole board won't be voting your shares.
DON ARGUS: I will be voting my shares according to the way it has been prescribed in some of the proxies. I will be voting my shares for the resolution.
MR MAYNE: You are voting and they are 1.3 billion in your back pocket.
DON ARGUS: That's right.
MR MAYNE: Gees. I would like to commend you for putting this up before shareholders when you didn't have to. Thanks for letting us know the proxies. I would like to ask Mr Gilbertson why he sold $7 million worth of shares a couple of months ago when he has already been adequately compensated. It sends a very bad signal that he has cashed out some of his holding. I think he sold more than 50 per cent of his stake. I have only got the BHP Limited report so I don't know how many shares he is lift with and I don't know what salary he got last year. Maybe you could illuminate the meeting with that. For instance, if you are saying Paul Anderson is getting a pay rise when he got $7.8 million last year I am assuming that means that Mr Gilbertson got more than 7.8 million last year and they are both going to get more than that this year. Just a couple of specific points. I like the scheme whereby you have got 18 peer companies and it only kicks in at the 10th company, I think it's a good scheme. My question is how are you measuring the currency on that? The BHP US dollar share price is pretty ordinary but the BHP Australian share price is pretty good. How are you doing that? If companies get taken over, over the three to five year period, do they drop out? Western Mining, there is talk of a takeover. That knocks off one company. What is the detail of the scheme in terms of currency and composition? Also you have mentioned this board discretion as to whether he gets these shares. From what I can see this is a fairly prescriptive formula where there is no board discretion. He either finished 3rd out of 18 or he hasn't. There doesn't seem to be any board discretion left there.
DON ARGUS: The board discretion is in how we set the targets. That's where the discretion comes. He will only get his rewards according to that scale if he meets the targets or at some stage at a pro rata basis as you outlined there in the notice. On the issue of currency, because it is a global company we moved all of our executives onto a US salary base and they and that's the way they are remunerated and they adjust accordingly in their own environment wherever they are. It's the only appropriate way to handle a global company. Did I catch them all? I don't really believe that's our business why he sold his shares but he was good enough to put it into the public domain. He had a tax position he had to meet and he wanted to buy some real estate. Next question.
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